UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission file number 0-23512
BIOCORAL, INC.
(Name of small business issuer as specified in its charter)
Delaware 33-0601504
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
c/o Stein Riso Haspel & Jacobs LLP,
805 Third Avenue, New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
(212) 752-7118
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock. $.001 Par Value
Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
Issuer's revenues for its most recent fiscal year were $ 1,095,489.
The aggregate market value of the voting stock held by non-affiliates of
the Issuer, as of November 1, 1996, was $30,758,266.
The Issuer had 5,432,041 shares of common stock outstanding as of November
1, 1996.
1
<PAGE>
Documents Incorporated by Reference - See Exhibit Index
PART I
Item 1. Description of Business
Background
BioCoral, Inc., a Delaware corporation (the "Company") is an international
biomaterials company that, through its subsidiaries, develops, manufactures and
markets bone graft and growth material for orthopedic, oral and maxillofacial
applications to a number of countries outside the United States. The Company's
chief product, BioCoral, is derived from natural coral using proprietary
manufacturing processes. BioCoral has certain characteristics (chemical
composition, porosity, etc.) similar to human bone that facilitates its
replacement of bone and concomitant bone strengthening. Prior to 1995, the
Company derived substantially all its revenue from other unrelated businesses.
The Company has written off its investment in one such area, and is under
contract to sell certain real property owned by it which had been a prior focus
of its business. Through the end of 1995, the Company had not yet realized
significant revenues from the sale of its BioCoral products. Its products are
not approved for sale in the United States and there can be no assurance such
approval will be obtained. The failure to do so could have a material adverse
effect upon the Company's ultimate profitability.
The Company, formerly known as IMMO-Finance Corporation, was incorporated
on May 4, 1992 under the name Hermeneutics Corporation. The Company was
originally formed for the purpose of either merging with or acquiring an
operating company with operating history and assets. The Securities and Exchange
Commission has defined and designated these types of companies as "blind pools"
and "blank check" companies. From May 1992 through March 1994 the Company was a
blank check company with the primary purpose of seeking merger or acquisition
candidates. The Company ceased to be a blank check company on March 25, 1994
when it acquired all of the issued and outstanding shares of the capital stock
of Cabestan, Inc., a Pennsylvania corporation ("Cabestan"). Cabestan owns two
commercial properties located in the Bensenville Industrial Park in the Chicago
area. Cabestan's commercial properties currently consist of one building which
serves as a bulk warehouse/distribution center and a second building which
serves as office space and as a service center. Cabestan has entered into an
agreement with a non-affiliated third party to sell all its interest in these
properties. See "Properties".
The Company entered the biomaterials field on August 2, 1995, when it
acquired virtually all the outstanding shares of 3H Human Health Hightech Public
Company Limited, an Irish corporation ("3H") The principal asset of 3H consists
of an exclusive worldwide (except France) license to distribute a bone
substitute material manufactured from coral and marketed under the name
BioCoral. The license was granted by the owner of the patent rights to BioCoral,
Inoteb, S.A., a French corporation ("Inoteb") in which a 51% interest was
subsequently acquired by the Company. The license granted by Inoteb is for a
period of 15 years plus two additional two year
2
<PAGE>
periods, and includes the right to distribute certain other products developed
by Inoteb. Potential products include a biological glue utilizing the patients
own blood as an ingredient to insure biocompatibility, and an osteoporosis
treatment. None of Inoteb's products are presently available in the United
States and no FDA approvals thereof have been obtained. The FDA approval process
is long and expensive and no assurance can be had of the ultimate granting
thereof, or of the Company's ultimate profitability.
The Company acquired the shares of 3H from Cornington International Inc.
and Halford Finance S.A., each a British Virgin Islands corporation and each a
client of Societe Financiere du Seujet, a financial services company owned by
Riccardo Mortara, the Company's Chairman and a director. 500,000 ordinary shares
(out of 500,800 shares outstanding) and all 100,000 outstanding preference
shares, of 3H Human Health Hightech Public Company Limited, an Irish corporation
("3H") were acquired in exchange for (a) 800,000 shares of the Company's common
stock, valued for purposes of the transaction at $8.00 per share; (b) $1,000,000
in cash, payable in five installments of $200,000 each 60 days, commencing
October 2, 1995; and (c) options to purchase 150,000 shares of the Company's
common stock for each $1,000,000 in net profit after taxes of 3H in excess of
$2,000,000, the aforementioned options to be prorated for each fractional
portion of each multiple of $1,000,000 net profit. In connection with such
Agreement the Company was granted an option to acquire Inoteb at a price of
$15,000,000, which option has been exercised in part. The Company also agreed,
in connection with any purchase of Inoteb, to invert all net profits after taxes
from BioCoral for five years (up to a maximum of $10,000,000) into Inoteb, and
agreed to use its best efforts to raise $15,000,000 for investment into Inoteb
at the rate of $5,000,000 per year by each of July 31, 1996, 1997 and 1998. The
Company did not raise such amount for Inoteb by July 31, 1996, and there can be
no assurance that it will be able to do so in the future. See "Certain
Relationships and Related Transactions".
The Company took further steps to solidify its position within the
biomaterials field by agreeing to acquire Inoteb. In October 1995, the Company
entered into an agreement (the "Inoteb Agreement") with 10 individuals, all
French nationals, pursuant to which the Company agreed to acquire from such
individuals an aggregate of 30,150 shares and 7497 convertible bonds
(collectively, the "Inoteb Securities") of Inoteb which, among other things,
owns certain patent rights to BioCoral's products. The shares and bonds of
Inoteb acquired represent 51.53% of the capital share of Inoteb and 86.67% of
the convertible bonds thereof. On October 1, 1996, the Company asked for the
conversion of all the Inoteb convertible bonds into shares of Inoteb. The
conversion will take effect January 1, 1997, at which time the Company will own
57.04% of the outstanding shares of Inoteb. The remaining minority interest in
Inoteb is owned by European financial institutions such as Sofinnova S.A. and
FCPR Soffinova Capital, both owned by Credit National of Paris; SDR Bretagne,
the official governmental development company for the French region of Brittany;
Jafco Saint-Honore I and II, owned by Compagnie Financiere Ed. de Rothschild of
Paris; Parquest Venture Partnership and Atlas Venture Europe Fund B.V.
The consideration for the Inoteb Securities was initially to be an
aggregate of 1,035,292
3
<PAGE>
shares of the Company's common stock. In addition, the Inoteb Agreement provided
for the Company to confirm that (a) the first $10,000,000 of 3H's net profits
would be utilized to subscribe for additional Inoteb capital for Inoteb to use
for research and development; and (b) it would use its best efforts to raise an
aggregate of $15,000,000 on or before July 31, 1998 to be utilized for
capitalizing Inoteb. 3H has yet to realize any significant revenues and the
Company has not raised any additional funds for Inoteb's capitalization.
The Agreement was closed in escrow with a French notary in late October
1995 owing to the implications of the agreement for the Inoteb shareholders
under French law. The Company completed the acquisition of a 51.53% equity
interest in Inoteb on July 23, 1996 when the shares were released from escrow.
The number of shares given to the Inoteb shareholders was increased to reflect
the share dividend the Company had declared in December 1995.
Previously, on September 12, 1994, the Company had acquired a 51% interest
in the capital stock of Borgonuovo SIM S. A. (the "SIM"), an Italian corporation
with principal offices in Milan engaged in the brokerage and investment advisory
business. During the year ended December 31, 1995, this investment was written
off by the Company in its entirety.
The Company has another subsidiary, IMMO Finance Distribution Limited, an
Irish corporation ("IMMO Distribution"), formed in April 1994. To date its only
activity has been a passive investment in PEMP, Inc., a Canadian mutual fund.
See "Certain Relationships and Related Transactions."
The US executive offices of the Company are located in care of its
counsel, Stein Riso Haspel & Jacobs LLP, 805 Third Avenue, New York 10022. Its
European office is located at 14 Quai du Seujet, 1201 Geneva, Switzerland. The
Company is presently seeking appropriate office space in New York City and
anticipates that it will require approximately 1000 square feet for such
offices.
BioCoral
BioCoral is a natural biomaterial produced from natural coral. Certain
chemical, physical and structural characteristics of coral are very similar to
that of human bone tissue. BioCoral is derived from three particular species of
coral which is naturally present in abundance. Like human bone tissue, BioCoral
is primarily (more than 97%) comprised of calcium carbonate. Porous and
resorbable, BioCoral is prepared in microgranules as well as in engineered
shapes according to specific indication. Due to its similarity to bone tissue,
BioCoral is resorbed by the body as new bone growth invades the BioCoral. The
principal current alternative to BioCoral is the utilization of autologous (from
the patient's own body) bone grafts. The use of autologue bone grafts requires
the patient to undergo one or more additional surgeries to harvest the bone
graft material. This is not always feasible due to the condition of the patient
or other contraindications, and must be shaped in a separate procedure to fit
the graft area.
4
<PAGE>
According to Inoteb, over $9,000,000 has been incurred in research and
development relating to BioCoral. BioCoral has been used in over 130,000
patients, principally in France and Italy. BioCoral was patented in France in
1979, in the United States in 1982, and in Japan in 1989. Inoteb acquired the
patent rights to BioCoral from ANVAR/CNRS, the French National Center for
Scientific Research, a French governmental agency. Revenues from these
operations have been realized at the Inoteb level and, accordingly, were not
part of the Company's 1995 operating data.
Clinical Applications
BioCoral has been used in various clinical applications. Current uses
include the following: (a) orthopedic surgery uses include spinal surgery,
tibial (shinbone) osteotomies, hip fractures, trephine (skull) hole replacement,
fracture repair and filling of bone cavities; (b) maxillocraniofacial surgery
and plastic surgery uses include reconstructive and cosmetic surgery; (c) oral
surgery uses include filling of bone defects due to loss of teeth or periodontal
disease.
BioCoral is comprised of a crystalline structure composed almost entirely
of calcium carbonate, with trace amounts of fluoride, strontium and magnesium.
BioCoral is highly porous, with one gram having a surface area greater than 1
square meter. It is believed that this porosity and the chemical similarity of
BioCoral to bone tissue is conducive to new bone growth and resorption by the
body. Because BioCoral is resorbed, it can be combined with antimicrobials,
anticancer agents or other pharmaceuticals for slow release into bone tissue,
resulting in an advantage over autologous bone grafts.
Osteoporosis
Osteoporosis is a progressive bone disorder in which bone density
decreases, combined with increased bone brittleness and porosity, which
primarily affects post-menopausal women. Current preventive treatment for
osteoporosis includes estrogen drugs. Phase II clinical trials in Europe have
demonstrated the efficacy of BioCoral for local osteoporosis treatment in
rebuilding bone, particularly in combination with osteodensimatic screening. The
Company intends to raise capital to fund Phase III clinical trials, which will
be a prerequisite to human use in the United States. There can be no assurance
that any such funds will be raised, and the failure to raise such funds could
have a material adverse effect upon the Company.
Surgical Glue
Inoteb has developed an autologous fibrin adhesive glue with autologous
growth factors. This surgical glue is prepared using the patient's own blood, in
a closed system, eliminating immunological problems and the risk of blood-borne
disease transmission such as, for example, HIV. The surgical glue can be used
not only with BioCoral but also for the treatment of hemorrhage during surgery
and for wound healing in soft tissues. Inoteb is beginning clinical trials in
Europe of the surgical glue and expects to have the product ready for marketing
in
5
<PAGE>
Europe and elsewhere (but not the US) in 1997. The Company anticipates that the
initial clinical applications of the autologous glue will be in connection with
facial and reconstructive plastic surgery. Pursuant to its license agreement
with Inoteb, 3H has the exclusive right to distribute the surgical glue outside
France. The world market segment for the surgical glue is estimated by Inoteb to
be in excess of $600 million. No assurance can be made that the Company will
ever be able to commercially exploit the surgical glue or, if commercially
exploited, that it will be successful.
On May 21, 1996, 3H entered into a requirements supply contract with
Intermedics Orthopedics of Denver, a subsidiary of Sulzer S.A. of Switzerland, a
major international medical products manufacturer. Pursuant to the agreement, 3H
agreed to supply all of such company's requirements of BioCoral products in
connection with Intermedics' proprietary bone growth factor. Intermedics' growth
factor, coupled with the Company's products, will be used in connection with
orthopedic surgical applications. Intermedics and BioCoral will move forward
promptly to begin clinical trials to obtain FDA approval of the products. No
assurance can be given as to the dollar value of this agreement, nor can there
be any assurance that it will be successful or lead to significant revenues.
Raw Materials and Manufacturing
The primary raw material used by the Company to manufacture BioCoral is
coral. The coral used in the Company's products is presently sourced from New
Caledonia, but is also found in abundance in wide areas of the Indian and
Pacific Oceans. The Company believes that its existing inventory of coral,
together with coral sources immediately available to it, are sufficient to meet
its present needs. To date, coral prices have been stable but no assurance can
be had that they will not rise. The Company is, however, unaware of any factors
which are likely to have a material adverse effect on the Company's ability to
obtain coral at a competitive price.
Manufacturing of BioCoral is done at Inoteb's facility in Saint Gonnery,
France. This facility, which covers approximately 350 square meters (3150 square
feet), has been ISO 9002 rated since August 1995 and recently passed an ISO
audit conducted by AFAQ, the French national quality assurance agency. On
October 25, 1996, Inoteb was granted, in addition to the ISO 9002 certification,
European Norms 46002 certification for the quality assurance system set up in
the manufacturing process of BioCoral. The Company believes this facility is
adequate to service the Company's present and immediately anticipated needs.
Competition
BioCoral. The Company's BioCoral product competes with (i) natural bone
obtained from autograft procedures and allograft sources and with (ii) two other
synthetic bone products, one marketed in the United States by a company named
Interpore, Inc. a publicly-held company with significantly greater resources and
distribution capabilities than the Company, and another
6
<PAGE>
that was approved by the FDA in May 1993. Autograft and allograft bone have been
used for graft material for a much longer period of time than BioCoral and
similar materials, and in order to increase its future sales of BioCoral, the
Company will have to demonstrate to the medical community the surgical and
patient advantages, safety, efficacy, cost effectiveness and clinical results of
BioCoral.
The Company believes that BioCoral provides an attractive alternative to
autograft and allograft bone graft materials. In an autograft procedure, bone
material is first harvested from another part of the patient's skeleton and
then, in a second procedure, grafted to the site of the bone deficit. The
harvesting procedure increases operating time and expense, and can lead to
complications such as infection, excessive blood loss, chronic pain and
deformity. When an autograft is not feasible or desirable, allograft bone,
typically obtained from a cadaver, can be used. To maintain mechanical and
biological properties, some allograft bone is not sufficiently sterilized to
avoid all risks of disease transmission. Therefore, unlike BioCoral, which is a
sterile and biocompatible material, allograft bone carries the risks of implant
rejection and the transmission of infections agents such as hepatitis and HIV.
The use of BioCoral entails none of these risks, and provides clinical results
comparable to those of autograft material.
In May 1993, a second bone graft substitute was approved by the FDA. This
product consists of hydroxyapatite-calcium phosphate and bovine collagen, which
must be mixed with patients' own bone marrow. The Company believes that this
three-part system is more difficult to use due to the mixing process and has
inferior mechanical qualities. It also requires refrigeration, has a shorter
shelf life and raises the risk of adverse reaction in patients allergic to
bovine collagen. This system is marketed by Zimmer, Inc., a subsidiary of
Bristol-Myers-Squibb, a competitor with significantly greater resources and
distribution capabilities than the Company.
The Company is not aware of the degree to which either Zimmer or
Interpore's products have penetrated the European and Asian markets, but their
significant market presence in the United States and their greater resources
pose a significant obstacle to the Company's ability to successfully market its
products in the United States should it ultimately obtain FDA approval of its
products.
Dental Implant Market. The Company competes with many businesses in the
production and distribution of dental implant systems for rehabilitation of
partially and totally edentulous patients. These businesses compete primarily on
the basis of product performance and price, as well as customer loyalty and
service.
Oral and Maxillofacial Market. BioCoral competes with autograft, allograft
and xenograft, as well as non-porous hydroxyapatite products for repair or
reconstruction of oral and maxillofacial bone structures. In addition, this
product competes with silicone implants for maxillofacial applications.
Companies selling competitive products sometimes also sell dental implants, so
bundling these products is often a strategy. All of these businesses compete
primarily on the basis of product performance and price, as well as on customer
loyalty and service. A
7
<PAGE>
number of the Company's competitors have substantially greater resources, larger
market share and greater research and development capabilities than the Company
and may, therefore, be expected to compete aggressively and successfully in the
markets for the Company's dental implant products.
Management believes that the Company's products are superior to its
competitors' products. The Company has begun to make arrangements for the
commencement of clinical trials for certain of its products with a view toward
FDA approval thereof . In the interim, the Company will focus on increasing its
European and other sales of its products, streamlining its operations, entering
into joint ventures with key strategic partners for distribution of its
products, research and development and the like. No assurance can be had that
any such arrangements will be reached or that they will be profitable.
Governmental Regulation
BioCoral has been approved for marketing in more than 15 countries in
Europe, Korea, South Africa, Canada and Australia. However, only in France and
Italy does BioCoral have a significant market share, 15% and 25%, respectively.
Revenues from these sales have been realized at the Inoteb level and thus were
not included in the Company's 1995 operating data. BioCoral has been approved
for reimbursement by the Tarif Interministeriel des Prestations Sanitaires, the
French national health services agency.
The Company's products are subject to significant government regulation in
the United States and other countries. To test clinically, and to produce and
mass market products for human diagnostic and therapeutic use, the Company must
comply with mandatory procedures and safety standards established by the Food
and Drug Administration ("FDA") and comparable state and foreign regulatory
agencies. Typically, such standards require that products be approved by the
government agency as safe and effective for their intended use before being
marketed for human applications. The approval process is expensive and
time-consuming, and no assurance can be given that any agency will grant
approval of the Company's products or that the length of time the approval
process will take will not be extensive. No clinical testing on humans may be
undertaken in the United States without first obtaining an Investigational
Device Exemption ("IDE") from the FDA.
There are two principal methods by which FDA approval may be obtained to
market regulated products in the United States. One method is to seek FDA
approval through a premarket notification filing under Section 510(k) of the
Food, Drug and Cosmetics Act. Applicants under the 510(k) procedure must prove
that the device for which approval is sought is substantially equivalent to
devices on the market before the Medical Device Amendments of 1976 or devices
approved after the 510(k) procedure. The review period for a 510(k) application
is 90 days from the date of filing the application; if not rejected, within such
90 days, applications are deemed approved.
8
<PAGE>
The alternative method is to obtain premarket approval ("PMA") from the
FDA. Under the PMA procedure, the applicant must obtain an IDE before beginning
the substantial clinical testing required to determine the safety, efficacy and
potential hazards of the products. The review period under the PMA procedure may
last for several years.
The FDA also imposes requirements on manufacturers and sellers of products
under its jurisdiction, such as labelling, manufacturing practices, record
keeping and reporting. There can be no assurance that appropriate approvals from
the FDA will be obtained for sales of any of the Company's products in the
United States. Such failure could have a materially adverse impact upon the
Company.
The Regulation D Offering
The Company conducted an offering of units of its debt and equity
securities in accordance with Regulation D promulgated under the Securities Act
of 1933 from June 1994 through January 31, 1995 (the "Regulation D Offering")
primarily to raise funds needed by the Company to acquire the SIM. In the
Regulation D Offering, the Company sought to raise up to $2,500,000 by the sale
of up to 50 Units (the "Units") at a price of $50,000 per Unit, each Unit
consisting of one $50,000 six month note bearing interest at a rate of 12% per
annum (the "Reg D Notes") and 1,250 shares of the Common Stock of the Company,
$.001 par value per share (the "Common Stock"). The Company sold an aggregate of
39.5 Units in the Regulation D Offering, with an aggregate of $1,975,000 in
proceeds for the Company raised in such offering in consideration for the
issuance of $1,975,000 in face amount of the Reg D Notes and 49,375 shares of
Common Stock. Baraban Capital Corporation ("BCC"), an investment banking firm
and former affiliate of the Company, guaranteed payment of principal and
interest on the Reg D Notes. Baraban Securities Incorporated, a broker dealer
and former affiliate of the Company ("BSI") acted as the broker dealer with
respect to the offering of the Units. In consideration for such activities BSI
received a sales commission of 10% on the Units sold and a nonaccountable
expense allowance equal to 3% on the Units sold. BSI also received 500 shares of
Common Stock of the Company for each Unit sold in the Regulation D Offering, or
an aggregate of 19,750 shares of Common Stock. See "Certain Relationships and
Related Transactions."
An aggregate of $1,775,000 in principal amount and $53,250 of accrued but
unpaid interest became due and payable on the Reg D Notes on April 4, 1995, and
the Company was unable to pay such amounts, and accordingly, defaulted in the
repayment of the Reg D Notes. Societe Financiere du Seujet, an affiliate of
Riccardo Mortara, the Chief Executive Officer and a director of the Company,
agreed to deliver to the holders of the Reg D Notes which have become due and
payable, in exchange for the surrender and cancellation of such Reg D Notes,
one-half of the principal amount due on such Reg D Notes, all of the accrued and
unpaid interest on such Reg D Notes through April 4, 1995 and a new promissory
note for one-half of the original principal amount on such Reg D Notes ("New
Notes").
9
<PAGE>
During the period from April 4, 1995 through June 30, 1996, an additional
60% of the principal amount and all accrued interest through June 30, 1996 was
paid on the New Notes. By letter, dated June 28, 1996, the Company obtained the
consent of most, but not all, of its noteholders, to the extension of the
remaining principal balance of the New Notes until December 31, 1996. There
remains outstanding on the New Notes the principal amount of $517,500.00 and
accrued but unpaid interest of $28,330.00. The Company anticipates repaying the
noteholders in 1997. The Company also intends to seek redress against BCC on
account of its negligence and malfeasance in connection with the Reg D Offering
and otherwise. The Company intends to seek indemnification or contribution from
BCC in connection therewith.
Real Estate Operations
Acquisition of Cabestan. On March 25, 1994 the Company acquired all of the
issued and outstanding capital stock of Cabestan. The Company acquired the stock
of Cabestan for a cash purchase price of approximately $5,500,000. The Company
financed the acquisition through a combination of obtaining a $1,050,000 short
term loan and through capital raised in a Regulation S offering to non-US
investors, which offering had its initial closing on March 23, 1994 with respect
to 630,000 shares of Common Stock with net proceeds to the Company of
$4,536,000. The short term loan bore interest at the rate of 5% per annum and
was repaid in full by the Company prior to its September 30, 1994 due date out
of the proceeds from the Company's Regulation S Offering. The Company raised an
aggregate of $7,022,160 in net proceeds to the Company in its Regulation S
Offering concluded in December 1994.
Concurrently with the Company's acquisition of the stock of Cabestan,
Cabestan acquired the following assets from Bensenville Industrial Park, L.P.
("BIP") for the following considerations: (i) Building #3 in the Bensenville
Industrial Park located adjacent to Chicago's O'Hare Airport ("Building #3") for
a purchase price of $3,631,212 in cash and the assumption of an outstanding
mortgage obligation on this property of $1,876,878; (ii) a 100% beneficial
ownership interest in Building #12 in the Bensenville Industrial Park ("Building
#12") for a purchase price of $1,642,790 in cash and the assumption of an
outstanding mortgage obligation on this property of $2,999,120 and (iii) a 9.3%
limited partnership interest in Bensenville Associates Limited, an Illinois
limited partnership ("BAL") (the "Limited Partnership Interest"), for a purchase
price of $270,000. Riccardo Mortara, a director and the Chief Executive Officer
of the Company is an affiliate of BIP. See "Certain Relationships and Related
Transactions". Building #3 is used as a bulk warehouse/distribution center and
Building #12 is used for office space and as a service center. BAL, the former
owner of the entire Bensenville Industrial Park consisting of 14 buildings in
the Chicago/O'Hare Airport area (the "Bensenville Industrial Park"), of which
Building #3 and Building #12 were a part, is currently the owner of
approximately 12.5 acres of undeveloped land in the Bensenville Industrial Park.
Building #3 and Building #12 are collectively referred to herein as the
"Bensenville Properties." Cabestan currently owns both Building #3 and Building
#12 in fee simple and has entered into a contract to sell same to a non-related
third party.
10
<PAGE>
The opportunity to acquire Cabestan was presented to the Company by Dremer
Holding, Ltd. ("Dremer"), through its President, Riccardo Mortara, who is also
the Company's Chief Executive Officer and a director. All the services Mr.
Mortara rendered to the Company in connection with the acquisition of Cabestan
and of the Bensenville Properties were rendered by Mr. Mortara through Dremer.
Mr. Mortara is the sole officer, director and shareholder of Dremer. Also as
part of the acquisition of Cabestan, Dremer received 1,000 shares of the Series
A Preferred Stock of the Company. The Series A Preferred Stock entitled Dremer
to elect 60% of the members of the Board of Directors of the Company and
effectively afforded Mr. Mortara, after the acquisition of Cabestan, with
effective control of the Company. During 1996, all such Series A Preferred Stock
was converted, together with a cash infusion into the Company of $1,000,000 ,
into 1,000,000 shares of the Company's common stock.
Discontinued Operations - The SIM. On May 31, 1994 the Company entered into a
non-binding letter of intent (the "Letter of Intent") to acquire a 51% ownership
interest in Borgonuovo SIM S.p.A. (the "SIM"), an Italian company with principal
offices located in Milan engaged in the brokerage and asset management business.
A SIM is the Italian equivalent of a U.S. securities brokerage and investment
advisory firm. The purchase price for the 51% interest in the SIM was
approximately $2,000,000 (US). Although the Letter of Intent contemplated the
purchase of the full 51% interest in the SIM at one time at the Closing (as
defined below), the Company acquired an aggregate of 14% of the issued and
outstanding capital stock of the SIM, in increments, between the execution of
the Letter of Intent and the execution of a definitive purchase agreement, for a
pro-rata portion of the approximately $2,000,000 (US) purchase price for the
full 51% interest. On September 12, 1994, there was a simultaneous execution and
closing (the "Closing") of a Stock Purchase Agreement, by and among the Company,
Kialu S.r.l., an Italian company (the "SIM Stockholder") and Alessandro
Bassetti, an individual residing in Milan ("Bassetti") (the "Stock Purchase
Agreement") with respect to the acquisition by the Company of the additional 37%
interest in the SIM for the balance of the $2,000,000 U.S. purchase price, so
that on September 12, 1994 the Company became the owner of a 51% interest in the
SIM. The Stock Purchase Agreement granted to the SIM Stockholder the right to
put the remaining 49% interest in the SIM (which includes the shares owned by
Mr. Bassetti's uncle) to the Company from and after the three year anniversary
date of the Closing. The put option entitles the SIM Stockholder to put the 49%
of the stock of the SIM to the Company at a purchase price of 49% of the net
book value of the SIM at the time of the exercise of the put option.
Owing to disagreements with management of the SIM and the SIM's poor
performance, this investment was written off in its entirety during 1995. The
Company is presently evaluating its options with respect to proceeding against
the SIM Shareholder.
The Regulation S Offering
The Company conducted an offering of its Common Stock outside of the
United States pursuant to Regulation S promulgated under the Securities Act of
1933 from March 1994
11
<PAGE>
through December 1994 (the "Regulation S Offering"). In its Regulation S
Offering, the Company sought to raise up to $40,000,000 through the sale of up
to 5,000,000 shares of its Common Stock at a price of $8.00 per share. An
aggregate of 975,300 shares of Common Stock were sold in the Regulation S
Offering raising aggregate net proceeds for the Company of $7,022,160.
The shares offered in the Regulation S Offering were offered primarily
through Societe Financiere Privee, S.A., a financial services company located
in, and organized under the laws of, Switzerland. Mr. Mortara, the Company's
Chief Executive Officer and a non-U.S. citizen, requested SFP to offer the
shares in the Regulation S Offering to certain of its customers. In addition,
Mr. Mortara offered the shares in the Regulation S Offering on behalf of the
Company directly to persons and entities which are among his personal and
business acquaintances. The Company paid a commission on all shares sold in the
Regulation S Offering by non-affiliates of the Company of 10% or $0.80 per share
sold in the offering. The shares which were offered through Mr. Mortara or his
affiliates were sold at a price of $7.20 per share and no commissions were paid
to Mr. Mortara or his affiliates with respect to such offers or sales.
Most of the sales in the Regulation S Offering were made to Societe
Financiere Privee, S.A., which purchased such shares as the nominee holder for
approximately 166 persons and entities. Mr. Mortara is not an affiliate of
Societe Financiere Privee, S.A., but does have a pre-existing long-term business
relationship with such entity.
Employees
The Company currently has no employees other than its officers and
directors who devote as much time as they believe necessary to carry out the
affairs of the Company. Inoteb currently has 12 employees, all of whom are full
time.
Special Note Regarding Forward-Looking Statements
Statements contained herein regarding, among other things, the dates upon which
the Company anticipates commencing clinical trials for certain of its products
constitute forward-looking statements under the Federal securities laws. Such
statements are subject to certain risks and uncertainties that could cause the
actual timing of such clinical trials or other events to differ materially from
those projected. With respect to such dates, the Company's management has made
certain assumptions regarding, among other things, the successful and timely
completion of pre-clinical tests, obtaining certain approvals of the clinical
trials from the FDA, the availability of adequate clinical supplies, the absence
of delays in patient enrollment and the availability of adequate capital
resources necessary to complete the clinical trials. The Company's ability to
commence clinical trials on the dates anticipated is subject to certain risks.
Undue reliance should not be placed on the dates on which the Company
anticipates commencing clinical trials. These estimates are based upon the
current expectations of Company's management, which may change in the future due
to a large number of potential events, including unanticipated future
developments.
12
<PAGE>
Item 2. Description of Property.
On October 15, 1996, Cabestan entered into an agreement with Brooklyn
Roads, Ltd., an Ontario corporation ("Buyer") based in Toronto pursuant to which
Buyer agreed to acquire the fee interest in all the real property owned by
Cabestan in Bensenville, Illinois for an aggregate consideration of $6,800,000.
Prior to entering into the Agreement, the Company had obtained an informal
valuation of such property at $6,800,000 from an independent major property
manager. The consideration is payable in part by the assumption of an existing
first mortgage loan on the property in the present principal balance of
approximately $4,900,000, and the balance in cash at closing, which is
anticipated to occur in late January 1997. Closing under the contract is subject
to a variety of conditions and contingencies including environmental and
engineering inspections and other due diligence reviews. There was no prior
relationship between the Company and Buyer. While there can be no assurance that
such sale will be consummated, the following information regarding the
properties in Bensenville should be read with the existence of the agreement for
their sale in mind.
Cabestan, Inc. is the owner in fee simple of Building #3 and Building #12
in the Bensenville Industrial Park located adjacent to the Chicago O'Hare
Airport. Building #3 and Building #12 are collectively referred to herein as the
"Bensenville Properties." In addition, Cabestan is the owner of a 9.3% special
limited partnership interest in BAL. BAL, the former owner of the Bensenville
Industrial Park, is now the owner of three parcels of undeveloped land including
a 5-acre tract called Bensenville #16 and two additional parcels of 4.9 and 2.76
acres (collectively, the "Undeveloped Land"). In the opinion of management of
the Company, the Bensenville Properties are adequately covered by insurance.
The Bensenville Properties comprise an aggregate of 158,791 square feet of
office and warehouse space on 10.33 acres, and are part of a 14 building
industrial park containing an aggregate of 1,967,698 square feet of rentable
space on 125 acres developed by Trammel Crow Company and formerly managed by
Trammel Crow MR, Inc. (the "Management Company"). In December 1993, 12 of the 14
buildings in the Bensenville Industrial Park were sold by BAL to a single
purchaser, and the remaining two buildings, the Bensenville Properties, were
distributed to BIP as a partnership distribution in lieu of cash. BIP ultimately
transferred such buildings to Cabestan; The Company had previously entered into
a management agreement with Trammel Crow MR, Inc. (the "Management Agreement")
to manage the Bensenville Properties. The initial term of the Management
Agreement expired on October 5, 1995. Pursuant to the Management Agreement, the
Management Company managed, maintained and provided all operational matters with
regard to the Bensenville Properties in exchange for a commission of 2.6% of the
gross rental receipts actually collected as a management fee. The Company also
pays leasing commissions to the Management Company for all existing lease
tenants in the amount of 2% of gross receipts per year and 7% in the first year
for any new leases entered into.
13
<PAGE>
General Office Space
In addition to the above, the Company maintains executive offices at 14
Quai du Seujet, Geneva, at the offices of SFS. SFS has provided this office
space on a rent-free basis. The Company maintains its US office, on a temporary
basis, in care of its US counsel and is actively seeking alternate office space
in New York City. The Company anticipates needing approximately 1000 square feet
of office space in New York City.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held a special meeting of its shareholders on November 6, 1995
to approve amending the Company's certificate of incorporation to change the
Company's name to BioCoral, Inc. Such matter was passed at the special meeting
and the Company's certificate of incorporation was amended on December 4, 1995.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
At November 1, 1996 there were 5,032,401 shares of the Company's Common
Stock issued and outstanding. A significant portion of the outstanding shares of
the Company are subject to resale restrictions and, unless registered under the
Securities Act of 1933 (the "Act"), or exempted under another provision of the
Act, will be ineligible for sale in the public market. Sales of substantial
amounts of the Common Stock of the Company which are presently restricted in the
public market could adversely affect prevailing market prices.
The following table sets forth information regarding the high and low bid
and asked price for the Company's common stock as reported by NASDAQ on the
Electronic Bulletin Board. Such prices no not necessarily reflect actual
transactions and do not include retail mark-up, markdown or commissions. The
prices set forth below are per share and thereby reflect the one for three stock
dividend declared by the Company in December 1995.
- --------------------------------------------------------------------------------
Quarter High Bid Low Bid High Ask Low Ask
- --------------------------------------------------------------------------------
March 31, 1995 no quotes no quotes no quotes no quotes
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
June 30, 1995 no quotes no quotes no quotes no quotes
- --------------------------------------------------------------------------------
September 30, 7 3 10 9
1995
- --------------------------------------------------------------------------------
December 31, 11 3 10 9
1995
- --------------------------------------------------------------------------------
Holders
As of November 1, 1996 there were approximately 111 holders of record of
the shares of the Company's common stock.
Dividends
The Company has paid no cash dividends on its equity securities to date
and does not anticipate the payment of cash dividends on its equity securities
in the near future. The Company paid a dividend of one share of its common stock
for each three shares owned on December 18, 1995 and has recently declared its
intention to pay another stock dividend of one share for each three shares owned
as of November 6, 1996.
Item. 6. Management's Discussion and Analysis of Business and Results of
Operations
This Management's Discussion and Analysis of Financial Condition and
Results of Operations, as well as several other parts of this Annual Report on
Form 10-K, contain forward-looking statements and information that involve
significant risks and uncertainties. The Company's actual results could differ
materially from those anticipated by such forward-looking statements and
information. Factors that may cause such differences may not be foreseeable by
the company at this time. This Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Company's consolidated financial statements and notes thereto included elsewhere
herein.
Results of Operations
Total revenues for the year ended December 31, 1995 ("FY 1995") were
$1,095,489 as opposed to $760,536 for the year ended December 31, 1994 ("FY
1994"). This increase was due principally to an increase in rental revenues
during FY 1995. The net loss for FY 1995 was $4,349,611 as opposed to $1,344,535
in FY 1994. This was due to the write down during FY 1995 of the Company's
entire interest in the SIM ($1,925,995) and its partial write down ($1,626,186)
of its interest in the Cabestan properties. Excluding these non-recurring items,
the loss for FY 1995 was $797,430 as compared to $1,127,520 for FY 1994. Since
operating expenses were virtually unchanged ($1,892,919 for FY 1995 as opposed
to $1,888,056 for FY 1994) this difference was primarily due to the increase in
rental revenues. In considering these
15
<PAGE>
comparisons, it is important to note that these results arise principally from
the operations of the Bensenville properties which the Company is under contract
to sell. See "Properties".
Financial Condition, Liquidity and Capital Resources
The Company's liquidity was helped during FY 1995 by certain sales of
common stock, in the net aggregate amount of $2,369,600. During 1995, the
Company repaid 80% of the outstanding principal balance of the Reg D Notes,
significantly increasing the Company's liquidity. The Company's liquidity was
also helped during 1996 by the infusion of an additional $1,000,000 into the
Company in connection with the conversion of its Series A Preferred Stock. The
Company has, however, significant cash needs on an ongoing basis during the
short and medium term, resulting primarily from its obligations on the remaining
balance due on the Reg D Notes, a portion of which are currently in default, the
Company's obligations to raise funds for Inoteb's research and development and
its obligation to use 3H's profits to do so. The Company anticipates receiving
net cash proceeds of approximately $1,600,000 from the sale of the Bensenville
properties which is anticipated to close in January 1997. If such closing does
not take place, the Company will need substantial additional cash. The Company
has received indications of interest from certain European financial
institutions for substantial investments in the Company but has not yet entered
into any agreement therefor. The Company's working capital deficit at the end of
FY 1995 amounted to $2,013,221 as opposed to $2,464,830 for FY 1994.
Current Plans of the Company
The Company intends to focus on the marketing and development of its
BioCoral and related products. To obtain approval for the sale of such products
in the United States will require a significant expenditure of capital over a
long period of time. The Company anticipates realizing revenues from 3H's sales
of the BioCoral products in 1997, and will also enable Inoteb to utilize some of
the Company's resources to help promote sales of the products. It is hoped that
such revenues can also be applied to the costs of obtaining FDA approval for the
products. The Company has entered into arrangements with two entities, each of
which is significantly better capitalized than the Company, to share certain of
such costs; however, there can be no assurance that such approval will be
obtained or that the Company will have sufficient funds to obtain such approval,
third party participations notwithstanding. If such is the case, the Company
will focus on the European market where demand is strong and the Company's
market penetration is significant, and will explore other markets as well.
Specifically, the Company intends to continue to explore a variety of
potential applications for its products on a number of different fronts. First,
regarding the autologous glue, the Company intends to clinically test the
product with a number of well-known plastic surgeons utilizing same in their
practices in Europe. The Company anticipates that the initial clinical uses will
be in the facial and reconstructive plastic surgery areas. Testing is expected
to commence
16
<PAGE>
during the first quarter of fiscal 1997, with a view towards beginning
commercial development of the product in Europe during the latter part of fiscal
1997. Second, regarding osteoporosis, the Company intends to continue expanding
the osteodensimatic screening and surgical implants, the results of which have
been highly successful. The Company intends, through the use of a large
European-based clinic, to expand the clinical trials on a wider group of
patients. It is anticipated that, if clinically proven, this unique combination
will substantially alter the current methodology of treatment of osteoporosis.
Third, the Company will continue to develop, through its supply contracts with
third parties, the potential for use of its product in conjunction with growth
factor with a view toward ultimate FDA approval of same for sale in the American
market.
Item 7. Financial Statements
17
<PAGE>
Item 8. Changes In and Disagreement with Accountants on Accounting and
Financial Disclosure :
None.
PART III
Item 9. Directors. Executive Officers, Promoters and Control Persons; Compliance
With Section 16 (a) of the Exchange Act
The following is certain information with respect to directors, executive
officers and key employees of the Company as of November 1, 1996:
Riccardo Mortara, Age 49, Chairman of the B o a r d , C h i e f Executive
Officer and a Director
Nasser Nassiri, Age 33, Secretary, Treasurer and a Director
Each of such persons was elected or appointed for a one-year term to serve
and hold office until their respective successors are elected or appointed.
Effective March 28, 1996, two former directors and officers of the Company, Jehu
Hand and Dempsey K. Mork, resigned their respective positions as officers and
directors of the Company.
Riccardo Mortara is the general manager and director of Societe Financiere
du Seujet, Geneva, Switzerland, a company that provides portfolio management and
financial services to banks, corporations and high-net-worth individuals
primarily in Europe. He is also president of Development Bancorp, Ltd., a US
publicly-traded investment banking concern. From 1989 to 1991, Mr. Mortara
served as the president of a financial services company listed on the Alberta
Stock Exchange. Between the years 1984 and 1991, Mr. Mortara was a director of a
Geneva private portfolio management company in which he is still a co-owner. Mr.
Mortara serves on the boards of five financial services companies. He holds a
Masters of Engineering degree from the Polytechnical University of Turin, Italy.
Nasser Nassiri is and has been for more than the last five years, a
private investor, financial advisor to family investment companies and
pharmaceutical businesses in the Middle East, and a director of various publicly
and privately held companies worldwide. Mr. Nassiri is based in Paris. In
addition, Mr. Nassiri serves as Managing Director of Starratt Resources
(Clarendon) Ltd., a Canadian corporation, and acts as financial consultant to
its parent corporation, Starratt Resources Ltd., a publicly-held Canadian
corporation involved in the production of minerals. From 1994 until 1995, Mr.
Nassiri was also a director of Central Asia Goldfields, a publicly-held Canadian
metals mining company. From 1990 until 1994, Mr. Nassiri
18
<PAGE>
was a director of Contact World Paris, a privately-held international
electronics company. From 1983 to 1987, Mr. Nassiri was a director of Prak
Management, a privately-held Middle East based oil and gas holding company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock to file with the Securities Exchange
Commission initial reports of stock ownership and reports of changes in stock
ownership. Due to administrative oversight, Mr. Mortara was late in reporting,
during three months, certain changes in beneficial ownership which occurred in
1996. Also due to administrative oversight, Mr. Nassiri was late in reporting
his initial statement of beneficial ownership, and one statement of changes in
such position.
Item 10. Executive Compensation
Directors currently do not receive compensation for their duties as
directors.
No compensation has been paid by the Company for the services of its
officers and directors to date. Compensation of the Company's management in the
future will be determined by the Board of Directors. The Board has, however,
agreed to grant each director reimbursement up to $75,000 per annum for expenses
actually incurred by them in connection with their service as such. During 1996,
the Company reimbursed Mr. Mortara an aggregate of $432,061 for expenses
theretofore incurred by him during 1994 and 1995. In addition, there is no
prohibition on advances being made by the Company to its officers and directors
although no such advances have been made to date. Management is not currently
aware of any circumstances under which it would institute a policy of
prohibiting advances from being made to its officers and directors. The
stockholders of the Company will not have the opportunity to vote on or approve
such compensation. There is no maximum dollar amount of compensation that may be
paid to management.
On June 10, 1996, the Company granted to each of Riccardo Mortara and
Nasser Nassiri, option for each of them to purchase up to 125,000 shares of the
Company's common stock at an exercise price of $7.75 per share. The
consideration for the grant of such options was their continued service as
directors of the Company. The options are exercisable at any time during the one
year period following their grant. The option exercise price was the market
price of the shares of the Company's common stock on the date of grant.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information, as of November 1, 1996,
relating to the beneficial ownership of the Company's Common Stock by those
persons beneficially holding more than 5% of the Common Stock, by the Company's
directors and executive officers, and by all of
19
<PAGE>
the Company's directors and executive officers as a group. Unless otherwise
indicated, the address for each person listed below is in care of the Company.
Name and Address Amount and Nature of Percent of Class
Beneficial Ownership
- --------------------------------------------------------------------------------
Societe Financiere du Seujet 1380387 (1) 25.4
- --------------------------------------------------------------------------------
Riccardo Mortara 825000 (2) 14.8
- --------------------------------------------------------------------------------
Nasser Nassiri 125000 (3) 2.2
- --------------------------------------------------------------------------------
All Officers/Directors as a 950000 16.7
Group (2 persons)
- --------------------------------------------------------------------------------
(1) This company holds such shares as nominee for ten beneficial owners of such
shares.
(2) Excludes 1,380,387 shares owned by Societe Financiere du Seujet, as nominee.
Mr. Mortara disclaims any beneficial ownership of any such shares. Includes
125,000 immediately exercisable options. Includes 700,000 shares owned by
Ofinco, S.A., a Panamanian corporation owned by Mr. Mortara. ***
(3) Includes 125,000 immediately exercisable options.
***As of March 29, 1996, Riccardo Mortara, through Ofinco S.A., the
assignee of Dremer, owned 1000 shares of the Company's Series A Preferred Stock
representing all such outstanding shares. On March 29, 1996 the Board of
Directors of the Company agreed to a proposal by Ofinco to convert all such
preferred shares to 1,000,000 common shares, conditioned upon Ofinco infusing an
additional $1,000,000 into the Company. Such conversion was effectuated in its
entirety during 1996, but only 700,000 of such shares had been issued as of
November 1, 1996.
Item 12. Certain Relationships And Related Transactions.
During 1996, the Company reimbursed Riccardo Mortara, its Chairman and a
director, an aggregate of $432,061.00 for expenses theretofore incurred by him
in connection with the Company's business. In addition, during 1996, the Company
granted stock purchase options to each of Riccardo Mortara and Nasser Nassiri.
See Item 10 - Executive Compensation.
The Company acquired 3H from two entities which are clients of Societe
Financiere du Seujet, the financial services company of which Riccardo Mortara,
a director of the company and its Chairman, is the owner. Mr. Mortara did not
receive any compensation in connection with
20
<PAGE>
such acquisition, and Mr. Mortara disclaims any beneficial ownership of either
of such entities or of any of the Company's securities owned by such entities.
Dremer, for services rendered to the Company through Dremer's President,
Riccardo Mortara, received 1,000 shares of the Series A Preferred Stock of the
Company. Services rendered by Mr. Mortara through Dremer included the
negotiation and structuring of the acquisition of the Bensenville Properties by
Cabestan, and the negotiation and structuring of the acquisition by the Company
of Cabestan. Riccardo Mortara, the Chief Executive Officer and a director of the
Company, is the sole officer, director and shareholder of Dremer. During 1996,
all such shares of Series A Preferred Stock were converted into shares of common
stock. See "Business- Discontinued Operations".
Cabestan acquired Building #3 from BIP for a purchase price of $3,631,212
in cash and the assumption of an outstanding mortgage obligation on this
property of $1,876,878. In addition, Cabestan acquired its beneficial ownership
interest in Building #12 from BIP (which interest became a fee simple ownership
interest on October 5, 1994), for a purchase price of $1,642,790 in cash and the
assumption of an outstanding mortgage obligation on this property of $2,999,120.
Finally, Cabestan acquired its 9.3% limited partnership interest in Bensenville
Associates Limited, an Illinois limited partnership ("BAL") from BIP for a
purchase price of $270,000. BIP originally acquired the Bensenville Properties
in December 1993 as part of a liquidating partnership distribution from BAL. BIP
held the 9.3% special limited partnership interest in BAL prior to the transfer
of this interest to Cabestan on March 25, 1994. Mr. Mortara is an officer and
director of the corporate general partner of BIP. Mr. Mortara is also an officer
and director of Cabestan.
During 1995, the Company entered into an oral Administrative Services
Agreement with BCC for a term of three years commencing April 1, 1994. Pursuant
to the Administrative Services Agreement BCC provided the Company with certain
administrative services, including the maintenance of an office at the offices
of BCC, the provision of telephone and fax services, and the furnishing of
employees of BCC from time to time to perform administrative functions such as
filing, record keeping and secretarial services for the Company. As compensation
for such services and office space, BCC received $5,000 per month. The
compensation payable to BCC under the Administrative Services Agreement was not
reached by arms' length negotiations and therefore may be on terms not as
favorable to the Company than if such agreement were entered into by the
Company. Both these arrangements were terminated in April 1995.
Also during 1995, the Company and Royalty Management Company ("RMC"), an
affiliate of BCC, entered into an oral agreement pursuant to which RMC provided
oversight management services with respect to the Bensenville Properties . In
consideration for the oversight management services which it provided RMC
received $250 per month per building, or a total of $500 per month or $6,000 per
year. In addition, RMC received a one-time initial start-up fee for its
oversight management services of $6,000. Stuart S. Greenberg, then an officer
and director of the Company, was then an officer and director of RMC. Claudine
L. Kalin and John J. Oppelt, then officers of the Company were also then
officers of RMC. The fees paid to RMC under this
21
<PAGE>
agreement were not reached by arms' length negotiations and therefore, may not
have been on terms as favorable to the Company than if such agreement had been
entered into with an unaffiliated third party. The arrangement with RMC was
terminated in April 1995.
BSI, a former affiliate of the Company and a SEC-registered broker dealer,
served as the broker-dealer with respect to the Company's Regulation D Offering.
An aggregate of 39.5 Units were sold in the Regulation D Offering at a price of
$50,000 per Unit for aggregate proceeds of $1,975,000. In connection with such
offering, BSI received a commission of 10% on all Units sold in the offering
plus 3% of the aggregate proceeds of the offering as a non-accountable expense
allowance. In addition, BSI received 500 shares of the Common Stock of the
Company for each Unit sold, or an aggregate of 19,750 shares of Common Stock.
The commissions and other compensation paid to BSI in connection with the
Regulation D Offering were not arrived at by arms' length negotiations and
therefore may not have been on terms not as favorable to the Company than if
such offerings had been conducted by broker dealers unaffiliated with the
Company.
Societe Financiere du Seujet, an affiliate of Riccardo Mortara, agreed to
lend the Company up to approximately $1,000,000 in order to enable the Company
to pay to holders of the Reg D Notes repayment of a portion of the principal due
on such notes, and all of the accrued but unpaid interest on such notes, which
notes were not paid when due by the Company. See "Business - The Regulation D
Offering."
BCC guaranteed payment of interest and principal on Reg D Notes issued by
the Company in connection with its Regulation D Offering. See "Business-- The
Regulation D Offering."
The Company, through IMMO Distribution, in September 1994 made a passive
investment of approximately $600,000 U.S. in PEMP Investment Advisers, Inc.
("PEMP"), a company with offices in Montreal which offers financial and tax
planning services to private individuals and entities. For its initial
investment in PEMP, IMMO Distribution acquired a PEMP "network" consisting of a
randomly chosen group of PEMP clients, and was entitled to receive a percentage
of the annual financial management and other fees paid to PEMP by the clients
included in IMMO Distribution's "network." The investment in PEMP's network was
converted by IMMO Distribution into a loan in December 1994 with a variable rate
of interest. This loan was converted into 800,000 shares of the preferred stock
of PEMP in June 17, 1995, which preferred shares are entitled to an annual
cumulative fixed dividend at the rate of 10% per annum. Although Mr. Mortara has
had prior business dealings with PEMP, neither Mr. Mortara, nor any officer or
director of the Company, is an affiliate of PEMP.
There are no arrangements, agreements or understandings between
non-management shareholders and the Company's management under which
non-management shareholders may directly or indirectly participate in or
influence the management of the
22
<PAGE>
Company's affairs. There are no arrangements, agreements or understandings
pursuant to which non-management shareholders have agreed to exercise their
voting rights to continue to elect the current directors to the Company's Board
of Directors.
PART IV
Item 13. Exhibits
(a) See Index to Exhibits. The Exhibits therein listed and attached
hereto and the Exhibits therein incorporated by reference are filed as part of
this report.
(b) Reports on Form 8-K. -- Filed December 21, 1995, May 23, 1996
and October 15, 1996.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BIOCORAL, INC.
Date: 12/18/96 By: /s/ Riccardo Mortara
- -------------- ---------------------
Riccardo Mortara , Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Signature Title Date
s/ Riccardo Mortara
- -------------------
Riccardo Mortara Chairman of the Board 12/18/96
and a director
s/ Nasser Nassiri
- -----------------
Nasser Nassiri Treasurer, Secretary and 12/18/96
a director
24
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
I N D E X
PAGE
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994 F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994 F-5/6
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8/18
* * *
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders
BioCoral, Inc.
We have audited the accompanying consolidated balance sheet of BIOCORAL, INC. (a
Delaware corporation) AND SUBSIDIARIES as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year 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 audit. The consolidated financial statements
of BioCoral, Inc. and Subsidiaries as of and for the year ended December 31,
1994 were audited by other auditors whose report dated April 14, 1995 expressed
an unqualified opinion on those statements. As discussed in Note 1, the Company
has restated its 1994 consolidated financial statements to account for a segment
of its business as a discontinued operation. The prior auditors reported on the
1994 consolidated financial statements before the restatement.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BioCoral,
Inc. and Subsidiaries as of December 31, 1995, and their results of operations
and cash flows for the year then ended, in conformity with generally accounting
principles.
/s/ J.H. COHN LLP
-----------------
J.H. COHN LLP
Englewood Cliffs, New Jersey
November 15, 1996
F-2
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
------ ---------- -----------
Current assets:
Cash $ 633,305 $ 99,529
Prepaid expenses and other current assets 89,314 36,816
---------- -----------
Total current assets 722,619 136,345
Property and equipment, at estimated net
realizable value in 1995 and cost in 1994,
net of accumulated depreciation of $323,632
and $138,952 6,601,379 8,407,645
License fees, net of accumulated amortization
of $61,906 1,423,845
Investment in limited partnership, at equity 174,363 270,000
Investment in nonmarketable securities 600,000 600,000
Deferred charges, net of accumulated amortiza-
tion of $90,618 172,800 263,418
Net assets of discontinued operations 1,925,995
Other assets 1,542 54,238
---------- -----------
Totals $9,696,548 $11,657,641
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of mortgage payable $ 107,700 $ 98,795
Notes payable 517,500 1,800,000
Accounts payable and accrued liabilities 2,025,149 642,690
Payables to related party 85,491 59,690
---------- -----------
Total current liabilities 2,735,840 2,601,175
Tenant security deposits 50,654 59,508
Mortgage payable, net of current portion 4,766,852 4,874,552
---------- -----------
Total liabilities 7,553,346 7,535,235
---------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000
shares authorized; 1,000 shares issued
and outstanding, 1 1
Common stock, $.001 par value; 20,000,000
shares authorized; 5,913,316 and 2,067,377
shares issued and outstanding 5,913 2,067
Additional paid-in capital 9,394,020 7,027,459
Accumulated deficit (7,256,732) (2,907,121)
---------- -----------
Total stockholders' equity 2,143,202 4,122,406
---------- -----------
Totals $9,696,548 $11,657,641
========== ===========
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
Revenues:
Rental revenue $ 1,066,530 $ 656,018
Other income 28,959 104,518
----------- -----------
Totals 1,095,489 760,536
----------- -----------
Operating expenses:
Interest (including amortization of loan
fees) 901,873 852,278
Depreciation and amortization of property
and equipment 184,680 138,952
Professional fees 349,886 412,672
Property taxes 125,805 90,896
Other operating expenses 330,675 393,258
----------- -----------
Totals 1,892,919 1,888,056
----------- -----------
Loss before other expenses (797,430) (1,127,520)
----------- -----------
Other expenses:
Write-down of property to estimated net
realizable value 1,626,186
Cost of terminated acquisitions 109,635
----------- -----------
Totals 1,626,186 109,635
----------- -----------
Loss from continuing operations (2,423,616) (1,237,155)
Discontinued brokerage operations:
Loss from operations (107,380)
Loss on disposal (1,925,995)
-----------
Net loss $(4,349,611) $(1,344,535)
=========== ===========
Loss per common share:
Loss from continuing operations $ (.96) $ (.70)
Loss from discontinued operations (.77) (.06)
----------- -----------
Net loss per common share $ (1.73) $ (.76)
=========== ===========
Weighted average common shares outstanding 2,517,613 1,771,536
=========== ===========
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
Number Number Additional Total
of of Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1994 754,844 $ 755 $ 491 $ (311) $ 935
Contribution to
capital 45 45
Cancellation of
common shares
on March 25, 1994 (533,333) (534) 534
Preferred shares
issued for
services 1,000 $1 6,012 6,013
Excess of purchase
price over his-
torical cost of
properties ac-
quired from com-
monly controlled
related party (1,562,275) (1,562,275)
Sale of common
stock through
Regulation S
offering, net of
issuance costs 1,733,866 1,734 7,020,426 7,022,160
Issuance of common
stock in connec-
tion with Regula-
tion D debt offer-
ing 112,000 112 (49) 63
Net loss (1,344,535) (1,344,535)
----- --- --------- ------ ---------- ----------- -----------
Balance, December
31, 1994, as ad-
justed 1,000 1 2,067,377 2,067 7,027,459 (2,907,121) 4,122,406
</TABLE>
F-5
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- -----------------
Number Number Additional Total
of of Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995, as adjusted 1,000 $1 2,067,377 $2,067 $7,027,459 $(2,907,121) $4,122,406
Cancellation of com-
mon shares issued
in 1994 (15,798) (16) 16
Issuance of common
stock in connec-
tion with Regula-
tion D debt offer-
ing 12,444 12 (5) 7
Sales of common
stock through
Regulation S
offering, net of
issuance costs 471,514 472 2,369,128 2,369,600
Issuance of common
stock in acquisi-
tion of subsidiary 1,422,223 1,422 (622) 800
Issuance of common
stock in terminated
acquisition (can-
celled in 1996) 1,955,556 1,956 (1,956)
Net loss (4,349,611) (4,349,611)
----- -- --------- ------ ---------- ----------- ----------
Totals 1,000 $1 5,913,316 $5,913 $9,394,020 $(7,256,732) $2,143,202
===== == ========= ====== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
Operating activities:
Net loss $(4,349,611) $(1,344,535)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 184,680 138,952
Amortization of deferred charges 90,618
Amortization of financing costs 62,335 9,739
Write-down of property 1,626,186
Loss from discontinued operations 1,925,995 (16,348)
Other 6,398
Changes in operating assets and liabili -
ties:
Prepaid expenses and other current
assets (52,498) (89,082)
Other assets 52,267
Accounts payable and accrued liabilities 292,708 590,854
Tenant security deposits (8,854) 59,508
----------- -----------
Net cash used in operating activi-
ties (169,776) (650,912)
----------- -----------
Investing activities:
Purchase of building and improvements, net
of cash acquired and mortgage obligation
assumed (4,917,818)
Initial licensing fee payment (396,000)
Distribution from limited partnership 89,239
Purchase of nonmarketable securities and
other investments (870,000)
Purchase of 51% interest in brokerage
operations (2,071,897)
Advances from related party 25,801 59,690
Other (4,600) (4,123)
----------- -----------
Net cash used in investing activi-
ties (285,560) (7,804,148)
----------- -----------
Financing activities:
Proceeds from sale of common stock 2,370,407 7,802,400
Costs associated with sale of common stock (780,240)
Net proceeds from short-term obligations 2,882,835
Principal payments on short-term obligations (1,282,500) (1,031,000)
Principal payments on mortgage obligations (98,795) (56,743)
Deferred loan fees (263,418)
----------- -----------
Net cash provided by financing
activities 989,112 8,553,834
----------- -----------
Net increase in cash 533,776 98,774
Cash, beginning of year 99,529 755
----------- -----------
Cash, end of year $ 633,305 $ 99,529
=========== ===========
Supplemental disclosure of cash flow data:
Interest paid $ 580,593 $ 383,350
=========== ===========
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies:
Business:
BioCoral, Inc. ("BioCoral") was originally incorporated under the
laws of the State of Delaware on May 4, 1992 as Hermeneutics
Corporation (it was also formerly named IMMO-Finance Corporation).
BioCoral was originally organized to be a "blind pool" or "blank
check company" for the purpose of either merging with or acquiring
an operating company. BioCoral was a "development stage company" for
accounting purposes until March 25, 1994 when it acquired all of the
issued and outstanding stock of Cabestan, Inc. ("Cabestan"), which
concurrently acquired commercial real estate properties from a
commonly controlled related party.
During 1994, BioCoral also purchased, from a related party, 51% of
the outstanding stock of Borgonuovo S.I.M. S.p.A. (the "SIM") which
is headquartered in Milan, Italy and operates a brokerage business
that is equivalent to the business conducted by brokers and dealers
in securities in the United States. The Company effectively
discontinued its brokerage operations and abandoned its interest in
the SIM as of January 1, 1995. Accordingly, the results of brokerage
operations have been shown separately as discontinued operations in
the accompanying consolidated statements of operations.
During 1994, BioCoral also formed IMMO-Finance Distribution Limited
("IMMO Limited"), an Irish corporation, which holds an investment in
nonmarketable securities of a related Canadian financial advisory
services company (see Notes 2 and 6).
During 1994, BioCoral filed a registration statement under the
Securities Exchange Act of 1934 (the "Exchange Act") and as a result
it became a "public company" that is required to file periodic
reports with the United States Securities and Exchange Commission.
During 1995, BioCoral acquired 3H Human Health Hightech Public
Limited Company ("3H"), another Irish corporation, which intends to
develop biomaterials operations, whereby it will manufacture and
market bone substitute materials made from coral and other
orthopedic, oral and maxillofacial products (see Note 2). Such
products will be marketed outside the United States. During 1995, 3H
acquired the worldwide licensing rights, exclusive of the rights in
France, for the marketing of certain bone substitute products under
the name BioCoral (see Notes 5 and 13). The Company did not generate
any significant amount of revenues or expenses from biomaterials
operations in 1995.
BioCoral and its subsidiaries are referred to collectively herein as
the "Company."
F-8
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Business (concluded):
Riccardo Mortara is the chairman of the Board of Directors and chief
executive officer of the Company. As of December 31, 1995, Mr.
Mortara controlled 100% of the outstanding shares of preferred stock
of the Company which comprised 60% of its voting shares (see Note
12).
Capitalization:
In December 1995 and November 1996, the Board of Directors of the
Company declared four for three stock splits on the Company's common
stock effected in the form of stock dividends which were paid on
December 18, 1995 and December 16, 1996, respectively. All common
share and per share amounts have been retroactively restated to
reflect the effects of the four for three stock splits.
On May 4, 1992, the Company issued 711,111 shares of common stock
for $500. During 1993, the Company sold 43,733 shares of common
stock at $.0056 per share in cash to 28 accredited and 29
nonaccredited persons. These transactions did not involve a public
offering or an underwriter and, accordingly, were exempt from the
registration requirements of the Securities Act of 1933 (the
"Securities Act") pursuant to Section 4(2) thereof. On March 25,
1994, the Company cancelled 533,333 of the 711,111 shares initially
issued.
The Company sold 1,733,866 and 471,514 shares of common stock
outside the United States and received net proceeds of $7,022,160
and $2,369,600 in 1994 and 1995, respectively, through an offering
that was exempt pursuant to Regulation S of the Securities Act. The
Company sold 36 units and 3.5 units in 1994 and 1995, respectively,
through an offering that was exempt pursuant to Regulation D of the
Securities Act. Each unit consisted of a six month, 12% note (the
"Regulation D note") in the principal amount of $50,000 and 2,223
shares of common stock. As a result the Company received net
proceeds of $1,800,000 and $175,000 and issued 112,000 and 12,444
shares of common stock in 1994 and 1995, respectively.
On March 23, 1994, the Company used a portion of such net proceeds
and the net proceeds from a short-term renewable loan to purchase
common stock from and a 100% interest in Cabestan, which
concurrently used the funds it received from the Company to purchase
commercial real estate properties from a commonly controlled related
party (see Note 2).
On September 12, 1994, the Company used a portion of the net
proceeds from the Regulation S and Regulation D offerings as part of
the consideration for the purchase of its 51% interest in the
brokerage operations.
F-9
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Basis of presentation:
As shown in the accompanying consolidated financial statements, the
Company incurred significant losses from continuing and discontinued
operations in 1995 and 1994. As a result, the Company had a working
capital deficiency of $2,013,221 and an accumulated deficit of
$7,256,732 at December 31, 1995. The Company will need additional
working capital to develop profitable biomaterials operations. In
the absence of mitigating circumstances, these matters would raise
substantial doubts about the Company's ability to continue as a
going concern.
During 1996, the Company received $1,000,000 in connection with the
issuance of 1,333,333 shares of common stock to the Company's
principal stockholder and the cancellation of all of the outstanding
preferred stock of the Company. In addition, the Company entered
into an agreement in 1996 for the sale of its real estate properties
consummation of which is subject to various terms and conditions. If
the sale is consummated the Company will receive net cash proceeds
of approximately $1,600,000. As a result, management believes that
the Company will be able to continue to operate through at least
December 31, 1996; however, management believes that the Company
probably will need to raise additional funds for working capital and
other purposes through additional debt or equity financing to
sustain and expand its operations thereafter. Management cannot
assure that such financing will be available.
Principles of consolidation:
The consolidated financial statements include the accounts of
BioCoral and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
F-10
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Cash:
At December 31, 1995 and 1994, substantially all of the Company's
cash was held in foreign banks.
Property and equipment:
Property and equipment are generally stated at cost, net of
accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets
(39 years for commercial properties and three to ten years for
equipment). Effective as of September 30, 1995, the carrying value
of property and equipment was reduced to estimated net realizable
value pursuant to Statement of Financial Accounting Standards No.
121 based on the terms of a 1996 contract for the sale of the
property and equipment (see Notes 4 and 13).
License fees:
License fees were recorded at cost and are being amortized using the
straight-line method over 15 years.
Deferred charges:
Deferred charges consist principally of loan fees which are
amortized to interest expense using the straight-line method (which
does not differ materially from the interest method) over the terms
of the related loans.
Investment in limited partnership:
The Company accounts for its investment in a limited partnership
using the equity method and, accordingly, the investment is carried
at cost adjusted for the Company's proportionate share of the
partnership's undistributed earnings or losses.
Advertising:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations were not material
in 1995 and 1994.
Income taxes:
The Company accounts for income tax pursuant to the asset and
liability method which requires deferred income tax assets and
liabilities to be computed annually for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods
in which the temporary differences are expected to affect taxable
income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
The income tax provision or credit is the tax payable or refundable
for the period plus or minus the change during the period in
deferred tax assets and liabilities.
F-11
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (concluded):
Net loss per common share:
Net loss per common share is computed based on the net income or
loss applicable to common stock divided by the weighted average
number of common shares outstanding during each period. The weighted
average number of common shares outstanding in 1995 was reduced to
reflect the cancellation of shares in 1996 attributable to the
termination of an agreement to acquire another company (see Note
13). No stock options or other common stock equivalents were
outstanding during 1995 and 1994.
Reclassifications:
Certain accounts in the 1994 consolidated financial statements have
been reclassified to conform to 1995 presentations.
Note 2 - Acquisitions and newly formed entities:
Cabestan was formed in February 1994 for the purpose of owning and
operating commercial real estate. On March 25, 1994, Cabestan
purchased land, two buildings and a 9.3% interest in a limited
partnership that owns undeveloped land from Bensenville Industrial
Park, L.P ("BIPLP"), a commonly controlled company, for the payment
of $5,544,000 in cash and the assumption of a $4,875,998 mortgage
note on the acquired buildings. The assumption of the mortgages is a
noncash transaction that is not reflected in the 1994 consolidated
statement of cash flows. Mr. Mortara, the controlling stockholder of
the Company, is an executive officer and sole director of BIPA,
Inc., the general partner of BIPLP.
The acquisition was accounted for as a purchase and, accordingly,
the results of operations of Cabestan have been included in the
consolidated totals from the date of acquisition. The purchase price
of $9,858,237 exceeded BIPLP's historical cost of the properties by
$1,562,275 which was, effectively, a distribution to a related party
for financial accounting purposes and, therefore, charged directly
to stockholders' equity.
On September 12, 1994, the Company completed the acquisition of 51%
of the SIM in a business combination accounted for as a purchase
(see Note 1). The purchase price was $2,043,026 which exceeded the
fair value of the net assets acquired by $1,281,018. The assets
acquired included a cash balance of $1,107,799. The Company
discontinued its brokerage operations, abandoned the related assets
and recognized a loss on such disposal of $1,925,996 effective as of
January 1, 1995 (see Note 15).
F-12
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions and newly formed entities (concluded):
During 1996, the Company entered into a contract to sell the land
and buildings that Cabestan had acquired from a related party in
1994. The Company recorded a loss of $1,626,186 in 1995 in
connection with the sale (see Notes 4 and 13).
On August 2, 1995, the Company issued 1,422,223 shares of common
stock to acquire all of the outstanding common shares of 3H. Prior
to the exchange, 3H's only activity was the acquisition of an option
issued by Inoteb SA for the purchase of a license that would give 3H
the exclusive right to distribute BioCoral outside of France. 3H
exercised the option in 1995 (see Note 5). Since neither the shares
issued by the Company nor the rights acquired by 3H had an
objectively determinable value at the date of the exchange, the
Company valued the shares issued and the rights initially acquired
on the basis of the par value of the shares issued of $1,422.
Note 3 - Income taxes:
As of December 31, 1995, the Company had net operating loss
carryforwards of approximately $1,432,000 available to reduce future
Federal taxable income which, if not used, will expire at various
dates through December 31, 2010. Due to changes in the ownership of
the Company, the utilization of these loss carryforwards may be
subject to substantial annual limitations. The Company also has net
operating loss carryforwards available for state income tax
purposes.
Deferred income tax assets attributable to these carryforwards and
the related valuation allowance consists of the following:
1995 1994
---------- --------
Federal $1,237,759 $339,745
State 338,563 25,046
---------- --------
Totals 1,576,322 364,791
Less valuation allowance 1,576,322 364,791
---------- --------
Totals $ - $ -
========== ========
The Company has offset the deferred tax asset of $1,576,322
attributable to the potential benefits from such net operating loss
carryforwards as of December 31, 1995 by an equivalent valuation
allowance due to the uncertainties related to the extent and timing
of its future taxable income. There were no other material temporary
differences as of that date.
F-13
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Property and equipment:
Property and equipment consists of the following:
1995 1994
---------- ----------
Land $1,373,253 $1,373,253
Buildings and improvements 7,175,701 7,171,101
Office equipment 2,243 2,243
---------- ----------
8,551,197 8,546,597
Less accumulated depreciation 323,632 138,952
---------- ----------
8,227,565 8,407,645
Less effect of write-down of
property and equipment to
estimated net realizable value 1,626,186
--------- ----------
Totals $6,601,379 $8,407,645
========== ==========
A significant amount of the Company's activities are in the Chicago
area. Accordingly, the Company's tenants and customers are located
in the same geographic area, and the Company is at risk with respect
to the effects of changes in the economic climate and to
fluctuations in the real estate market for that region.
During 1996, the Company entered into a contract to sell the
buildings, equipment and land owned by Cabestan (see Note 13). In
connection with the sale, the Company has determined that the
carrying value of such assets exceeded their estimated net
realizable value. Accordingly, a loss of $1,626,186, which
represents the excess of the net carrying value of $8,227,565 over
the estimated net realizable value of $6,601,379, was charged to
results of operations in 1995.
Note 5 - Licensing fees:
3H entered into a 15 year licensing agreement in 1995 for the
worldwide marketing rights, outside of France, for certain medical
products produced by Inoteb SA, a French corporation. The agreement
requires 3H to pay aggregate licensing fees of $1,485,751. As of
December 31, 1995, the Company had paid $396,000 to Inoteb SA and
had included $1,089,751 for the remaining installments in accounts
payable (the unpaid installments have been accounted for as a
noncash transaction in the 1995 consolidated statement of cash
flows). Subsequent to December 31, 1995 and through November 15,
1996, approximately $770,000 had been paid under the contract and
$320,000 was to be paid by December 31, 1996.
F-14
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Investment in nonmarketable securities:
In September 1994, IMMO Limited invested $600,000 in PEMP, Inc.
("PEMP"). The investment was in the form of a loan at December 31,
1994. It was converted into nonmarketable preferred shares during
1995 which are entitled to an annual cumulative 10% dividend. PEMP
is a Canadian financial advisory firm and an affiliate of PEMP
Investment Advisors, Inc., a beneficial owner of 9.7% of the
Company's common stock.
Note 7 - Leases:
The Company is the lessor of commercial space with a net carrying
value of approximately $6,600,000 at December 31, 1995 under
operating leases with terms of up to six years. Most of the leases
contain clauses for reimbursement of real estate taxes, maintenance,
insurance and certain other operating expenses of the properties.
Income from leases is recognized on a straight-line basis regardless
of when payment is due.
Future minimum rents to be received in each of the years subsequent
to December 31, 1995 are as follows:
Year Ending
December 31, Amount
------------ ------
1996 $ 664,356
1997 433,113
1998 386,981
1999 308,664
----------
Total $1,793,114
==========
The above amounts reflect the assumption that all leases which
expire during this period will not be renewed and, accordingly,
neither minimal rentals nor rentals from replacement tenants are
included.
Note 8 - Commitments and contingencies:
The Company has an agreement with Trammell Crow to manage the two
buildings owned by Cabestan. The agreement provides for Trammell
Crow to manage, maintain and provide all operational matters with
regard to Cabestan's properties. In return, Trammell Crow is
compensated with a commission of 2.6% of the gross rental receipts
as a management fee. The Company must also pay a leasing commission
to Trammell Crow for all existing lease tenants in the amount of 2%
of gross receipts per year, and 7% in the first year for any new
leases acquired. The Company is required to reimburse Trammell Crow
for the ordinary expenditures it incurs in managing the properties.
F-15
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Short-term borrowings:
As of December 31, 1994, the outstanding principal balance of the
Regulation D notes was $1,800,000. As of April 4, 1995, the Company
defaulted with respect to the payment of Regulation D notes with a
principal balance of $1,775,000 and accrued but unpaid interest of
$53,250 and, accordingly, such notes became due and payable. In
August 1995, the Company paid 80% of the principal balance and was
able to negotiate an extension of the due date.
As of December 31, 1995, the outstanding principal balance of the
Regulation D notes was $517,500. Because of the defaults and the
related circumstances, management of the Company could not determine
the fair value of the Regulation D notes as of December 31, 1995.
The due date for substantially all of the Regulation D notes has
subsequently been extended to December 31, 1996.
Note 10- Long-term debt:
Long-term debt consists of a mortgage note with a principal balance
of $4,874,533 at September 30, 1995, bearing interest at 8.66%,
which is payable in monthly installments of $43,802 through April
1999. The mortgage note is secured by buildings with a net carrying
value of approximately $6,800,000 at December 31, 1995.
Principal payment requirements on long-term debt in each of the
years subsequent to December 31, 1995 are as follows:
Year Ending
December 31, Amount
------------ ------
1996 $ 107,700
1997 117,405
1998 127,985
1999 4,521,463
----------
Total $4,874,553
==========
Management of the Company believes that the 8.66% interest rate on
the mortgage note approximates the interest rate the Company would
have paid on an equivalent mortgage loan obtained as of December 31,
1995; accordingly, it also believes that the carrying value
approximated the fair value of the mortgage note as of that date.
F-16
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11- Stock option plan:
On May 4, 1992, the Company adopted a stock option plan (the "Plan")
pursuant to which options to purchase an aggregate of up to
2,000,000 shares of common stock may be issued. There were no
outstanding options at December 31, 1995, and no shares were issued
under the Plan during 1995 and 1994.
Note 12- Preferred stock:
The 1,000 shares of nonconvertible, Series A preferred stock
outstanding at December 31, 1995 were owned by Dremer Holding, Ltd.
which is controlled by Mr. Mortara. Holders of the Series A
preferred stock had the right to elect 60% of the members of the
Company's Board of Directors. In all other respects, the holder of
the shares of the Series A preferred stock had the same rights and
preferences as holders of the common stock. The Series A preferred
shares were cancelled in 1996 (see Note 13).
Note 13- Subsequent events:
During May 1996, the 1,000 shares of Series A preferred stock
outstanding at December 31, 1995 were cancelled and 1,333,333 shares
of common stock were sold to the holder for $1,000,000.
In connection with the acquisition of the rights to market certain
biomedical materials in 1995 (see Note 5), the Company also obtained
an option to acquire a controlling interest in the licensor, Inoteb
SA, which is a French medical products manufacturer and developer.
In July 1996, the Company acquired 51.5% of the common stock of
Inoteb SA, and bonds that are convertible into another 4.5% of its
common stock, in exchange for 1,840,516 shares of common stock of
the Company. The Company has requested the conversion of bonds. The
Company also agreed to reinvest after tax profits, if any, up to a
specified maximum amount, in the operations of Inoteb SA and use its
best efforts to raise additional capital.
In October 1996, the Company entered into an agreement to sell the
real estate owned by Cabestan for approximately $6,800,000 before
costs directly related to the sale (see Note 4). The sale is subject
to certain conditions and contingencies.
The Company had issued 1,955,556 common shares in 1995 in connection
with a proposed acquisition of a new subsidiary. The acquisition
proposal was terminated and the shares were cancelled in 1996.
F-17
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14- Prior period adjustment:
The accompanying 1994 consolidated financial statements have been
restated to record additional travel expenses incurred by an officer
and stockholder of the Company. The effect of the correction of this
error was to increase the net loss by $237,634 ($.13 per share).
Note 15- Discontinued operations:
The assets and liabilities of the brokerage operations that were
discontinued effective as of January 1, 1995 consisted of the
following at December 31, 1994:
Cash $ 7,088
Marketable securities 2,495,026
Accounts receivable and prepaid expenses 365,091
Loans receivable 722,744
Income tax refund receivable 332,266
Related party receivable 879,607
Property and equipment 371,487
Goodwill 1,271,366
Other assets 27,361
Accounts payable and accrued liabilities (3,049,374)
Other liabilities (316,139)
Loans payable (476,141)
Minority interest (704,387)
----------
Total $1,925,995
==========
* * *
F-18
AGREEMENT
by and between
INOTEB, S.A.
3, Villa de l'Industrie
93400 Saint-Ouen
France ("Inoteb")
and
3H HUMAN HEALTH HIGHTECH
PUBLIC LIMITED COMPANY
Company registered at Dublin under number 228980
with head office:
ICC House, 17 Dame Street, Dublin 2
Ireland ("3H")
It is agreed:
Art. 1 Exclusivity
Inoteb grants to 3H, who agrees, the exclusive and unique distribution licence
of all presently manufactured products of Inoteb. The future products are
handled at articles 18 and 19. Under those conditions, they are an integral part
of the agreement.
Art. 2 Territory
The rights granted by Inoteb to 3H are for the whole world except France.
Art. 3 Duration
The agreement is concluded for a minimum duration of 15 years. It will
nevertheless automatically be extended for two years as long as Inoteb will
manufacture the products concerned by the agreement, on the one hand, and as
long as the patents that protect Inoteb's products will be valid, on the other
hand.
1
<PAGE>
Each party will have the right to denounce this renewal by registered letter
sent 6 months at least before the end of the current period.
Art. 4 Patents
The patents mentioned under article 3 are mentioned in the exhibit 1 considered
as part of the agreement.
All complementary patents or improvements that Inoteb will have will be listed
on the exhibit 2.
The conditions of the acquisition of the exploitation of emption or preemption
of the rights are defined in the article 18 and 19. The exhibit 2 is fully part
of the present agreement.
Art. 5 Production
The rights granted by Inoteb to 3H do not concern the manufacture of the product
which is the exclusive right of Inoteb
But on the other hand, as soon as Inoteb will stop the production of one of its
products concerned by the agreement, 3H will automatically be authorized to
manufacture the said product, unless Inoteb has voluntarily stopped the
production to start the production of a new product considered more adapted or
performant than the previous products.
The right to manufacture the product will also and automatically belong to 3H if
Inoteb will not be able to produce enough quantity to satisfy on time the orders
of 3H or of one or more affiliated to which 3H will sub-licence all or parts of
the rights of the agreement.
This right to manufacture will also and automatically be transferred to 3H in
case of violation of the emption and preemption rights granted to 3H in clause
7.
As soon as 3H will be entitled to produce Inoteb will immediately transfer to
3H, without any counterparts the knowhow necessary for the production.
Art. 6 Sub-licence
In order to satisfy to the execution of the worldwide but France agreement, 3H
will sub-licence all or parts of its rights to third parties for specified
territories.
It is agreed that 3H will sub-licence its rights under its fully and exclusive
responsibility towards Inoteb.
2
<PAGE>
3H will pay to Inoteb 10% of any amount that it will receive for the sub-licence
from the third parties in exhange of the help brought by Inoteb for the
recruitment of the third parties and the starting training of the third parties.
Art. 7 Patents ownership
Inoteb will remain exclusive owner of its present or future patents.
Nevertheless Inoteb grants to 3H an emption right for those patents, that 3H
will be entitled to partially or totally exercice, at its will, in case of
1) Cessation of the production of one product by Inoteb and for the patent
concerned by that product.
2) Bankruptcy or chapter 11 for Inoteb for in that case will have an
emption right to purchase any of Inoteb's patents.
On the other hand, Inoteb grants to 3H a pre-emption right for the same patents.
These emption and pre-emption rights are granted to 3H for the duration of the
patents and/or of the extension and/or improvement of the same patents.
The price that 3H should pay to Inoteb will be established as follows:
For the patent concerning exploited products by 3H for at least 3 years, 3H will
pay to Inoteb three times the average net annual profit after taxes made by
Inoteb and coming from the sale of the product protected by the concerned patent
to 3H or to its sub-licencees. The average net annual profit after taxes will be
determined by the average of the three last fiscal years.
For the patents concerning products exploited for less than three years by 3H,
3H will pay to Inoteb three times the average net annual profit after taxes,
made by Inoteb and coming from the sale of the protected product by the
concerned patent to 3H or its sub-licencees. The average net annual profit after
taxes will be determined by the average of the two last fiscal years concerned
or by the net profit coming from thesole year of exploitation. The price will be
increased by the expenses made for the protection by Inoteb concerning the said
patent since the signature of the agreement with 3H.
For the patent concerning the products which are not yet in exploitation by 3H,
3H will have to pay to Inoteb the price paid by Inoteb or its subsidiaries for
the industrial protection since the initial registration of the patent.
3
<PAGE>
As long as Inoteb remains exclusive owner of its patents, Inoteb undertakes to
maintain said patents in all conditions allowed by the laws. Inoteb will have to
defend against patent infringements, claims brought by others and to defend
against infringement by other parties. In return, as long as Inoteb will sell
its products to 3H or its sub-licencees, the royalties will be included in the
price billed by Inoteb. If Inoteb would not sell itself the said product, it
will receive royalties concerning this patent at the rate of 5% of the turnover
made by 3H or its sub-licencees under condition that these royalties added to
the sale price to 3H or its sub-licencees does not infring the article 14.
Art. 8 Registrations
Inoteb undertakes to deliver to 3H and/or its sub-licencees all documentation
useful in order to register in the concerned countries.
Art. 9 Documentation
Inoteb will deliver free of cost to 3H the documentation mentioned on the
exhibit 3 listing all the existing documents concerning the concerned products.
Inoteb will deliver all technical information concerning the said products.
Art. 10 Training
Inoteb undertakes to deliver to 3H or to any third party designated by 3H all
the assistance in formation in order to facilitate the promotion and the
utilisation of the products. The travel cost will be paid by 3H.
Art. 11 Trademarks
The trademarks will remain under Inoteb's ownership. Nevertheless, the present
licence agreement gives to 3H the exploitation right of the products under their
tradename. In return, royalties will be included in the price made by Inoteb to
3H unless Inoteb would not sell itself the said products. In that case, Inoteb
will receive royalties for its trademarks at the rate of 2% of the turnover made
by 3H or its sub-licencees. It is agreed that these 2% added to the price to 3H
or its sub-licencees must not infringe the article 14.
4
<PAGE>
Art. 12 Purchase from Inoteb and sales to thirds
3H and the third parties mentioned at article 6 purchase from Inoteb and sell to
thirds the products on the contract at their own name and for their own account.
Art. 13 Advertising and headed notepaper
3H and the third parties mentioned at article 6 are authorized to use the marks
and the charateristic symbols of Inoteb in their advertising and on their headed
notepaper. They will make this advertising at their own name and for their own
account and at their own expense.
The new documents that could be created by 3H or by its sub-licencees concerning
Inoteb products will have to be submitted to the return agreement of the
Scientific and Medical Direction of Inoteb prior to distribution.
Art. 14 Inoteb's prices
Inoteb will have to invoice to 3H and to the third parties mentioned at article
6 at prices not higher than the prices invoiced, for the same products, to its
agent in France.
If the competent authority of one or more countries should require prices to the
clients at an amount that will not allow 3H or the third parties mentioned at
article 6 to make an equitable profit, Inoteb will have to adapt its own prices
for the concerned countries in order to allow 3H to make that equitable profit.
Art. 15 Competition
3H will not have the right to act for any direct competitor of Inoteb without
the previous written agreement of Inoteb.
Art. 16 Other obligations of Inoteb
Inoteb undertakes to deliver to 3H and to the third parties mentioned at article
6 the products on time and in adequate quantity. Inoteb is not allowed to
deliver the products concerned by this agreement outside of France unless to 3H
or to its sublicencees. However, this prohibition does not concern the present
distributors of Inoteb at the day of the signature of this agreement and of
which the list is attached as exhibit 4. This derogation will be valid during
the contract of such distributors but such contracts will not be renewed or
extended unless 3H agrees.
5
<PAGE>
If one of the third parties at article 6 would not abide by the exclusivity
granted to another third party 3H will inform Inoteb that will deliver the
products to such third party only with the agreement of 3H who could also
require the stoppage of all deliveries to such third parties. If 3H or one of
the third parties mentioned at article 6 would not abide by the exclusivity
granted by Inoteb to one of the distributors mentioned on exhibit 4, Inoteb
could stop the deliveries to this third party.
Art. 17 Other obligations of 3H
By 60 days following the signature of the agreement 3H irrevocably undertakes to
pay Inoteb FF 1,000,000 (one million french francs). In addition 3H undertakes
to let Inoteb realize, directly or by the third parties mentioned at article 6,
a minimum turnover of FF 7,500,000 (seven and a half million french francs) from
the date of the signature of this agreement until 31st december 1997. If one or
other of these two conditions is not fullfilled by 3H, Inoteb will be entitled
to give up this agreement.
Art. 18 Future products
The future products listed in this article, that is those concerning directly or
undirectly
A - the applications for the osteoporosis B - the autologue biological
glue C - the coral and growth factor
will be automatically inserted in this agreement within the limits that 3H
fullfills the following conditions:
a - for A: payment to Inoteb of FF 2,000,000 (two million french
francs) for B: payment to Inoteb of FF 3,000,000 (three million
franch francs) for C: payment to Inoteb of FF 1,500,000 (one million
and a half french francs)
b - under the following calendar
FF 500,000 by 30th June 1995 FF 500,000 by 30th September 1995 FF
2,250,000 by 31st December 1995 FF 1,625,000 by 30th June 1996 FF
1,625,000 by 31st December 1996
6
<PAGE>
If 3H has not totally paid the agreed amounts on time, it will loose the rights
for the exclusive licence.
Art. 19 Future products other than those mentioned at article 18
With the payment FF 6,500,000 (six and a half million french francs) mentioned
at article 18, 3H will obtain a preemption right for all new product of Inoteb.
The exclusive licence would be granted to 3H only if 3H will have paid the
necessary amounts for the R&D or an amount at least equal to the one proposed by
another party to acquire the same rights.
Art. 20 Improvement and derived of the existing and future products
The improvements and derived of the existing or future products will be
concerned by this agreement as for the original products themselves.
Art. 21 Applicable law
The french law will be exclusively applicable to the present agreement.
Art. 22 Arbitration and for
For any claim that could oppose the parties, unless an agreement is reached,
will be of the exclusive competence of the arbitration court of the
International Chamber of Commerce of Paris.
Done in Paris, this May 13, 1995
INOTEB S.A: s/ J.L. Patat
------------------
3H HUMAN HEALTH HIGHTECH PUBLIC LIMITED COMPANY:________________________
7
CONTRAT
entre
INOTEB S.A.
3, Villa de l'Industrie
93400 Saint-Ouen
France ci-apres INOTEB d'une part
representee par
et
3H HUMAN HEALTH HIGHTECH
PUBLIC LIMITED COMPANY
Societe enregistee a Dublin sous n(degree)228980
ayant son siege:
ICC House, 17 Dame Street, Dublin 2
Irelande ci-apres 3H d'autre part
representee par
Il a ete convenu ce qui suit:
art. 1 exclusivite
Inoteb concede a 3H, qui l'accepte, la lecence exclusive et unique de la
distribution de tous les produits actuellement fabriques par Inoteb. Le sort des
produits futurs est regle par les articles 18 et 19. A ces conditions, ils font
partie integrante de la presente convention.
<PAGE>
art. 2 territoire
Les droits concedes par Inoteb a 3H's entendent pour le monde entier a
l'exclusion de la France.
art. 3 duree
La presente convention est conclude pour une duree de 15 annees. Elle sera
cependant automatiquement prolongee par tacite reconduciton de deux annees aussi
longtemps que Inoteb fabriquera les produits faisant l'objet de la presente
convention d'une part et aussi longtemps sera au benefice des brevets protegeant
ses produits, d'autre part. La denonciation de cette reconduction pourra etre
faite par l'une ou l'autre partie par lettre recommandee avec AR six mois au
moins avant la fin de la periode en cours.
art. 4 brevets
Les brevets mentionnes a l'article 3 font l'objet d'une liste exhaustive annexee
au present contrat sous annexe n(degree)1, laquelle est reputee faire partie
integrante du present contrat. Tous les brevets complementaires ou les
ameliorations dont pourra beneficier Inoteb seront listees dans l'annexe 2. Les
conditions d'acquisition des droits d'exloitation, d'emption ou de preemption
sont definies dans les articles 18 et 19. L'annexe 2 est reputee faire partie
integrante du present contrat.
art. 5 production
Les droits concedes par Inoteb sont a l'exclusion de la production pour laquelle
Inoteb se reserve le droit exclusif. Inoteb's engage a produire ou a faire
produire ses produits selon les normes d'assurance qualite internationales en
vigueur.
En revanche, si et des que Inoteb cesserait de produire ou de faire produire
l'un des produits faisant l'objet de la presente convention, 3H aurait alors
egalement et automatiquement le droit d'en assurer la production, sauf dans le
cas ou le produit serait arrete volontairement pour etre remplace par un autre
considere par Inoteb plus adapte ou plus performant que le precedent.
Ce droit de production appartiendra egalement et automatiquement a 3H si, contre
toute attente. Inoteb devait produire de maniere insuffisante et durablement,
pour satisfaire en temps normal aux commandes de 3H ou d'une ou plusieurs des
societes auxquelles elle aura sous-concede tout ou partie des droits faisant
l'objet de la presente convention.
Ce droit de production sera egalement transfere a 3H en cas de violation du
droit d'emption et de preemption concede a 3H par l'article 7.
<PAGE>
Des que 3H sera en droit de produire, Inoteb transferera immediatement, sans
autre contrepartie a 3H le know how permettant de produire.
art. 6 sous-concession
Pour assurer l'execution de la presente convention conclue pour le monde entier
a l'exclusion de la France, 3H sera amenee a conceder a son tour, en tout ou
partie, les droits de la presente convention a des tiers qui se verront
attribuer des territoires delimites. Il est cependant stiuple que 3H le fera
sous son entiere et exclusive responsabilite vis-a-vis de Inoteb.
3H reversera a Inoteb 10% du prix d'acces a la sous-licence recu des tiers vises
a ce paragraphe, en echange de l'aide apportee au recrutement de ces tiers et a
leur formation initiale.
art. 7 propriete des brevets
Inoteb demeurera exclusif proprietaire de ses brevets existants ou futurs.
Cependant Inoteb concede a 3H un droit d'emption des dits brevets que 3H pourra
exercer en tout ou partie, a son gre, que dans le cas ou
1) Inoteb viendrait a cesser la production par elle-meme ou ses
sous-traitants d'un produit et ce pour le brevet concerne par ce produit, sauf
dans le cas ou le produit serait arrete volontairement pour etre remplace par un
autre considere par Inoteb plus adapte ou plus performant que le precedent.
2) Inoteb viendrait a tomber en faillite, ferait l'objet d'un
concordat judiciaire ou encore serait l'objet d'une mise sous controle judiciare
quelconque et ce pour tous les brevets qui pourront interesser 3H.
En outre, Inoteb concede a 3H un droit de preemption pour ces memes brevets.
Les droits d'emption ou de preemption s'entendent pour la vie des brevets et/ou
de leur extension et/ou amelioration.
Pour le droit d'emption, le prix que 3H aurait alors a payer serait etabli comme
suit.
- Pour les brevets dont les produits sont en exploitation par 3H
depuis au moins 3 ans, 3H paierait a Inoteb 3 fois le benefice net annuel moyen,
apres impot retire, realise par Inoteb et issu de la vente du produit protege
par le brevet en question, a 3H ou a ses sous-licencies. Le benefice net annuel
moyen serait determine par la moyenne des 3 dernieres annees fiscales.
- Pour les brevets dont les produits sont en exploitation depuis
moins de 3 ans par 3H, 3H paiera a Inoteb 3 fois le benefice net annuel moyen,
apres impot retire, realise par Inoteb et issu de la vente du produit protege
par le brevet en question, a 3H ou a ses sous-licencies. Le benefice net annuel
moyen serait determine soit par la moyenne des deux annees fiscales considerees,
soit par le benefice de la seule annee d'exploitation. Le prix sera augmente des
depenses de protection industrielle engagees par Inoteb pour le dit brevet
depuis la signature du contrat avec 3H.
<PAGE>
- Pour les brevets dont les produits ne sont pas en exploitation par
3H, 3H paierait a Inoteb le prix de laprotection industrielle depense par Inoteb
ou ses filiales depuis le depot initial du brevet.
Tant et aussi longtemps que Inoteb sera exclusif proprietaire de ses brevets,
Inoteb s'engage a en assurer le maintien dans la mesure ou et tant que la loi le
rendra possible. Inoteb est tenue de combattre juridiquement et a ses propres
frais toute atteinte portee a ses brevets. En contrepartie tant qu'Inoteb assure
la vente des produits a 3H ou a ses sous-licencies, les royalties sont inclues
dans le prix de vente d'Inoteb. En revanche si Inoteb n'assurait pas elle-meme
cette vente, elle aurait droit a des royalties au titre de ses brevets, dont le
montant serait de 5% du chiffre d'affaires realise par 3H et ses sous-licencies,
pour autant que ces royalties additionnes aux prix de vente a 3H ou a ses
sous-licencies respectent l'article 14.
art. 8 enregistrements
Inoteb's s'engage a transmettre a 3H et/ou a ses sous-licencies les documents en
sa possession utiles a l'obtention de l'enregistrement dans les pays concernes.
art. 9 documentation
Inoteb livrera gratuitement, a la demande de 3H, les elements de la
documentation figurant sur une liste jointe an annexe 3 enumerant les documents
existants sur les produits consideres. Inoteb fournira les renseignements
techniques relatifs a ses produits.
art. 10 formation
Inoteb's engage a fournir a 3H l'assistance en matiere d'information et de
formation initiale tant aupres de 3H qu'aupres des tiers mentionnes a l'article
6, en vue de faciliter la promotion et l'utilisation des produits. Les frais de
deplacement eventuels seront a la charge de 3H.
art. 11 marques
Les marques restent la propriete d'Inoteb, cependant la presente licence donne
droit a l'exploitation des produits sous leur nom de marque. En contre partie
des royalties sont inclues dans le prix de vente d'Inoteb, mais si Inoteb
n'assurait pas elle-meme cette vente, elle aurait droit a des royalties au titre
de ses marques, dont le montant serait de 2% du chiffre d'affaires realise par
3H et ses souslicencies, pour autant que ces 2% additionnes aux prix de vente a
3H ou a ses sous-licencies respectent l'article 14.
art. 12 achats a Inoteb et ventes aux tiers
3H et les tiers mentionnes a l'article 6 achetent a Inoteb et vendent a leur
clientele les produits sous contrat a leur nom et pour leur propre compte.
<PAGE>
art. 13 publicite et papier a lettre
3H et les tiers mentionnes a l'article 6 sont autorises a utiliser les marques
et signes distinctifs de Inoteb dans leur publicite et leur papier a lettre. Ils
feront la dite publicite en leur nom, pour leur propre compte et a leurs frais.
Les documents nouveaux qui seraient crees par 3H ou par ses sous-licencies
concernant les produits seront prealablement a leur diffusion soumis a l'accord
ecrit de la Direction Scientifique et Medicale d'Inoteb.
art. 14 prix pratiques par Inoteb
Inoteb ne pourra facturer a 3H et aux tiers mentionnes a l'article 6 aucun
produit a un prix superieur a celui auquel elle vendra le meme produit a son
representant ou concessionnaire en France. Si les autorites competentes d'un ou
de plusieurs pays devaient exiger des prix de vente a la clientele arretes a un
montant ne permettant pas a 3H et aux tiers mentionnes a l'article 6 de realiser
un profit equitable, Inoteb s'emploiera alors a ajuster ses propres prix pour le
ou les pays concernes aux fins de permettre ce profit equitable.
art. 15 concurrence
3H ne peut travailler pour le compte d'aucun concurrent direct de Inoteb sans le
consentement ecrit prealable de Inoteb.
art. 16 autres obligations de Inoteb
Inoteb s'engage a livrer a 3H et aux tiers mentionnes a l'article 6 les produits
sous contrat en temps utile et en quantite suffisante. Inoteb s'interdit de
livrer les produits concernes par le present contrat hors de France, si ce n'est
a 3H ou a ses sous-licencies. Toutefois cet article ne s'applique pas pour les
distributeurs d'Inoteb existants au jour de la signature du present contrat et
dont la liste est en annexe 4. Cette derogation s'appliquera pendant toute la
duree de leur contrat qui ne pourra etre ni renouvele ni prolonge, sauf accord
de 3H. Si l'un des tiers mentionnes a l'article 6 ne respectait pas
l'exclusivite concedee a un autre tiers, 3H en informera Inoteb qui ne livrera
au dit tiers qu'en accord avec 3H qui pourra exiger la cessation de toute
livraison a ce tiers. En revanche, si 3H ou l'un des tiers mentionnes a
l'article 6 ne respectait pas l'exclusivite concedee par Inoteb a un
distributeur existant sur la liste en annexe 4, Inoteb pourrait cesser toute
livraison a ce tiers.
art. 17 autres obligations de 3H
Dans les 60 jours qui suivront la signature de la presente convention 3H
s'engage irrevocablement a verser a Inoteb une somme de FF 1.000.000 (un million
de francs francais).
<PAGE>
En outre 3H s'engage a faire realiser a Inoteb, directement, ou par les tiers
mentionnes a l'article 6, un chiffre d'affaires minimal de 7.500.000 (sept
millions et demi de francs francais), entre la date de la signature du present
contrat et le 31 decembre 1997.
Si l'une ou l'autre de ces deux conditions ne devait pas etre remplie par 3H,
Inoteb serait en droit de se departir de la presente convention.
art. 18 produits futurs
Les futurs produits enumeres dans le present article, soit ceux concernant
directement ou indirectement
A - les applications pour l'osteoporose
B - la colle biologique autologue
C - le corail additionne d'un facteur de croissance,
seront automatiquement inclus dans la presente convention pour autant que 3H
satisfasse aux conditions suivantes:
a - au versement de cash
pour A: paiement a Inoteb de 2.000.000 (deux millions de
francs francais).
pour B: paiement a Inoteb de 3.000.000 (trois millions de
francs francais).
pour C: paiement a Inoteb de 1.500.000 (un million et demi de
francs francais).
b - selon l'echeancier suivant
500'000 FF au 30 juin 1995
500'000 FF au 30 septembre 1995
2'250'000 FF au 31 decembre 1995
1'625'000 FF au 30 juin 1996
1'625'000 FF au 31 decembre 1996
Au cas ou 3H ne verserait pas la totalite des sommes convenues dans les delais
convenus, les droits de licence exclusive ne lui seraient pas acquis.
art. 19 produits futurs autre que ceux mentionnes a l'article 18
Par le paiement de la somme totale de FF 6.500.000 (six millions et demi de
francs francais) mentionnee a l'article 18, 3H obtient en outre un droit de
preemption pour tout autre nouveau produit
<PAGE>
de Inoteb.
Les droits de licence
exclusive ne seraient acquis a 3H qu'a condition d'avoir verse les sommes
necessaires au financement de la R&D ou une somme au moins egale a celle
proposee par un autre partenaire pour acquerir ces memes droits.
art. 20 amelioration et derives des produits
Les ameliorations et derives de produits existants ou futurs sont reputes suivre
sans autre le sort des produits originaux eux-meme dans le sens de la presente
convention.
art. 21 droit applicable
Le droit francais est exclusivement applicable a la presente convention.
art. 22 clause arbitrale et for
Pour tout litige pouvant opposer les parties, s'il ne peut etre resolu a
l'amiable, sera de la competence exclusive du Tribunal Arbitral de la Chambre
Internationale Commerce de Paris.
Fait a Paris le May 13, 1995
INOTEB S.A...............................................
3H HUMAN HEALTH HIGHTECH PUBLIC LIMITED COMPANY................................
CONVENTION
entre
IMMO-FINANCE CORPORATION
73725 El Paseo, Suite 21E
Palm Desert, California 92260
designee ci-apres
IMMO, d'une part
et
Monsier Yves BOISARD
7, rue Paul Kempf
78340 Louveciennes
Monsier Jean DARONDEL
Ferme les Marrionniers
14340 Cambremer
Monsier Yannick HENRIAT
Rue de la Butte
56920 Saint-Gonnery
Monsieur Jean-Louis PATAT
176, boulevard Malesherbes
75-17 Paris
Monsier Gilbert PEPIN
24, quai du 4 Septembre
92100 Boulogne
Monsier Pascal CHRISTEL
9, square de Clignancourt
75018 Paris
Monsier Yves CIROTTEAU
191, rue de l'Universite
75007 Paris
1
<PAGE>
Madame Genevieve GUILLEMIN
7, rue des acacias
75017 Paris
Monsier Alain MEUNIER
18, boulevard Lorimy
77120 Coulommiers
Monsier Jean-Marc RODEL
6, rue Nicolo
75016 Paris
ci-apres dessignes
les actionnaires
PREAMBULE
Il est prealablement rappele que les actionnaires detiennent, entre eux, 30.000
actions A, 150 actions B et 7.497 obligations de la Societe Inoteb S.A., societe
anonyme au capital de FF 11.992.500 dont le siege social est sis Le Guernol -
BP26 - 56920 Saint-Gonnery France.
Le capital social d'Inoteb S.A. est compose de 58'500 actions d'une valeur
nominale de FF 205 chacune.
Par decision de l'assemblee generale du 29 juin 1994 Inoteb a emis 8.650
obligations convertibles portant interet annuel au taux de 8%, chaque obligation
donnant droit a convertion en une action B d'Inoteb, etant precise que les
actionnaires apparaissant a la presente convention ont souscrit 7.497 des
susdites obligations.
La repartition des actions et obligations susmentionnees entre les actionnaires
susmentionnes est la suivante:
Monsieur Yves BOISARD 2.630 actions A et 860 obligations Monsieur Jean DARONDEL
6.710 actions A et 2.173 obligations Monsieur Yannick HENRIAT 6.728 actions A
Monsieur Jean-Louis PATAT 6.710 actions A et 2.173 obligations Monsieur Gilbert
PEPIN 6.730 actions A et 2.178 obligations Monsieur Pascal CHRISTEL 76 actions A
Monsieur Yves CIRROTEAU 36 actions A
2
<PAGE>
Madame Genevieve GUILLEMIN 299 actions A, 148 actions B et
113 obligations
Monsieur Alain MEUNIER 80 actions A, 1 action B
Monsieur Jean-Marc RODEL 1 action A, 1 action B
Les actionnaires apparaissant a la presente convention detiennent en total
30.150 actions et 7.497 obligations d'Inoteb.
Pour memoire il sera encore mentionne que l'Assemblee generale extraordinaire
des actionnaires d'Inoteb du 21 decembre 1992 a autorise l'emission de 540 bons
de souscription autonomes. L'exercice de ces bons (BSA 1) donnera droit a la
souscription d'une action B et a l'attribution d'une action B gratuite. Les
actionnaires apparaissant a la presente convention n'ont souscrit aucun de ces
bons de souscription autonomes et la presente convention ne concerne en
consequence aucun de ces bons de souscription lesquels seront cependant pris en
compte pour le calcul de la valeur de l'action Inoteb dans le cadre de la
presente convention.
Enfin, l'assemblee generale extraordinaire d'Inoteb du 6 avril 1993 a permis
l'emission de 270 bons de souscription autonomes (BSA 2), chacun permettant de
souscrire une action Inoteb B etant precise que les actionnaires apparaissant a
la presente convention n'ont souscrit aucun de ces bons de souscription
autonomes qui ne sont en consequence egalement pas concernes par la presente
convention, mais egalement pris en compte pour le calcul de la valeur de
l'action Inoteb dans le cadre de la presente convention.
Les actionnaires apparaissant a la presente convention detiennent 51,53% du
capital actions d'Inoteb S.A. et 86,67% des obligations convertibles emises par
Inoteb S.A.
Il est rappele que les bons de souscription autonomes emis par Inoteb le 21
decembre 1992 permettent de souscrire une action de categorie B et de se voir
attribuer une action gratuite de categorie B. En consequence le 540 bons en
question doivent etre pris en compte comme equivalant potentiellement a 1.080
actions Inoteb auxquelles il convient encore d'ajouter les 270 bons de
souscription autonomes emis par Inoteb le 6 avril 1993, soit au total un
potentiel de 1.350 actions d'Inoteb.
Pour la comprehension de la presente convention il est donc rappele que sont
prises en compte 58.500 actions A et B, 8.650 obligations
3
<PAGE>
convertibles et 1.350 actions potentielles resultant des susdits bons de
souscription autonomes, soit au total 68.500 titres Inoteb.
Il est egalement precise que la presente convention concerne toutes les actions
et obligations emises par Inoteb et appartenant aux actionnaires apparaissant a
la presente convention, soit pour ce qui les concerne un total de 37.647 titres.
Il est en outre rappele que le 2 aout 1995 Immo a accepte de prendre en compte,
dans le cadre d'un echange de titres Inoteb, une valeur d'Inoteb a hauteur de
US$ 15.000.000., soit FF 75.000.000 environ.
Il est cependant precise que les calculs apparaissant dans la presente
convention seront etablis en US$.
En d'autres termes, Immo accepte de prendre en compte une valeur de US$ 219,97
par titre emis par Inoteb, etant precise qu'il s'agit des titres concernes par
la presente convention.
Des lors qu'Immo s'est declaree d'accord le 2 aout 1995 d'accepter d'echanger
ses propres titres a US$ 15.000.000, il est convenu entre les parties qu'une
action ou une obligation Inoteb correspond, dans le cadre de la presente
convention, a 27,5 actions Immo.
Les parties a la presente convention sont Immo et les actionnaires mentionnes a
la page 1 qui contresigneront cette convention d'ici au 18 octobre 1995.
Ceci etant rappele, les parties conviennent ce qui suit
Article 1
Les parties conviennent que le texte des preambules susmentionne fait partie
integrante de la presente convention.
Article 2
Immo offre par la presente aux actionnaires mentionnes a la page 1 d'echanger
toutes leurs actions et obligations, soit au total 30.000 actions A, 150 actions
B et 7.497 obligations convertibles, soit au total 37.647 titres Inoteb tel que
ci-dessus decrit contre 1.035.292 actions Immo.
Article 3
Les actionnaires seront reputes accepter l'offre d'echange
4
<PAGE>
presentement formulee par Immo en apposant leur signature au bas de la presente
convention au plus tard le 18 octobre 1995 etant entendu au'Immo ne sera liee
par la presente convention que vis-a-vis des actionnaires qui l'auront
contresign
Article 4
Des la signature de la presente convention les actionnaires qui l'auront
contresignee, s'engagent a notifier celle-ci sans delai aux actionnaires
investisseurs d'Inoteb et a Madame Marie-Christine Candelle, ceci en execution
du << Pacte de preference et engagements particuliers >> du 29 septembre 1989,
de son avenant du 21 decembre 1992 et du second avenant du 10 mai 1993. Il est
precise que la presente convention est notifiee par Immo a tous les actionnaires
mentionnes a la page 1 avec copie a Inoteb.
Article 5
Si a l'echeance du delai de 2 mois mentionne a l'article A4 du << pacte de
preference et engagements particuliers >> susmentionne les beneficiaires n'usent
pas de leur droit de preference qui devra s'appliquer a la totalite des titres
proposes et acceptes par les actionnaires qui auront contresigne la presente
convention, l'echange des titres aura effectivement lieu, Immo s'engageant a
remettre a chacun des actionnaires apparaissant a la presente convention et
ayant contresigne celle-ci 27,5 actions Immo par action ou obligation d'Inoteb
contre remise des dites actions et obligations d'Inoteb.
Article 6
Immo confirme pour le compte de 3H Human Health Hightech Public Limited Company
dont elle detient la quasi totalite du capital actions que le benefice net
realise par 3H Human Health Hightech Public Limited Company, apres impots et
pour un montant maximum de US$ 10.000.000 sera utilise les cinq prochaines
annees, et ce a compter du 2 aout 1995, pour souscrire a des augmentations du
capital d'Inoteb S.A. aux fins de mettre a la disposition d'Inoteb les fonds
necessaires pour poursuivre ses travaux de recherche et de developpement. Le
prix de souscription prendra en compte l'estimation d'Inoteb arretee a US$
15.000.000, ce montant etant valorise de 8% chaque annee. Mais cet engagement
valable jusqu'au ler aout 2000 entrera en vigueur a partir du moment ou Immo
detiendra 51% du capital actions d'Inoteb.
Article 7
Immo confirme par ailleurs qu'elle emettra sur la base << best effort
5
<PAGE>
>> des titres sur le marche aux fins de lever d'ici au 31 juillet 1996 US$
5.000.000, au 31 juillet 1997 US$ 5.000.000 et au juillet 1998 US$ 5.000.000,
montants qui seront utilises pour proceder a des augmentations de capital
d'Inoteb, l'agio etant egalement calcule sur une estimation globale d'Inoteb
arretee a US$ 15.000.000.
Article 8
Les actionnaires prennent note que les actions Immo qu'ils recevront en
execution de la presente convention seront << restricted >> et ne pourront pas
etre revendues pendant 3 ans et seront deposees sous dossiers a leur nom aupres
de la Societe Financiere du Seujet S.A. / Societe Financiere Privee S.A. a
Geneve. Il est neanmoins convenu entre les parties qu'apres deux ans les
actionnaires apparaissant a la presente convention auront le droit de vendre 10%
de leurs actions Immo et ceci en conformite avec la reglementation de la SEC.
Article 9
Immo declare que la presente convention la liera vis-a-vis des actionnaires qui
l'auront contresignee d'ici au 18 octobre 1995 et les parties, soit les
actionnaires signataires et Immo, declarent que la presente convention vaudra
alors convention ferme et definitive d'echange d'actions sans qu'il soit
necessaire de passer une nouvelle convention. Immo declare egalement
expressement etre liee par sa propre signature jusqu'au 18 octobre 1995 et qu'il
ne lui sera donc pas possible de se desister d'ici au 18 octobre 1995.
Article 10
Les parties a la presente convention s'emploieront alors sans delai a satisfaire
a toutes les obligations legales francaises eventuellement necessaires. En
d'autres termes, les parties a la presente convention subordonnent l'execution
de leurs engagements respectifs a l'obtention de toute autorisation
eventuellement necessaire des autorites competentes.
Article 11
L'echange des actions et obligations visees par la presente convention devra
intervenir en une seule operation globalement a Geneve aupres de la Societe
Financiere du Seujet S.A., 14, quai du Seujet.
Article 12
La presente convention est soumise au droit suisse.
6
<PAGE>
Article 13
Tout litige relatif a l'interpretation et/ou a l'execution de la presente
convention sera soumis a la competence exclusive des Tribunaux de Geneve et le
cas echaent du Tribunal Federal a Lausanne.
Immo-Finance Corporation
.................................................le 6 octobre 1995
Monsieur Yves BOISARD
.................................................le....octobre 1995
Monsieur Jean DARONDEL
.................................................le....octobre 1995
Monsieur Yannick HENRIAT
.................................................le....octobre 1995
Monsieur Jean-Louis PATAT
.................................................le..18...octobre 1995
Monsieur Gilbert PEPIN
.................................................le....octobre 1995
Monsieur Pascal CHRISTEL
.................................................le....octobre 1995
Monsieur Yves CIROTTEAU
..................................................le....octobre 1995
Madame Genevieve GUILLEMIN
...................................................le....octobre 1995
7
<PAGE>
Monsieur Alain MEUNIER
...................................................le....octobre 1995
Monsieur Jean-Marc RODEL
...................................................le....octobre 1995
8
<PAGE>
INOTEB
Shareholder agreements
On September 29th, 1989 with codicils of December 21st, 1992 and May 10th, 1993,
the Inoteb's shareholders agreed that any shareholder had the priority to
purchase titles belonging to other shareholders if one of these shareholders
wanted to sell his titles (shares or bonds).
In other words, if one shareholder of Inoteb wants to sell one or more titles
issued by Inoteb and belonging to him for a price offered by a third party, he
has to inform all the other Inoteb's shareholders about the purchase offer and
its price. Each one of Inoteb's shareholders has two months to take the
opportunity to buy such titles for himself paying the same amount offered by the
third party.
It was specially agreed that such Inoteb's shareholders cannot purchase only a
part of the titles but they have to buy all the titles concerned by the offer.
After the above mentioned 2 months the Inoteb's shareholders can sell their
titles to the third party.
* * * *
On October 6th, 1995 Immo Finance Corporation made an offer to 11 Inoteb's
shareholders to purchase all their Inoteb's share and bonds, that is 30.150
shares and 7.497 bonds representing 51,53% of the capital share of Inoteb and
86,87% of convertible bonds issued by Inoteb.
In exchange Immo offered 27 Immo shares for each Inoteb share or bond.
Globally the exchange concern 30.150 Inoteb shares and 7.497 Inoteb bonds
against 1.011.609 Immo shares that will be issued for this transaction.
The eleven concerned Inoteb's shareholders accepted the abovementioned Immo's
offer and signed such agreement by October 18th.
9
<PAGE>
The other Inoteb's shareholders had until December 28th, 1995 the right to
purchase such shares and bonds by delivering 1.011.609 Immo shares.
It is specified that the other Inoteb's shareholders had to exercise their
priority rights for the whole transaction and not only for part of the
transaction. These shareholders have already invested in Inoteb approximately FF
23.000.000 and did not exercice their priority right.
In conclusion Immo hold from December 28th, 1995, 51.33% of the capital share of
Inoteb and 86.87% of the convertible bonds issued by Inoteb, that is virtually
54.959% of the capital share of Inoteb. The exchange of shares by and between
Immo and the abovementioned 11 Inoteb's shareholders is running its course and
the concerned Inoteb's securities are hold by a French notary on an trustee
account.
10
State of Delaware
Office of the Secretary of State
----------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "IMMO-FINANCE CORPORATION", CHANGING ITS NAME FROM "IMMO-FINANCE CORPORATION"
TO "BIOCORAL, INC.", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF DECEMBER, A.
D. 1995, AT 3 O'CLOCK P.M.
s/EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
SUPPLY AGREEMENT
THIS AGREEMENT made this 23rd day of May, 1996, among Inoteb, S.A.
("Inoteb"), having its principal place of business at Le Guernol - 56920 Saint
Gonnery, France and Human Health Hightech Public Limited Company ("3H"), having
its principal place of business at ICC House, 17 Dame Street, Dublin 2, Ireland;
and Intermedics Orthopedics/Denver, Inc. ("Company"), having its principal place
of business at 4056 Youngfield Street, Wheat Ridge, Colorado 80033.
WHEREAS Inoteb is developing, manufacturing and commercializing calcium
carbonate ("Biocoral") and has appointed 3H as its exclusive distributor in
certain territories and
WHEREAS Company desires to conduct clinical trials utilizing Company's
proprietary bone growth factor (hereinafter "Trials") and, upon FDA clearance
("Approval"), to commercialize certain products and processes relating to said
Trials and
WHEREAS such study and commercialization will require the use of
Biocoral and
WHEREAS Company desires to obtain its requirements for Biocoral from 3H
as its exclusive source;
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, covenants, and agreements hereinafter set forth, the parties agree as
follows:
1. Initial Supply. Inoteb agrees to provide its formulation of Biocoral
to Company for conducting the Trials. The first 1000 grams for granular form
Biocoral (450 to 1000 micrometer diameter) and the first 50 cervical
intervertebral blocks will be provided at no charge. Additional supplies of
Biocoral needed for conducting Trials will be supplied at a price to be agreed
between Inoteb and Company.
1
<PAGE>
2. Product Specifications. Company's initial product specifications and
requirements have been agreed to between Company and Inoteb and are identified
in Exhibit A, attached to and made a part of this Agreement. Any changes to
Exhibit A will be made upon the mutual agreement of Inoteb and Company.
3. Purchase Terms. Upon commercialization or Approval, whichever first
occurs, Company agrees to purchase its requirements for Biocoral from 3H under
the following terms and conditions. To the extent that 3H is unable to fulfill
Company's requirements or is unable to comply with the pricing provisions
contained in subparagraph 3(a), Company will have the right to purchase Biocoral
from other sources.
(a) 3H agrees to sell Biocoral to Company at a price no less
favorable than offered or sold by 3H to third parties for comparable quantity,
size and quality of Biocoral and at a price at least as favorable as offered by
3H's competitors under comparable terms, but in no event more than $160 per
cervical intervertebral block or, if by gram, no more than the price set forth
below:
Annual Quantity Price per Gram
--------------- --------------
50 kg or more $12
25 to 50 kg $15
10 to 25 kg $20
5 to 10 kg $30
less than 5 kg $60
(b) Company will initiate purchases of the Biocoral by issuing
purchase orders to 3H by telephone, facsimile, or other mutually-acceptable
means of communication. Orders placed by telephone or in person are to be
confirmed in writing. 3H will accept Company's orders whether by shipment or by
issuance of 3H's written order acknowledgment. The provisions of this Agreement
will apply to all purchase orders. If any terms and conditions conflict with any
provision of this Agreement, the provisions of this Agreement will prevail over
such inconsistent provisions of the purchase order of acknowledgment.
(c)Unless otherwise consented to by 3H in writing, payment to 3H
for all purchases will be due 30 days from the receipt of shipment or invoice,
whichever last occurs. Company will
2
<PAGE>
be responsible for all costs of transportation and insurance. Title to the goods
and risk of loss or damage will pass to Company upon delivery to the carrier at
3H's facility.
4. Scheduling. Each calendar quarter, Company agrees to provide to
Inoteb and 3H non-binding six-month, updated forecasts for purchases of Biocoral
no less than 30 days before the beginning of each calendar quarter.
In order to enable Inoteb and 3H to plan production, Company will
use reasonable efforts to ensure that its purchases of Biocoral, following
Approval, do not decrease by more than 50% from the immediately preceding
calendar year's purchases. The parties agree that the preceding provision is
included for the convenience of Inoteb and that Company's failure to comply with
the stated objective is not a breach of the Agreement.
5. Force Majeure. No party will have any liability to either of the
other parties or any third party for any failure or delay in performance of any
obligation under this Agreement (except the obligation to make payments when and
as due) if directly or indirectly caused by or resulting from force majeure.
Force majeure will include, but is not limited to, any act of
God, government act or regulation, judicial act or order, outbreak of
hostilities (whether or not war is declared), insurrection, riot, civil
disturbance, climatic conditions, fire, flood, explosion, accident, theft,
shortage of materials, energy shortage, delay or failure of carriers,
subcontractors, or suppliers, strike or other labor difficulty, lockout or trade
dispute (whether involving employee or other parties), and/or any events or
circumstances (whether or not of the same or similar kind to those enumerated)
beyond the reasonable control and without fault or negligence of the party
claiming force majeure.
The party claiming force majeure will give the other party
written notice of the cause within 15 days after the occurrence of the event of
force majeure and will exercise reasonable diligence to remove the cause and
resume performance. If any performance is suspended or delayed on account of
force majeure, the period of performance will be correspondingly extended;
provided, however, if the performance is suspended or delayed more than 3
months, the party not claiming force majeure may at any time after such
three-month period and while the performance remains
3
<PAGE>
suspended or delayed, terminate this Agreement by written notice to the other
party.
6. Warranty. Inoteb and 3H warrant, jointly and severally, that the
Biocoral delivered hereunder will conform to the specifications set forth in
Exhibit A. Company will inspect the Biocoral within 30 days of receipt and will
have the right to return any non-conforming Biocoral to the party who supplied
it for replacement or credit.
7. Indemnification. Company agrees, at its own expense, to defend,
indemnify, and hold harmless Inoteb and 3H and their officers, shareholders,
agents, and employees from and against any and all claims, losses, damages,
causes of action, suits and liability of every kind, including all expenses of
litigation, court costs, and attorney's fees, for injury to or death of any
person, or for damage to any property, arising from or out of or in connection
with the design, manufacture, marketing, sale, implantation, or use of any
product sold by Company which contains Biocoral unless such injury, death, or
damages are caused in whole or in part by the negligence of Inoteb, its
officers, agents, or employees or if such Biocoral, as delivered, does not
conform to the product specifications identified in Exhibit A.
Company further agrees, at its own expense, to defend, indemnify, and
hold harmless Inoteb and 3H from and against any and all claims, losses,
damages, causes of action, suits, and liability of every kind, including all
expenses of litigation, court costs, and attorney's fees, based on a claim
alleging that the commercialized product sold by Company containing Biocoral
infringes a patent of any third party.
The company will have the exclusive right to control the defense
of any claims indemnified under this section 7.
8. Confidentiality. Any information which is to be disclosed by any
party to another party pursuant to this Agreement, and which is deemed by the
disclosing party to constitute confidential or proprietary information, must be
disclosed in writing and conspicuously labeled as confidential information of
the disclosing party, or with words of similar impact. Any such confidential
information which is initially disclosed orally must be noted at the onset by
the
4
<PAGE>
disclosing party as confidential information, and must be reduced to writing and
submitted by the disclosing party to the receiving party within 15 business days
after the original oral disclosure.
The receiving party will hold all such information in strict
confidence and will use it solely for the purposes for which it is supplied
under this Agreement. The receiving party will not disclose such information to
any third party or use same for the benefit of any third party. The foregoing
restriction will not apply to any information which is:
(i) not disclosed and labeled as provided in the first paragraph
of this Section (except orally disclosed information for the first 15 business
days thereafter, pending the submission of same in writing) or
(ii) known to the receiving party prior to receipt thereof from
the disclosing party or
(iii) of public knowledge without breach by the receiving party
of its obligations hereunder or
(iv) rightfully received by the receiving party from a third
party without restriction on disclosure or use or
(v) disclosed by the disclosing party to a third party without
restriction on disclosure or use or
(vi) independently developed by personnel of the receiving party
who have not had access to or knowledge of the contents of the disclosing
party's disclosure or
(vii) disclosed after receiving written consent from an
authorized officer of the disclosing party;
provided that in the events (ii), (iii), (iv), (v), (vi) and (vii), the
receiving party can demonstrate same to the reasonable satisfaction of the
disclosing party.
The restrictions on use and disclosure of information under this
Section will survive the expiration or termination of this Agreement.
9. Inoteb's Additional Obligations. In addition to Inoteb's other
obligations set forth in this Agreement, it further agrees to:
(a) Provide Company information, when available, concerning the
technical aspects of the Biocoral, its use and characteristics, in writing or in
oral presentations.
5
<PAGE>
(b) Aid Company in responding to any questions by any regulatory
agency regarding product complaints, inquiries, and/or use of the Biocoral.
However, Inoteb will not be required to conduct additional testing that may be
requested by regulatory agencies without additional compensation from Company as
mutually agreed.
10. Company's Additional Obligations. In addition to Company's other
obligations set forth in this Agreement, it further agrees to provide general
information, upon request from Inoteb, that the Company deems appropriate and
acceptable outlining the performance of the product, form or surgical
experiences in which Biocoral is used.
11. Improvements. Any improvements, enhancements, processes and the like
involving the Biocoral that are made, developed, devised or first reduced to
practice by Company in the course of conducting the Trials, and that are outside
of the scope of Inoteb's patent rights, will belong to Company. Company agrees
to offer to 3H a worldwide, non-transferable license for such improvements,
enhancements or processes on terms to be mutually agreed.
12. Audits. Inoteb agrees to allow Company to have access to its
facilities upon reasonable notice during business hours for the purpose of
conducting ISO and/or FDA GMP audits of Inoteb's manufacturing facilities
relating to the Biocoral. Inoteb also will allow Company access to records
required to be kept under the current regulations, in effect as amended from
time to time. Both parties agree to maintain the necessary records documenting
such audits. Any information learned by Company in the course of an audit is
confidential. Company agrees to treat such information as confidential unless
and until Inoteb specifically authorizes Company to release the information or
unless Company is required by law to make such disclosure.
13. Term. This Agreement will take effect on the date first written
above and will continue for a period of 10 years after Approval unless sooner
terminated as provided herein. This Agreement will automatically renew for
successive one-year terms unless either party has given written notice of
non-renewal at least 360 days prior to expiration of the initial term or any
renewal
6
<PAGE>
term. Either party may terminate this Agreement upon 30 days prior written
notice if the other party defaults any of its material obligations in this
Agreement and such default is not cured with 30 days of receipt of such notice.
14. Assignability. Either party may freely assign this Agreement to any
company controlling, controlled by or under common control with such party or
succeeding to the entire business of such party. This Agreement will be binding
upon and inure to the benefit of the parties, their successors and assigns.
15. Use of Names. Neither party will use the name of the other in any
form of publicity without written permission of the other.
16. Miscellaneous. This Agreement constitutes the sole and entire
agreement between the parties relating to the subject hereof.
17. Notices. Any notice required, permitted or contemplated by this
Agreement must be in writing, sent by the party giving notice to the other party
by certified or registered mail, return receipt requested, prepaid, addressed to
such other party as set forth below, or to such other address as may from time
to time be substituted therefor by notice, or delivered in person to such other
party. Except as otherwise provided in this Agreement, notices sent by mail in
the aforementioned manner will be effective on the date deposited in the mail by
the party giving notice; otherwise, the notice will be effective on the date
received by the other party.
If to Inoteb: Inoteb, S.A.
Le Guernol - 56920
If to 3H: Human Health Hightech Public
Limited Company
ICC House
17 Dame Street
Dublin 2, Ireland
7
<PAGE>
If to Company: Intermedics Orthopedics/Denver, Inc.
4056 Youngfield Street
Denver, Colorado 80333
With copy to: Sulzermedica USA, Inc.
4000 Technology Drive
Angleton, Texas 77515
Attn: Vice President and General Counsel
and
Intermedics Orthopedics, Inc.
9900 Spectrum Drive
Austin, Texas 78717
Attn: President
18. Invalidity. If any provision of this Agreement is rendered or
declared unlawful by reason of any existing or subsequently enacted law or by
decree or order of a court of last resort, the remaining provisions of this
Agreement will continue in full force and effect. The parties will promptly met
and negotiate substitute provisions for those rendered or declared unlawful,
retaining as much of the intent of the original provisions as is practicable
without the defects which caused them to be unlawful.
19. Controlling Law. The construction, validity and performance of this
Agreement will be governed in all respects by the law of the State of Texas,
U.S.A. All disputes between the parties arising out of or in connection with
this Agreement or relating to the performance of the parties hereunder will be
finally settled by binding arbitration according to the rules of conciliation
and arbitration of the International Chamber of Commerce, by a panel consisting
of three arbitrators, two of whom are to be selected respectively by the parties
and the third of whom is to be selected by mutual agreement of the first two
arbitrators. The panel will conduct is proceedings at Houston, Texas, U.S.A., in
the English language, applying the law of the State of Texas, U.S.A. Each party
will bear its own costs for the presentation, prosecution and defense of its own
case, and both parties will share equally the costs, if any, of the arbitration
panel. Each party hereby submits to such arbitration and jurisdiction of such
panel, and agrees that the decision of a majority of the arbitrators
8
<PAGE>
will be final and binding on the parties and may be enforced by the prevailing
party in any court having jurisdiction over the person or property of the other
party.
The parties expressly reject any application of the United Nations
Convention on Contracts for the International Sale of Goods.
The parties having read, understood and reached agreement on each and
every provision, term and condition in this Agreement, acknowledge and confirm
same by their signatures or that of their respective duly authorized officers
below, as of the date first written above.
Intermedics Orthopedics/Denver, Inc. Inoteb, S.A.
By:_________________________________ By: s/ J.L.Patat
----------------------------------
Printed Name:_______________________ Printed Name:________________________
Title:______________________________ Title: President
Human Health Hightech Public Limited Company
By:_________________________________
Printed Name:_______________________
Title:______________________________
9
STOCK OPTION AGREEMENT
AGREEMENT, dated as of June 10, 1996, between BioCoral, Inc., a
Delaware corporation with its principal place of business c/o Stein Riso Haspel
& Jacobs, 805 Third Avenue, New York, NY 10022 (the "Company") and Riccardo
Mortara, with his office at 14 Quai du Seujet, 1201 Geneve, SWITZERLAND (the
"Optionee").
W I T N E S S E T H:
WHEREAS, on June 8, 1996, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 125,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $7.75 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 125,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $7.75 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 12 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10,
<PAGE>
the receipt of which is hereby acknowledged, and Optionee's agreement to serve
as a director of the Company during all or any portion of the Option period.
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its
principal office, presently located c/o Stein Riso Haspel & Jacobs LLP, 805
Third Avenue, New York, NY 10022. The Notice shall state the Optionee's election
to exercise this Option and the number of Option Shares in respect of which it
is being exercised, and shall be accompanied by a check in the amount of the
Exercise Price. Upon payment of the full purchase price of the Option Shares by
Optionee, the Company shall deliver a certificate or certificates representing
those shares. A certificate or certificates for the shares as to which this
Option shall have been so exercised shall be registered in the name of the
Optionee and shall be delivered to Optionee at the address of Optionee specified
in the Notice or at such other address as Optionee shall set forth in its
Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
2
<PAGE>
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock splits, stock dividends, recapitalization or
other changes in the stock of the Company, an appropriate and proportionate
adjustment shall be made in the number and kind of shares issued upon any
subsequent exercise of this Option without any change in the aggregate purchase
price to be paid for such shares. For any and all such purposes, but only for
such purposes, Optionee shall be considered to be a shareholder of record of the
Company as of the date of this Option Agreement. Nothing in this Agreement shall
preclude the Corporation from issuing additional shares of Common Stock to any
third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
restricted securities as such term is defined under the Securities Act of 1933,
as amended, (the "Act") and accordingly will bear a legend indicating such
restrictions.
3
<PAGE>
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
(i) Optionee acknowledges that the Company is a development
stage company with no significant operating history and that there are
significant risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's development
of its business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (upon exercise of the option) are being offered and sold under an
exemption from registration provided by Section 4(2) of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present
addressor to Optionee at the address provided herein, or at such other address
as either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited
4
<PAGE>
postage prepaid in a post office or branch post office or, in person, when so
delivered, or by Federal Express or similar courier providing evidence of
receipt.
11. Representations of Company. The Company represents: (i) the execution,
delivery and performance of this Agreement has been duly authorized by the Board
of Directors of the Company; (ii) the consummation of the transaction
contemplated by this Agreement will not violate any provision of the Company's
Certificate of Incorporation or Bylaws; and (iii) no consent of any third party
including, without limitation, federal or state regulatory agencies is required
for execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
----------------------------
Nasser Nassiri, Secretary
/s/ Riccardo Mortara
----------------------------
Riccardo Mortara
5
STOCK OPTION AGREEMENT
AGREEMENT, dated September 13, 1996 but effective as of August 2nd, 1995,
by and between Biocoral Inc., 74-900 Highway 111, Suite 121, Indian Wells,
California 92210, U.S.A., a Delaware corporation with its principal place of
business at N.Y. (the "Company") and each of Halford Finance S.A., Road Town,
Pasea Estate, P. O. Box 3149, Tortola, B.V.I. and Cornington International Inc.,
both British Virgin Islands corporations with their principal places of business
at Road Town, Pasea Estate, P.O. Box 3149, Tortola B.V.I., (individually, an
"Optionee" and collectively, the ("Optionees").
WITNESSETH
WHEREAS, pursuant to an agreement, dated as of August 2, 1995
("Agreement") the Company agreed to grant to each Optionee certain options to
purchase shares of its common stock, par value USD 0,001 per share, as
additional consideration for the acquisition by the Company of 3H Human Health
Hightech Ltd., an Irish corporation ("3H"), and
WHEREAS, the Company previously adopted a stock option plan (the "Plan")
pursuant to which it was to issue certain stock options under certain
circumstances; and
WHEREAS, the Company is desirous of issuing an option to the Optionees as
agreed in the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionees the right to purchase all or any part
of an aggregate of that number of shares of Common Stock of the Company
(the "Option Shares"), at an exercise price of USD 8.00 per share, as are
calculated as follows: at the close of each fiscal year of 3H's, and by
the end of following quarter, a calculation shall be done of 3H's "Net
Profit", as herein defined, on an unconsolidated basis, by the accountants
regularly engaged to audit 3H or the Company, or such other accountant as
shall be agreed upon by the Company, 3H and the Optionees. For purposes of
this Agreement, the term "Net Profit" shall mean the net profits of 3H on
an unconsolidated basis, after making provision for the payment of all
operating expenses including all taxes thereon, as long as these expenses
and taxes are related to the business conducted with Inoteb S.A./Biocoral
Inc. In addition to the above definition of "Net Profit", it should be
noted that the "Net Profit", for the purpose of this agreement, may only
be derived from the business that 3H will conduct with Inoteb S.A.
<PAGE>
-2-
business, which include the present applications of their products
(osteoporosis, autologue glue, coral + growth factor), as well as all and
any future applications of the same products, as mentioned in the agent
agreement between Inoteb S.A. and 3H on May 13, 1995.
The calculation of "Net Profit" excludes the other activities which may,
from time to time, be conducted by 3H or Biocoral Inc. The number of
Option Shares shall be that number of whole shares obtained by subtracting
USD 2,000,000 from the "Net Profit" to obtain a "Remainder" multiplying
the Remainder by a fraction, the numerator of which is 150,000 times the
"Remainder", and the denominator of which is 1,000,000. By way of
illustration, if 3H's Net Profits in a given year are USD 3,000,000 then
the number of shares subject to this option shall be USD 3,000,000 - USD
2,000,000 = USD 1,000,000; 1,000,000 x 150,000/1,000,000 = 150,000. All
Option Shares issuable pursuant hereto shall be on a cummulative basis.
The Optionees shall determine the allocation of Option Shares as between
themselves.
2. Exercise of Option. The Option Shares subject to the Option shall become
purchasable beginning at the date of calculation of that year's number of
Option Shares and at any time thereafter until 730 days (2 years)
thereafter (the "Expiration Date"). This Option and all the rights
hereunder shall expire on an Expiration Date and any Option Shares not
purchased on or before the "Expiration Date" may not thereafter be
purchased hereunder. In the event Optionees fail to exercise the Option
granted hereunder, Optionees shall have no rights with respect to the
Option or the Option Shares for the concerned year, without affecting
Optionees rights to receive further options hereunder for the next year
and all years after without any time limit. This Agreement will be valid
and shall remain in force as long as Inoteb S.A./Biocoral Inc. will
produce Biocoral products as mentioned at Clause 1 and 5, or remain in
activity.
3. Consideration for Grant of Option. The consideration for grant of the
Option is USD 10 and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged.
4. Method of Exercise of Option: Payment of Option Shares Purchase Price.
This Option shall be exercisable at any time after Option Shares are
issuable pursuant to paragraph 1 hereof from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its
principal office, which Notice shall be received by the Company at least
20 days prior to payment of the full purchase price for the Option Shares.
The Notice shall state the Optionee's election to exercise this Option and
the number of Option Shares in respect of which it is being exercised.
Upon payment of the full purchase price of the Option Shares by Optionee,
the Company shall deliver a certificate or certificates representing those
shares. A certificate or certificates for the shares as to which this
Option shall have been so exercised shall be registered in the name of
such Optionee(s) and shall be delivered to such Optionee(s)
<PAGE>
-3-
at the address of such Optionee(s) specified in the Notice or at such
other address as such Optionee(s) shall set forth in its Notice.
5. If Biocoral Inc. decides to sell, liquidate, merge 3H or transfer 3H's
rights concerning the Biocoral products as above defined to another person
or entity or if Biocoral Inc. takes any decision concerning 3H that can
affect the rights of Optionees under this Agreement, or if 3H takes any
decision that can affect the right of Optionees under this agreement,
Optionees or their assignees will keep the same benefit directly from
Biocoral Inc. and the Company commits itself to obtain similar rights for
Optionees from any other corporation or person to which 3H's rights would
have been transferred.
6. Non-Assignability of Option. This Option may be exercised only by each
Optionee and shall not be sold, transferred, assigned, pledged,
hypothecated or otherwise disposed of in any way, (whether by operation of
law or otherwise), except that each Optionee may sell, transfer or assign
all its interest in this Agreement to a third party controlling ,
controlled by or under common control with Optionees but only after giving
the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment and in case of assignment as mentioned at clause l,
last sentence, and clause 7. Any buyer, transferee, or assignee of this
Option shall be bound by and subject to each and every provision of this
Agreement and shall not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of the Option in anyway (whether by operation of law or
otherwise).
7. Adjustments to Preserve Option Benefits. If the outstanding shares of the
Company's Common Stock are exchanged for a different number or kind of
shares or securities of the Company through stock splits, reverse stock
splits, stock dividends, recapitalization, or any other changes in the
stock of the Company, an appropriate and proportionate adjustment shall be
made in the number and kind of shares issued upon any subsequent exercise
of this Option. Nothing in this Agreement shall preclude the Corporation
from issuing additional shares of Common Stock to any third party.
8. Limitation of Optionee's Rights. Notwithstanding anything in this
Agreement to the contrary, neither Optionee shall have any of the rights
or privileges of a shareholder of the Company in respect of any Option
Shares issuable upon exercise of this Option unless and until those shares
have been paid for in full.
9. Purchase for Investment. Each Optionee represents, warrants and agrees
that if such Optionee exercises this Option in whole or in part then those
Option Shares will be acquired for such Optionee's own account for the
purpose of investment and not with a view to their resale, distribution or
fractionalization. Upon each exercise of this Option, each Optionee will
furnish to the Company a written statement to that effect, satisfactory in
form and
<PAGE>
-4-
substance to the Company and its councel. Each Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will
be "Restricted Securities", as such term is defined under the Securities
Act of 1933, as amended, (the "Act") and accordingly will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "STATE ACT"), OR ANY STATE SECURITIES, BLUE
SKY LAW OR REGULATION (THE "STATE ACT"). THESE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER THE ACT AND UNDER ANY
APPLICABLE STATE ACT OR UNLESS COUNSEL HAS GIVEN AN OPINION
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
10. Other Representations and Warranties of Optionees. As a condition to
receipt of the Option and for other good and valuable consideration,
receipt of which is hereby acknowledge, each Optionee, jointly and
severally, represents and warrants to the Company as follows:
(i) Optionee acknowledges that the Company is a development stage
company with no operating history and that there are significant
risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's
development of its business which is subject to significant risks;
and
(ii) Optionee understands that the Option and the Option Shares (issuable
upon exercise of the Option) are being offered and sold under an
exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law
exemptions, and warrants and represents that the Option and the
Option Shares are being or will be (in the case of the Option
Shares) acquired by each Optionee solely for the Optionee's own
account, for investment purposes only, and are not being purchased
with the intent or view to resell the Option or the Option Shares or
for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk
of the investment for an indefinite period of time because the
Option and the Option Shares cannot be resold or otherwise
transferred unless registered under the Act and qualified under
applicable State law or an opinion of qualified counsel that
indicates an exemption from registration and/or qualification is
available.
12. Notices. Any notices to be given under the terms of this Option shall be
in writing and addressed to the Company and to the Optionees at their
respective addresses first above provided herein, or at such other address
as either party may hereafter designate in writing
<PAGE>
-5-
to the other. Any notice or other communication given hereunder shall have
been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, registered or certified, and deposited postage
prepaid in a post office or branch post office regularly maintained by the
United States Government, or, in person, when so delivered.
13. Governing Law. This agreement shall be deemed to be made under and shall
be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
14. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their legal successors and assigns.
15. Entire Understanding. This Agreement constitutes the entire understanding
of the parties and shall not be amended except by written agreement
between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
OPTIONEES:
CORNINGTON INTERNATIONAL, INC.
By:_____________________________________
HALFORD FINANCE S.A.
By:_____________________________________
OPTIONOR:
BIOCORAL, INC.
By: _____________________________________
PURCHASE AGREEMENT
This Agreement is made and entered into this 9th day of October, 1996 by and
between BROOKLYN ROADS LIMITED ("Purchaser") and CABESTAN, INC., a Pennsylvania
corporation ("Seller").
RECITALS
a. The Seller currently holds title to two parcels of real estate and
appurtenant rights located in Bensenville, Illinois, which parcels are
legally described on Exhibit "A" attached hereto and made a part
hereof by this reference (the parcels are hereinafter referred to
collectively as the "Property"). The Property is improved with two
industrial/office buildings commonly known as 890 Supreme Drive,
Bensenville, Illinois and 800-820 Thorndale Avenue, Bensenville,
Illinois.
b. Purchaser desires to purchase from Seller and Seller desires to sell
to Purchaser all of the items of property hereinafter described in
Paragraph 1 below, in accordance with the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, and the above recitals which are by this, reference
incorporated herein, the sufficiency of which are hereby acknowledged by the
parties hereto, the parties hereto agree as follows:
1. Agreement to Purchase:
Seller agrees to sell, convey and assign to Purchaser, or its nominee or
assignee, all of the following:
a. The Property and all rights, appurtenances, privileges and easements
thereto owned by Seller;
b. The buildings located upon the Property and all improvements and
structures of any kind whatsoever now or hereafter located on the
Property (the buildings and other structures, if any, are hereinafter
collectively referred to as the "Building");
c. All fixtures, equipment, apparatus, machinery, appliances,
furnishings, and other personal and tangible property, if any, owned
by Seller located at or upon the Building or Property or both and used
or usable in connection with the operation and ownership of the
Building and the Property, exclusive of personal property or trade
<PAGE>
fixtures owned by tenants (hereinafter referred to as the "Personal
Property"); and
d. All intangible property, if any, owned by Seller used in connection
with the Building and the Personal Property, including, but not
limited to all rights to obtain utility services in connection with
the Building and the Property; assignable licenses and other
governmental permits and permissions relating to the Property, the
Building, and the operation thereof to the extent assignable by law,
and all assignable contracts and contract rights, including guarantees
and warranties (all of the foregoing are hereinafter collectively
referred to as the "Intangible Property").
The Property, Building, Personal Property and Intangible Property are herein
sometimes collectively referred to as the "Project".
2. Purchase Price.
a. The purchase price (the "Purchase Price") for the Project shall be SIX
MILLION, EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS ($6,800,000.00)
payable, in lawful United States of America dollars, as follows:
i. Within two (2) business days (which for the purposes of this
Agreement shall exclude Saturdays, Sundays and statutory holidays
within the State of Illinois or the Province of Ontario) after
the date of execution of this Agreement by Seller (the date of
execution by Seller is hereinafter referred to as the "Acceptance
Date"), Purchaser shall deliver to the Seller's solicitor, as
hereinafter defined, as earnest money, the sum of FIFTY THOUSAND
AND 00/100 DOLLARS ($50,000.00) (the "Initial Earnest Money
Deposit").
Within thirty (30) days from receipt by Purchaser of the last of
all the documents listed in paragraph 4, Purchaser shall deposit
as additional earnest money, the sum of ONE HUNDRED THOUSAND AND
00/100 DOLLARS ($100,000.00) (the "Additional Earnest Money"),
unless Purchaser has exercised its right to terminate this
Agreement, in accordance with its terms. The Initial Earnest
Money and the Additional Earnest Money are hereinafter referred
to as the "Earnest Money". The Earnest Money or any part thereof
shall be held by the Seller's Solicitor(s), in trust, in an
interest bearing account. All interest earned on the Earnest
Money shall accrue for the benefit of the Purchaser, unless the
Earnest Money is retained by Seller as liquidated damages
pursuant to paragraph 2(b) hereof and in such event, the interest
<PAGE>
shall accrue for the benefit of Seller.
At Closing, the Earnest Money, together with all interest
thereon, shall be applied toward the Purchase Price.
ii The balance of the Purchase Price, plus or minus prorations,
shall be paid by Purchaser at Closing in immediately available
funds payable to Seller.
b. If the transaction herein described is not consummated due to a
default of Purchaser hereunder, the Earnest Money together with all
interest thereon shall be paid and forfeited to Seller as liquidated
damages in lieu of all other remedies available to Seller, and the
parties hereto shall have no further obligations hereunder.
3. Time of Closing
Subject to the conditions precedent contained in this Agreement, the
consummation of the transaction herein contemplated (hereinafter referred to as
the "Closing") shall take place thirty (30) days following the end of the
Inspection Period. The Closing will take place at the offices of Chicago Title
Insurance Company (the "Title Company"), 171 N. Clark Street, Chicago, Illinois.
4. Documents to be Delivered by Seller
Except as otherwise set forth in this paragraph, within ten (10) days after
the Acceptance Date, Seller shall deliver to Purchaser the following documents:
a. Copies of all certificates of occupancy and other necessary
governmental licenses or approvals pertaining to the Project, if any,
which are in the possession of Seller;
b. A complete copy of "as-built" plans and specifications for the
Building and any modifications or amendments thereto, if any, in the
possession of Seller;
c. Copies of all service and maintenance contracts and other written
agreements of any kind pertaining to the Project (including all
amendments and modifications thereto) which Seller or its agents and
affiliates have entered into in connection with the construction,
development, maintenance, ownership and operation of the Project (such
contracts and agreements being hereinafter collectively referred to as
the "Project Contracts"). Purchaser shall advise Seller not less than
twenty (20) days prior to the Closing which Project Contracts, if any,
it shall require to be assigned to it at the Closing. Any contracts
<PAGE>
which Purchaser has not required Seller to assign to it at the
Closings shall be cancelled by Seller without liability to Purchaser;
d. Copies of all leases relating to the Project together with a current
rent roll;
e. A schedule listing all Personal Property;
f. Within twenty (20) days after the Acceptance Date, Seller shall
deliver to Purchaser a commitment (hereinafter referred to as the
"Title Commitment") to issue an ALTA Form B Owner's Title Insurance
Policy (the "Title Policy") issued by Chicago Title Insurance Company
(the "Title Company") in the amount of the Purchase Price, showing
title to the Property and Building and, in addition, all access,
ingress and egress and utility casements and rights-of-way used in
connection with the Project naming Purchaser as the proposed insured,
with title being subject only to real estate taxes not yet due or
payable, covenants, conditions and restrictions of record, public
easements and rights of way, leases, acts of Purchaser and parties
acting through Purchaser, the Mortgage, as hereinafter defined, and
such other exceptions as are approved in writing by Purchaser
(hereinafter referred to as the "Permitted Exceptions") and any other
title exceptions pertaining to liens or encumbrances of a definite,
ascertainable amount which may and shall be removed by the payment of
money by Seller at or prior to Closing as confirmed by Purchaser with
the Title Company (such other title exceptions being hereinafter
referred to as the "Removable Exceptions"), together with copies of
all covenants, conditions, easements and restrictions affecting the
Project. The Title Policy or "marked-up" title commitment shall be
delivered at Closing and shall provide full extended coverage
insurance which shall result in the deletion of the general exceptions
and shall contain the following affirmative endorsements:
i. The Title Company's standard form 3.1 ALTA zoning endorsement
with parking;
ii. If there is more than one Parcel comprising either parcel of the
Project, a contiguity endorsement insuring that all parcels
comprising the Property are contiguous;
iii. Restriction endorsement if any recorded covenant or restriction
affects the Property; and
iv. Access endorsement;
<PAGE>
g. Within twenty (20) days after the Acceptance Date, Seller shall
deliver to Purchaser three (3) copies of surveys of the Property (the
"Surveys") dated or recertified as of or subsequent to the Acceptance
Date, prepared by a land surveyor licensed by the State of Illinois
and certified to have been prepared in accordance with 1992 ALTA land
title standards and certified to Purchaser, the Title Company and the
Mortgagee, as hereinafter defined. The Surveys shall show the location
of the Building to be within lot and setback lines and that the
Building does not encroach upon easements in such a manner as to
adversely affect or impair the use or marketability of the Property
and that there are no encroachments of buildings or other improvements
from adjoining properties which adversely affect or impair the use or
marketability of the Property. The Surveyor shall certify that the
Property does not contain wetlands and that the Property is not in an
area identified by any agency or department of the federal government
as having special flood or mudslide hazards which would require flood
insurance under the Flood Insurance Act of 1968.
If the Title Commitment or the Title Policy disclose exceptions to
title other than Permitted Exceptions, or Removable Exceptions in the
case of the Title Commitment (such exceptions are hereinafter referred
to as "Unpermitted Exceptions") or the Surveys disclose defects or
other matters which result in Unpermitted Exceptions, then Purchaser
may elect, upon written notice to Seller, (i) to terminate this
Agreement; or (ii) to take title as it then is and deduct from the
Purchase Price an amount necessary to discharge such Unpermitted
Exceptions or to obtain affirmative title insurance against loss with
respect to any unpermitted liens, encumbrances or restrictions. If
Purchaser fails to make an election, such failure shall constitute an
election to terminate this Agreement;
h. All documents in Seller's possession relating to any special use,
nonconforming use, or zoning variance granted with respect to the
Project;
i. All environmental reports, audits or studies in Seller's possession
relating to the Project;
j. A copy of all guaranties, warranties and other documents or
instruments evidencing or relating to the Building, Personal Property
and the Intangible Personal Property, if any;
k Copies of all contracts for construction, repair or capital
replacement performed or to he performed at the Project or covering
such work performed during the two (2) years immediately preceding the
<PAGE>
date hereof;
l. All other studies, reports, maps and documents related to the Project
that are in Seller's possession including without limitation
engineering reports, environmental impact reports, historical site
status reports, roof reports, traffic circulation, flood control and
drainage plans and all correspondence with governmental agencies
concerning the same;
m. Copies of real estate tax bills for the three (3) most recent years
and all notices pertaining to real estate taxes and assessments
applicable to the Project, together with documents relating to all
real estate protests or tests filed during such period in connection
with the Project;
n. Completed Disclosure Form executed by Seller pursuant to the Illinois
Responsible Property Transfer Act; and
If Seller fails to deliver to Purchaser any of the documents specified in this
Paragraph within the time herein provided, then the Inspection Period granted
pursuant to paragraph 8 hereof shall be extended by the number of days by which
the date on which such documents are delivered exceeds the time period set forth
in this paragraph 4.
5. Documents To Be Delivered By Seller At Closing
At or prior to the Closing, Seller shall deliver or cause to be delivered
to Purchaser the following, all in form and substance reasonably satisfactory to
Purchaser:
a. Special Warranty Deed to Purchaser or Purchaser's nominee in
recordable form, conveying good and marketable title in fee simple to
the Property and Building, subject only to the Permitted Exceptions;
b. The Title Policy or a "marked-up" Title Commitment (including extended
coverage and title endorsements) and indicating waiver or deletion of
the Removable Exceptions;
c. A Bill of Sale executed by Seller, assigning, conveying and warranting
to the Purchaser title to the Personal Property, if any, and the
Intangible Property, if any, free and clear of all encumbrances;
d. The original executed Leases;
e. Letter from the tenants under the Leases (hereinafter referred to as
"Tenant Estoppel Certificates") addressed to Purchaser or its nominee
<PAGE>
and Mortgagee, as hereinafter defined, in the form attached hereto as
Exhibit "B". If Seller is unable to obtain Tenant Estoppel
Certificates from all of the tenants, Seller shall provide Purchaser
with a Seller's Estoppel Certificate for the tenants who did not
provide Tenant Estoppel Certificates. The Seller's Estoppel
Certificate shall contain the matters set forth in Exhibit "B"
attached hereto;
f. Notices executed by Seller to all tenants, licensees or
concessionaires, under the Leases and Project Contracts directing such
parties to pay all rental and other payments to Purchaser or its
agent;
g. All architectural drawings, plans, specifications, surveys, building
permits, occupancy permits or other similar items in Seller's
possession and control which Seller has created, used or relied upon
for the ownership and maintenance of the Project;
h. A non-foreign certificate in accordance with the provisions of
paragraph 22 hereof;
i. Insurance certificates in Seller's possession required by the tenants
under the Lease;
j. A rent roll dated as of the Closing certified by Seller to Purchaser
to be true, correct and complete;
k. All keys in possession of the Seller used in connection with the
Project and the combinations to all locks included on the Project;
l. An affidavit of title;
m. A certificate from Seller stating that the representations and
warranties set forth in paragraph 9 are true and accurate in an
material respects as of the date of the Closing; and
n. Such other documents as Purchaser or the Title Company may reasonably
request to enable Purchaser to consummate the Transaction contemplated
by this Agreement.
6. Documents to be Delivered by Seller and Purchaser.
At or prior to the Closing, Purchaser and Seller shall jointly deliver the
following:
<PAGE>
a. Executed state, county and municipal transfer declarations;
b. ALTA Statement;
c. A Closing Statement containing calculations of prorations;
d. An Assignment and Assumption Agreement with respect to the Leases and
the Project Contracts (to the extent that Project Contracts are to be
assigned to Purchaser at Closing) pursuant to which Seller shall agree
to indemnify, protect, defend and hold Purchaser harmless from and
against all claims (including attorneys' fees) arising in connection
with the Leases and the assigned Project Contracts for the period
prior to Closing and Purchaser shall agree to indemnify, protect,
defend and hold Seller harmless from and against all claims (including
attorneys' fees) arising in connection with the Leases and assigned
Project Contracts for the period from and after the Closing; and
e. An Assignment of the Mortgage, if required pursuant to the Mortgage.
7. Documents To Be Delivered By Purchaser
At Closing, Purchaser shall deliver to Seller the Purchase Price, plus or
minus prorations, by wire transfer as directed by Seller.
8. Inspection Period
a. Notwithstanding anything contained in this Agreement to the contrary,
if, for any reason whatsoever, in Purchaser's sole discretion,
Purchaser is not satisfied with the condition of the Project, or any
part thereof, or with the documents to be delivered to Purchaser in
accordance with Paragraph 4 hereof, or with the financial or physical
feasibility of ownership of the Project and any proposed plans for the
rehabilitation and renovation of same, then Purchaser shall have the
right to terminate this Agreement by written notice to Seller within
thirty (30) days from the receipt by Purchaser of the last of all
documents listed in paragraph 4 (the "Condition Date) The period of
time from the Acceptance Date through and including the Condition Date
is herein referred to as the "Inspection Period".
b. Purchaser, its agents, representatives and employees may, during the
Inspection Period, make soil, environmental and engineering tests,
inspect and audit the Project for such purposes as Purchaser may
require and Seller shall provide Purchaser and its agents and
representatives full and complete access to the Project. Purchaser
hereby agrees to indemnify, defend and hold Seller harmless from and
<PAGE>
against all liability and cost caused by the negligence of Purchaser
and its agents in performing said inspection.
9. Warranties and Representation of Seller.
a. In order to induce Purchaser to enter into this Agreement Seller
warrants and represents to Purchaser as follows:
i. that between the Acceptance Date and the Closing, Seller shall:
(i) not, without first obtaining the written consent of the
Purchaser, enter into, amend or cancel any contracts, agreements
or leases pertaining to the Project which would survive the date
of Closing and be binding upon Purchaser; (ii) not convey any
Intangible Property or remove from the Project any of the
Personal Property except in the ordinary course of business;
(iii) remedy all violations of laws, ordinances, orders or
requirements relating to the Project of which Seller has actual
notice. (iv) not cancel or permit cancellation of any hazard or
liability insurance carried with respect to the Project or its
operation; and (v) not apply any security deposit to any
obligation of any tenant under any of the Leases;
ii. To the best of Seller's knowledge, no fact, condition or
proceeding exists which would result in the termination or
impairment of the furnishing of or an increase in rates for
services to the Project of water, sewer, gas, electric,
telephone, drainage and other such utility services. To the best
of Seller's knowledge, the facilities servicing the Project are
in compliance with all governmental rules and regulations;
iii. All building permits, certificates of occupancy, business
licenses and, without limitation, all other notices, licenses,
permits, certificates and authority, required in connection with
the construction, use or occupancy of the Project have been
obtained and are in effect and in good standing and the leasing,
operation and use of the. Project is in compliance, in all
material respects, with such notices, licenses, permits,
certificates and authority;
iv. There are no presently pending, and Seller has received no notice
of, any special assessments of any nature with respect to the
Project or any part thereof;
v. Seller is not a party to any contract, agreement or commitment to
sell, convey, assign, transfer, provide rights of refusal or
other similar rights or otherwise dispose of any portion or
<PAGE>
portions of the Project;
vi. This Agreement has been duly authorized and executed on behalf of
Seller and constitutes a valid and binding agreement, enforceable
in accordance with its terms, except as limited in bankruptcy or
by court of equity;
vii. There is no litigation pending against Seller or the Project
which materially and adversely affects the Project or Seller's
ability to perform pursuant to this Agreement;
viii.Seller has not received any notice and Seller has no knowledge
that the Building is being operated by Seller other than in
accordance with all applicable federal, state and local laws,
ordinances, rules, regulations and orders (including without
limitation, those relating to the environment, health and safety
matters and handicapped persons);
ix. Seller has not received any notice and Seller has no knowledge
that, (a) any building permits, certificates of occupancy,
business licenses and all other certificates and authorization
required in connection with the construction, use and occupancy
of the Project have not been obtained and are not in full force
and effect; and (b) the leasing, operation and use of the Project
is not in compliance, in all material respects with such notices,
licenses, permits and certificates;
x. Seller has not received and knows of no unsatisfied requests for
repairs, restorations or improvements with respect to the Project
from any person, entity or authority, including, but not limited
to, any tenant, lender, insurance carrier or government
authority. Seller has no knowledge or notice of, any claims of
any governmental agency to the effect that the construction,
operation or use of any of the Project is in violation of any
applicable law, ordinance, rule, regulation or order;
xi. To the best of Seller's knowledge, during the period in which
Seller has owned the Project, the Project has never been used as
a landfall or a waste dump, and there was not any installation
in, or production, disposal or storage on, the Project of any
hazardous waste or other toxic substances, including, without
limitation, asbestos, by Seller or, to the best of Seller's
knowledge, by any tenant or any previous tenant or owner (other
than storage of small amounts of ordinary office supplies, copier
and printer toner, etc.) and there is no proceeding or inquiry by
<PAGE>
any governmental authority or agency with respect thereto. During
the period in which Seller has owned the Project, the Project has
not contained any hazardous substance or hazardous waste, as said
terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. subsections
9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. subsections 6901 et seq. or the Illinois
Environmental Protection Act., as amended, I11.Rev.Stat. Ch.
111-1/2, subsections 1001 et seq.; and
xii. none of the foregoing representations, warranties and statements
of fact contemplated by this Agreement contains any untrue
statement of a material fact or omit to state any material fact
necessary to make any such statement or representation not
misleading to a prospective purchasers seeking full information
as to the Property; the Seller has no knowledge of any facts
which should reasonably be known to the Seller relating to the
Property which are not disclosed in this Agreement or in any
document deliverable hereunder and which might reasonably be
expected to materially diminish he Purchaser's appreciation of
the value of the Property or, if known by the Purchaser, might
reasonably be expected to deter the Purchaser from completing the
transactions contemplated by this Agreement on the terms and
conditions contained herein.
b. All representations and warranties contained in this Paragraph 9 or
elsewhere in this Agreement shall be deemed remade as of the Closing
and shall survive the Closing for a period of nine (9) months. No suit
shall be brought in connection with any representation or warranty
unless commenced within nine (9) months of the date of the Closing.
Each and every warranty and representation of Seller shall be deemed
to have been relied upon by Purchaser, notwithstanding any
investigation, Purchaser may have made with respect thereto. If there
shall be any material, adverse change between the date of this
Agreement and the date of Closing such that the foregoing
representation, and warranties shall not be true as of the time of
Closing, then Purchaser may, at its election, terminate this Agreement
and be relieved of any further obligations hereunder.
10. Adjustments.
a. An adjustment to the Purchase Price shall be made between Seller and
Purchaser on a per diem basis as of midnight of the date preceding the
date of Closing for real estate taxes, personal property taxes and
<PAGE>
other state or city taxes, charges and assessments levied against the
Project, not yet due and payable or due but not yet paid, on the basis
of the fiscal year for which the same are levied or assessed. If the
amount of any such taxes, charges or assessments shall not be fixed
before the date of Closing, the adjustment thereof at Closing shall be
based upon the Tax Assessor's most recent assessed valuation and the
latest known tax rate and equalization factors. In such event, Seller
and Purchaser agree to reprorate such taxes, charges or assessments as
the amount of such items become available, such agreement shall
survive the Closing. To the extent Purchaser receives after the
Closing, any payment from any of the tenants for the tenants'
proportionate share of real estate taxes for which Purchaser received
a closing credit, Purchaser shall promptly remit such payments to
Seller.
b. An adjustment to the Purchase Price shall be made between Seller and
Purchaser on a per diem basis as of midnight of the date preceding the
date of Closing for rents under the Leases, and all security deposits
held by Seller pursuant to the Leases, and, without limitation, other
payments payable by tenants, licenses, concessionaires and other
persons using or occupying the Project or any part thereof, for or in
connection with such use or occupancy. However, Purchaser shall not be
obligated to make any payment or give any credit to Seller on account
of or by reason of any rental or other payments which are unpaid as of
the Closing (which shall remain the property of Seller) but instead
Purchaser shall be required merely to turn over to Seller its share of
the same if, as and when received by the Purchaser. All payments
received by the Purchaser from a tenant, licenses , concessionaire or
other person shall be applied against the most recently accrued
obligation or obligations of the payor. In addition, in the event that
as of the Closing there shall exist any rental concession, free-rent
period or rent reduction under or with respect to any Lease which
extends beyond the Closing, then the amount thereof shall be credited
to Purchaser as of the Closing.
c. At Closing, Purchaser shall receive a credit in the amount of the
outstanding principal amount of the Mortgage, as hereinafter defined,
together with all accrued interest thereon less the amount of any real
estate tax deposits made by Seller and held by the Mortgagee as of the
date of Closing.
d. The following items set forth below shall be apportioned between
Seller and Purchaser as of the Closing:
<PAGE>
i. Fuel, water, sewer, telephone, and all other utility charges.
ii. Fees paid or payable under any Project Contract licenses, permits
or other Intangible Property assignable to Purchaser and charges
and other amounts payable under any contracts assigned to
Purchaser pursuant to the terms of this Agreement.
iii. All other items customarily prorated or adjusted on the
conveyance of similar projects.
e. In the event any prorations, apportionments or computations made under
this Paragraph 9 shall prove to be incorrect for any season, then
either party shall be entitled to an adjustment to correct the same,
provided that it makes written demand on the one from whom it is
entitled to such adjustment within twelve (12) months after the
Closing.
11. Closing Costs
All title charges and expenses of or relating to the Title Policy herein
provided for and survey fees, documentary or transfer taxes payable in
connection with the delivery of any instrument or document provided in or
contemplated by this Agreement (except for municipal transfer taxes imposed upon
the transferee) or any agreements described or referred to herein, if any, any
sales or transaction tax payable by reason of the transaction herein described,
any fee charged or imposed by the Mortgagee in connection with the conveyance of
the Project or the assignment of the Mortgage, and one-half (1/2) of any escrow
and Closing charges imposed by the Title Company, the cost of extended coverage
with the Title Policy shall be paid by Seller. One-half(1/2) of any escrow and
Style Closing charges imposed by the Title Company thecost of all title
endorsements, municipal transfer taxes (if any) imposed uponthe transferee and
the cost of recording the deed to cost of recording the deed to Purchaser shall
be paid by Purchaser shall by paid by Purchaser.
12. Operation Until Closing
From the date of this Agreement, until Closing, the Seller shall operate
the Property in the ordinary course in accordance with sound business and
management practices as would a prudent owner of comparable properties and will
carryout all routine day-to-day repairs and maintenance thereof.
13. Damage or Destruction to Project
In the event that between the Acceptance Date and the date of Closing, all
or any portion of the Project is damaged or destroyed by fire or other casualty
and the cost of repairing such damage exceeds $250,000.00, Purchaser may elect
to:
<PAGE>
a. Terminate this Agreement without cost, obligation or liability on
Purchaser's part, in which event all rights and obligations of the
parties hereunder shall cease and the Earnest Money and all interest
thereon shall be returned to Purchaser; or
b. Consummate the transaction contemplated hereby, in which event the
Seller shall provide Purchaser with a closing credit in the amount of
its insurance deductible and shall insurance proceeds payable as a
result of such damage or destruction shall provide Purchaser with a
closing insurance proceeds payable as a result of Purchaser at Closing
and used to rebuild the Project.
Purchaser shall notify Seller within thirty (30) days after receipt of
notice from Seller of such damage or destruction of its election. If Purchaser
fails to notify Seller of its election within said 30-day period, such failure
shall constitute an election to terminate this Agreement as aforesaid. The
Closing shall be adjusted, if necessary, to allow for Purchaser's election not
to terminate.
In the event that the cost of restoration or rebuilding is less than
$250,000.00, Seller shall effect such restoration and if such restoration or
rebuilding is not completed as of the date of Closing, the date of Closing shall
be extended until such time as such restoration or rebuilding is completed.
14. Condemnation.
In the event between the Acceptance Date and the date of Closing any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Building or the Property, Purchaser, at its sole
option, may elect to terminate this Agreement without costs, obligation or
liability on the part of Purchaser, in which event all rights and obligations of
the parties hereunder shall cease and the Earnest Money and all interest thereon
shall be returned to Purchaser. In the event Purchaser elects not to terminate
this Agreement, Seller shall assign to Purchaser at Closing all of Seller's
title and interest in an to any award pertaining to the Project made in
connection with such condemnation or eminant domain proceedings. Purchaser shall
notify Seller within thirty (30) days after its receipt of notice of such
condemnation or eminent domain proceedings whether it elects to exercise its
right to terminate. If Purchaser fails to notify Seller of its election within
said 30-day period, such failure shall constitute an election to terminate this
Agreement aforesaid. The Closing shall be adjusted, if necessary, to allow for
Purchaser's election not to terminate.
15. Brokers
<PAGE>
The parties mutually warrant and represent to the other that no broker has
been authorized to act on its behalf in respect of the transaction contemplated
hereby. Each of the parties shall indemnify and save the other harmless from any
claim by any broker or other person.
16. Mortgage
Seller and Purchaser acknowledge and agree that the consummation of the
transaction contemplated by this Agreement is expressly subject to and
conditioned upon the agreement and consent of Principal Mutual Life Insurance
Company (the "Mortgagee") to the assignment of the Mortgage to Purchaser and the
assumption of the Mortgage Note by Purchaser. Seller shall be solely responsible
for all costs charged, imposed or assessed by Mortgagee in connection with the
assignment of the Mortgage and the consent of the Mortgagee to the conveyance to
Purchaser.
17. Entire Agreement
It is understood and agreed that all understandings and agreements
heretofore had between the parties hereto are merged in this Agreement, the
exhibits annexed hereto and the instruments and documents referred to herein,
which alone fully and completely express their agreements, and that neither
party is relying upon any statement or representation, not embodied in this
Agreement, made by the other. Each party expressly acknowledges that, except as
expressly provided in this Agreement, the other party and the agents and
representatives of the other party have not made, and the other party is not
liable for or bound in any manner by, any express or implied warranties,
guaranties, promises, statements, inducements, representations or information
pertaining to the transactions contemplated hereby.
18. Assignment
The Purchaser, upon notice to the Seller but without the necessity of
obtaining the Seller's consent, shall have the right to assign its rights
hereunder, provided that in the case of any such assignment the Purchaser shall
not be released from its obligations hereunder unless the Seller consents to the
Assignment and the assumption of such obligations by the assignee, which consent
may not be unreasonably withheld. The Seller may not assign its rights under
this Agreement without the prior written consent of the Purchaser, which consent
may not be unreasonably withheld.
19. Modifications
No modification, amendment, discharge or change of this Agreement, except
as otherwise provided herein, shall be valid unless the same is in writing and
<PAGE>
signed by the party against which the enforcement of such modification,
amendment, discharge or change is sought.
20. Notices
All notices, demands, requests and other communications under this
Agreement shall be in writing and shall be deemed properly served when received
(a) if delivered by hand or expedited messenger service with proof of receipt to
the party to whose attention it is directed or (b) if sent, postage prepaid, by
registered or certified mail, return receipt requested, postage prepaid or (c)
if sent by private carrier guaranteeing next day delivery or (d) if sent via
telecopier or other electronic communication which results in a written or
printed notice, addressed as follows:
If intended for Purchaser: Frank Camenzuli
Brooklyn Roads Limited
Suite 301
347 Bay Street
Toronto, Ontario
Canada
M5H 2R7
Telecopier: (416) 864-9929
with a copy to: John Wright
Owens, Wright
Suite 401
20 Holly Street
Toronto, Ontario
Canada
M4S 3B1
Telecopier: (416) 486-3309
If intended for Seller: Cabestan, Inc.
c/o Trammel Crow Company
2 Pierce Place, Suite 700
Itasca, Illinois 60143
Telecopier: (630) 285-2955
with a copy to: Neil Jacobs
Stein, Riso, Haspel & Jacobs, LLP
80 Third Avenue
21st Floor
New York, New York 10022
<PAGE>
Telecopier: (212) 752-8468
or such other address or to such other party which any party entitled to receive
notice hereunder designates to the other in writing. Notice delivered by hand,
by private carrier or by telecopier shall be effective when delivered. Notice
sent by mail shall be effective five (5) days after mailing.
21. Illinois Tax Withholding.
Seller represents and warrants that the sale of the Project to Purchaser
shall not subject Purchaser to liability under 35 ILCS 5/902. Seller shall
indemnify and hold Purchaser harmless from any claims for transferee liability
asserted by the State of Illinois against Purchaser pursuant to 35 ILCS 5/902 in
connection with the sale of the Project by Seller to Purchaser. The foregoing
indemnity agreement of Seller shall survive the Closing of the sale of the
Project to Purchaser.
22. Non-Foreign Certificate
Seller shall provide Purchaser on or before the Closing, with a non-foreign
certificate sufficient in form and substance to relieve Purchaser of any and all
withholding obligations under federal law, which certificate shall be reasonably
satisfactory to Purchaser and the Title Company.
23. Binding Effect
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
24. Partial Invalidity
Seller and Purchaser intend and believe that each provision in this
Agreement comports with all applicable local, state and federal laws and
judicial decisions.
However, if any provisions or provisions in this Agreement which is or are
not materially related to the liability of the parties hereto or to the
conditions to Purchaser's obligations to consummate the transaction contemplated
herein is found by a court of law to be in violation of any applicable local,
state or federal ordinance, statute, law administrative or judicial decision, or
public policy, and if such court should declare such portion, provision or
provisions of this Agreement to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent both of Seller and Purchaser
that such portion, provision or provisions shall be given force to the fullest
possible extent that they are legal, valid and enforceable, that the remainder
of this Agreement
<PAGE>
shall be construed as if such illegal, invalid, unlawful, void or unenforceable
portion, provision or provisions were not contained therein, and that the
rights, obligations and interest of Purchaser and Seller under the remainder of
this Agreement shall continue in full force and effect. If any provision or
provisions which is or are material as set forth above are found to be illegal,
invalid, unlawful, void or unenforceable as written, this Agreement may, at the
option of either party, be terminated without further obligation to either
party.
25. Acceptance
Purchaser agrees that this Agreement shall be irrevocable by it until 11:59
a.m. on the 18th day of October, 1996, after which time, if not accepted, this
Agreement shall be null and void.
Exhibits "A" and "B" form part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Dated at Toronto, Ontario, Canada, this 9th day of October, 1996.
BROOKLYN ROADS LIMITED
[ILLEGIBLE]
------------------------------------
The undersigned accepts the above Agreement.
Dated at Geneva, Switzerland, [ILLEGIBLE], this 15th day of October, 1996.
CABESTAN, INC.
[ILLEGIBLE]
------------------------------------
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF LANDS
Building Twelve
Address: 800/804/806/808/816/818/820 Thorndale Avenue
Bensenville Industrial Park
Dupage County, Illinois
Site Area: 5.563 acres
Building Area: 73,249 square feet
Legal Description:
Parcel 2: Lot 2 in Thorndale Distribution Park in Bensenville Unit
No. 4, being a resubdivision of Part of the southwest 1/4 of
Section 2 and part of the northwest 1/4 of Section 11,
Township 40 north, range 11, east of the third principal
meridian, according to the plat thereof recorded October 31,
1984 as document R84-88005, in Du Page County, Illinois.
Parcel 3: A right-of-way and non-exclusive appurtenant easement for
the benefit of Parcel 2, as created by access agreement
recorded January 6, 1994 as document R94-004671, for
Ingress, Egress and Driveway over the following described
property:
The east 25.00 feet of the south 300.00 feet and the east
20.00 feet of the north 175.00 feet of the south 475.00 feet
of Lot 1 in Thorndale Distribution Park in Bensenville Unit
No. 4, being a resubdivision of part of the southwest 1/4
Section 2 and part of the northwest 1/4 of Section 11,
Township 40 north, range 11, east of the third principal
meridian, according to the plat thereof recorded October 31,
1984 as document R84-88005, in Du Page County, Illinois
Building Three
Address: 820/860/890 Supreme Drive
Bensenville Industrial Park
Dupage County, Illinois
Site Area: 4.77 acres
<PAGE>
Building Area: 85,542 square feet
Legal Description:
Parcel 1: Lot 1 in Thorndale Distribution Park in Bensenville Unit No.
4, being a subdivision of part of the southwest 1/4 of
Section 2 and part of the northwest 1/4 of Section 11, all
in Township 40 north, Range 11, east of the third principal
meridian according to the plat thereof recorded September 4,
1974 as document R74-45804, in Du Page County, Illinois.
<PAGE>
EXHIBIT "B"
TENANT ESTOPPEL CERTIFICATES
TO: BROOKLYN ROADS LIMITED
AND TO:
RE: BROOKLYN ROADS LIMITED PURCHASE OF 890 SUPREME DRIVE AND 800-820
THORNDALE AVENUE, BENSENVILLE, ILLINOIS (the "Property") and a Lease
dated BETWEEN _______, as LANDLORD and _______, as TENANT (the
"Lease") as amended by an AGREEMENT dated _______ for the premises
known as Unit _______, at _______ (the "Premises")
The undersigned, being or on behalf of the Tenant of the Premises, hereby
confirm and acknowledge that:
1. The Tenant is in possession of the Premises and is paying rent and other
payments reserved by the Lease and there is no set-off of such rental;
2. Additional Rents are charged and paid as follows:
Charge Date(s) Paid Paid To
Realty Tax
Maintenance
Insurance
Utilities
(separately metered)
(not separately metered)
Others
3. There has been no oral and written variation, modification or alteration of
the Lease or of any guarantee thereof and the Lease is now in full force
and effect;
4. As of this date, the Lease is in good standing in all respects and the
undersigned has no claim or right to any set off against the Rent due or
accruing due, other than Pre-paid Rents as set forth below;
3. No event has occurred and is continuing which would constitute a default or
breach under the Lease by the Landlord or by the Tenant of any of the
<PAGE>
terms, conditions, covenants or provisos thereof including but
not limited to the Landlord's obligation to repair and maintain
the Premises;
6. There is no subsisting prior assignment of the Lease; there is no
subsisting Sub-lease of the Premises or any portion of same;
7. The area being occupied by the Tenant under the Lease is ____ square feet
and is designated as Unit _______, the Tenant occupies no other part of any
other unit.
There is no dispute as regards the area being occupied by the Tenant or as
regards its entitlement to space;
8. This amount of $_______ is presently being paid for Base Rent monthly; the
amount of $_______ is presently being paid for Additional Rent monthly;
9. Rent/Additional Rent is paid on the first day of each month; the last
payment of Rent/Additional Rent was paid on _______;
10. The amount of $_______ has been paid as Last Month's Rent;
11. The amount of $_______ has been paid as a Security Deposit;
12. The Lease matures on _______. There is an option to renew which has/has not
(delete as applicable) been exercised;
13. The undersigned is aware the subject property, namely _______ is being
purchased by BROOKLYN ROADS LIMITED, which will be relying on this
Acknowledgement in completing the purchase.
DATED at ___, this day of _______, 1996.
TENANT
_____________________________________
Name:
Title:
UI USA, Inc.
Rockefeller Center
Suite 306
610 Fifth Avenue
New York, New York
10020
November 26, 1996
Biocoral, Inc.
c/o Stein, Riso, Haspel & Jacobs, LLP
805 Third Avenue
New York, NY 10022
Attention: Mr. Riccardo Mortara
Mr. Nasser Nassiri
Dear Gentlemen:
This letter agreement shall confirm the understanding that UI USA, Inc.
(the "Financial Advisor") has been engaged to act as Financial Advisor to
Biocoral, Inc. (the "Company") in connection with general financial advisory
services and the potential structuring of a transaction with a broker or
brokers, and with advising the Company regarding the potential raising of debt
or equity financing. In the case that the Company is combined with another
company (whether by merger, consolidation, reorganization or otherwise), the new
company will assume the responsibilities, for the purposes of this letter, of
the Company.
1. The Company hereby engages the Financial Advisor, in connection with
financial advisory services and a Capital Transaction (as defined below), for
the period commencing with the signing of the agreement by the Company and
ending twelve (12) months thereafter, unless this
1
<PAGE>
agreement is extended by mutual consent in writing. Prior to the Company
engaging any other financial advisor, the Company must advise the Financial
Advisor of such and of the purpose for which the new advisor is being engaged,
and there must be no conflict with the work of the Financial Advisor, and it
must be reasonably acceptable to the Financial Advisor.
2. The Company agrees to pay the Financial Advisor a retainer fee
structured in milestone payments as follows: (i) an up front fee of $15,000
payable within five days of the signing of this agreement; and (ii) a fee of
$12,000 upon the completion of a presentation which is used in meetings with
investment bankers who could potentially raise capital either publicly or
privately in the U.S. The Financial Advisor will prepare materials as necessary
and perform other duties reasonably related to the Company's efforts to identify
a broker or brokers which would be interested and able to raise capital for the
Company. The retainer will be payable by the Company regardless of whether any
Capital Transaction is consummated.
3. If the Company issues any equity or subordinated debt securities, or
otherwise obtains capital (each a "Capital Transaction") (i) during the term of
this agreement (including any extensions thereof) or (ii) within one year after
the expiration of the term of this agreement (including any extensions thereof)
from an investing party approved by the Company (or any affiliate thereof), the
Company agrees to pay the Financial Advisor a fee (the "Transaction Fee") equal
to: seven (7) percent of the first $15 million, six (6) percent of the next $10
million, five (5) percent of the next $10 million, and four (4) percent of the
balance of the balance of the gross proceeds over $35 million received by the
Company from the issuance of any equity or subordinated debt securities by the
Company in the Capital Transaction or other receipt of capital by the Company
thereunder, such fee to be payable to the Financial Advisor in cash at the
closing of the Capital Transaction. If the Company executes a Capital
Transaction - with an investor who was known to the Company, in advance, and for
whom the Company requested the assistance of the Financial Advisor, the Fee will
be negotiated on a case-by-case basis, but shall not be more than one-half of
the Transaction Fee outlined above. In the case that any investor which invests
within the term of
2
<PAGE>
this agreement (as defined above, including the additional one year period if
the extension applies) invests additional capital in the Company in the
following years (other than as part of any Capital Transaction), the Company
agrees to pay the Financial Advisor a fee of one-half the Transaction Fee on any
such amounts invested in the one year following the term of this agreement. If
the Company enters into a loan or credit agreement or senior secured debt (also
a "Capital Transaction"), (i) during the term of this agreement (including any
extensions thereof) or (ii) within one year after the expiration of the term of
this agreement (including any extensions thereof) from a lending entity (or any
affiliate thereof) with whom the Financial Advisor was in contact and/or worked
with on behalf of the Company, the Company agrees to pay the Financial Advisor a
fee (also a "Transaction Fee") equal to one (1) percent of the gross proceeds
received by the Company upon the closing of such transaction. Such fees shall be
payable upon the closing of such Capital Transaction(s). The Transaction Fee(s)
is/are separate from any Success Fee (as defined below), and is not to be based
on a dollar amount which includes any money raised pursuant to paragraph 4.
4. The Company also agrees to pay the Financial Advisor a fee (a "Success
Fee") if, (i) duringthe term of this agreement (including any extension thereof)
or (ii) within one year after the expiration of the term of this agreement
(including any extensions thereof) from a party approved by the Company (or any
affiliate thereof), the Company is able to consummate a financing, either
privately or publicly, using an underwriter or agent other than the Financial
Advisor ("Intermediary Transaction"). The Success Fee shall be (i) seven (7)
percent of the amount raised if less than $4.9 million is raised, (ii) $200,000
if between $5 million and $9.9 million is raised, (iii) $250,000 if between $10
million and $14.9 million is raised, and (iv) $300,00 if $15 million is raised
with an additional $100,000 fee for each additional $5 million raised; and such
fee is payable upon the closing(s). If the party was known to the Company in
advance, then the Fee shall be negotiable on a case by case basis but not more
than one-half of the Success Fee as defined above. The other intermediary(ies)
used may be paid commissions by the Company directly, which is separate from any
Success Fee due the Financial Advisor. Such Success Fee is separate from an
Transaction Fee(s) and is not based on dollar amounts raised which includes any
money raised pursuant to paragraph 3.
3
<PAGE>
5. In no case shall the Transaction Fee and the Success Fee both be
payable based on the same dollar amount of money raised.
6. The Company also agrees to reimburse the Financial Advisor for its
reasonable out-of-pocket costs and expenses incurred in connection with its
activities hereunder, including, without limitation, the fees and disbursements
of the Financial Advisor's legal counsel, upon submission of invoices from time
to time. An administrative charge of 7% of costs and expenses incurred will be
charged to cover miscellaneous direct expenses such as telephones, fax, and
regular mail. The Financial Advisor will notify the Company before incurring
expenses of over $10,000 and the Company shall approve additional expenses in
writing, such approval not to be unreasonably withheld.
7. The Company agrees to furnish to the Financial Advisor all financial
and other information and data which the Financial Advisor deems appropriate and
necessary for the purposes of the engagement of the Financial Advisor hereunder,
and will provide the Financial Advisor with access to its directors, officers,
employees and agents (including, without limitation, its accountants and
attorneys) as the Financial Advisor shall deem appropriate.
8. If, in connection with any services or matters that are the subject of
this agreement, the Financial Advisor becomes involved in any capacity in any
claim, action, suit or other proceeding involving claims asserted by any person
other than the Company, the Company agrees to reimburse the Financial Advisor on
demand for the costs and expenses (including, without limitation, the fees and
disbursements of attorneys, accountants and other experts) incurred by the
Financial Advisor in connection therewith (including, without limitation, the
costs and expenses of investigation, preparation and defense), promptly upon
submission of invoices from time to time. The Company also agrees to indemnify
and hold the Financial Advisor harmless against any losses, claims, damages,
penalties, judgements, liabilities, costs and expenses (including without
limitation, the fees and expenses of attorneys, accountants and other experts),
whether joint or several, to which
4
<PAGE>
it may become subject which in any way relate to or arise out of the services or
matters which are the subject of this agreement; provided, however, that the
Company shall not be liable in respect of any loss, claim, damage, penalty,
judgement, liability cost or expense of the Financial Advisor to the extent that
a court having jurisdiction shall have determined by a final judgement from
which no appeal may be taken, that such loss, claim, damage, penalty, judgement,
liability, cost or expense resulted principally from the willful misfeasance or
gross negligence of the Financial Advisor. In the event that the foregoing
indemnity is unavailable or insufficient to hold the Financial Advisor fully
harmless, then the Company shall contribute to amounts paid or payable by the
Financial Advisor in respect of any such loss, claim, damage, penalty,
judgement, liability, cost or expense in such proportion as appropriately
reflects the relative benefits received by, and fault of, the Company and the
Financial Advisor in connection with the matters as to which any such loss,
claim, damage, penalty, judgement, liability, cost or expense relate and other
equitable considerations; provided, however, that the Financial Advisor shall in
no event be responsible for any amount (whether individually or in the
aggregate) in excess of the fees received from the Company under this agreement.
If, in the judgment of the Financial Advisor, any action, suit or other
proceeding for which the Financial Advisor is entitled to indemnity might result
in damage to the Financial Advisor other than monetary damage, or monetary
damage in excess of the Company's ability to pay, or if there is a potential
conflict between the Company and the Financial Advisor, the Financial Advisor
may defend its position in such action, suit or other proceeding (at the
Company's sole cost and expense) with counsel of its choice. The provisions of
this paragraph________________________________________________________________
______________________________________________________________________________
shall be in addition to any liabilities that extend to and inure to the benefit
of each person who may be deemed to control the Financial Advisor and to each
affiliate, director, officer, agent and employee of the Financial Advisor and of
any such controlling person.
9. It is hereby confirmed that Riccardo Mortara and Nasser Nassiri jointly
have the necessary power and authority to sign this letter on behalf of the
Company, and to bind the Company
5
<PAGE>
and any other affiliated entity that executes a Capital Transaction on behalf of
the Company to the terms hereof as they are shareholders and the Chief
Executives of the Company.
10. The Financial Advisor agrees to use its best efforts to provide the
Company with the names of potential underwriters before they are contacted so
that the Company is aware of any potential approaches and has 48 hours in which
to reasonably refuse that the Financial Advisor approach such underwriters.
Likewise, the Financial Advisor agrees to use its best efforts to get any
underwriters or placement agent which has an interest in working with the
Company to inform the Company of any potential institutional investors it
intends to approach so that the Company may confirm that there is no conflict in
it contacting such potential investors. The Company shall then be responsible to
get back to the Financial Advisor and/or the underwriter (as applicable) with
the go ahead, or indication that they should not proceed, and the Company shall
do so within 48 hours. The company has the right not to accept any Capital
Transaction, and if neither are consummated, the Financial Advisor would not be
due a Transaction Fee or Success Fee.
11. Regarding paragraphs 3, 4 and 10, the Financial Advisor has to obtain
written agreement from the Company before any potential underwriters or
investors, which shall not be unreasonably withheld, and which shall be granted
or not, in writing within 48 hours.
12. This agreement may not be amended, modified, waived or changed, except
by an instrument in writing signed by the Company and the Financial Advisor.
This agreement shall be governed by and construed in accordance with the law of
the State of New York applicable to agreements made and to be performed in New
York, without regard to its principles of conflicts of law, and shall be
construed without regard to any presumption or other rule requiring construction
against the party causing the agreement to be drafted.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to the undersigned a copy of this letter agreement,
whereupon it shall become a valid and
6
<PAGE>
binding agreement by and between the Company and the Financial Advisor.
UI USA, Inc.
By: /s/ALLISON GUSHEE MOLKENTHIN
-----------------------------
Name: Allison Gushee Molkenthin
Title:President & COO
Accepted and agreed to as of the date first written above:
Biocoral, Inc.
By: /s/RICCARDO MORTARA
--------------------
Name: Mr. Riccardo Mortara
By: /s/NASSER NASSIRI
------------------
Name: Mr. Nasser Nassiri
7
LIST OF SUBSIDIARIES
1. Inoteb S.A.
2. 3H Human Health Hightech, PLC
3. Cabestan, Inc.
4. Immo Distribution Ltd., an Irish Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 633,305
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 722,619
<PP&E> 6,925,011
<DEPRECIATION> 323,632
<TOTAL-ASSETS> 9,696,548
<CURRENT-LIABILITIES> 2,735,840
<BONDS> 5,392,052
0
1
<COMMON> 4,435
<OTHER-SE> 2,138,766
<TOTAL-LIABILITY-AND-EQUITY> 9,696,548
<SALES> 0
<TOTAL-REVENUES> 1,095,489
<CGS> 0
<TOTAL-COSTS> 1,892,919
<OTHER-EXPENSES> 1,626,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579,620
<INCOME-PRETAX> (797,430)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,423,616)
<DISCONTINUED> (1,925,995)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,349,611)
<EPS-PRIMARY> (2.30)
<EPS-DILUTED> (2.30)
</TABLE>
