AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SAFESCIENCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 2834 33-0231238
STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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31 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(617) 422-0674
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
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DAVID PLATT, PH.D.
CHIEF EXECUTIVE OFFICER
SAFESCIENCE, INC.
31 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(617) 422-0674
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
CHERYL REICIN, ESQ.
MCDERMOTT, WILL & EMERY
50 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212)547-5400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Aggregate Offering Aggregate
Securities to be Registered Registered Price (2) Offering Price Amount of Registration Fee
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share........ 1,023,802(1) $9.96875 $10,206,027 $2,695
====================================================================================================================================
(1) The shares being registered by this registration statement include(i)
484,429 shares of common stock sold by SafeScience in March 2000 to various
purchasers in a private placement under the terms of a Securities Purchase
Agreement dated March 29, 2000, (ii) 108,996 shares of common stock that may be
issued by SafeScience under closing warrants issued to the purchasers in the
private placement, (iii) 430,377 shares of common stock that may be issued by
SafeScience under adjustable warrants issued to the purchasers in the private
placement, and (iv) pursuant to Rule 416 of the Securities Act, an indeterminate
number of additional shares that may be issued under the terms of the above
mentioned warrants as a result of anti-dilution provisions, stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of determining the registration fee and
computed pursuant to Rule 457(c), based upon the average of the high and low
sales prices on April 27, 2000, as reported by the Nasdaq SmallCap Market.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 28, 2000
1,023,802 SHARES
[LOGO]
COMMON STOCK
These shares of common stock are being offered and sold from time to time
by certain of our current shareholders. These shares include shares issuable
upon exercise of warrants issued by us in March 2000.
The selling shareholders may sell the shares from time to time at fixed
prices, market prices or at negotiated prices, and may engage a broker or dealer
to sell the shares. For additional information on the selling shareholders'
possible methods of sales, you should refer to the section of this prospectus
entitled "Plan of Distribution" on page 47. We will not receive any proceeds
from the sale of the shares, but will bear the costs relating to the
registration of the shares.
Selling stockholders identified in this prospectus are offering all of
these shares and will receive all of the proceeds of this offering. Our common
stock is listed on the Nasdaq SmallCap Market under the symbol "SAFS." The
closing price for our common stock on the Nasdaq SmallCap Market on April 27,
2000 was $10.00 per share.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
PAGE
----
Prospectus Summary............................................................ 1
Risk Factors.................................................................. 5
Note on Forward Looking Statements............................................11
Use of Proceeds...............................................................11
Dividend Policy...............................................................11
Capitalization................................................................12
Market Price of our Common Stock..............................................13
Selected Financial Data.......................................................14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.... ............................................. 15
Business......................................................................19
Management....................................................................28
Certain Transactions..........................................................37
Selling Stockholder...........................................................39
Principal Stockholders........................................................41
Description of Capital Stock..................................................42
Shares Eligible for Future Sale...............................................46
Plan of Distribution..........................................................47
Legal Matters.................................................................48
Experts.......................................................................48
Where You Can Find More Information...........................................48
Index to Consolidated Financial Statements...................................F-1
We own or have rights to trademarks that we use in conjunction with the
sale of our products. "SafeScience," our logo, "Elexa" are our trademarks. All
other trade names and trademarks used in this prospectus are the property of
their respective owners.
-i-
<PAGE>
PROSPECTUS SUMMARY
This is only a summary and may not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, including the "Risk Factors" section and our
financial statements and the notes thereto included elsewhere in this
prospectus.
SAFESCIENCE, INC.
INTRODUCTION. We are a biotechnology company engaged in developing
pharmaceutical products for cancer treatment, as well as introducing a line of
high-performance, non-toxic agricultural, consumer and industrial products under
the SafeScience(R) brand name. We have begun selling a line of cleaning products
through local and national supermarket, drug, mass merchandise and industrial
channels, and expect to introduce additional product categories in the near
future. We also expect to launch environmentally friendly agricultural products,
beginning with a biofungicide (principally for grapes and other high-value per
acre crops) subject to approval by or registration with state regulatory and
federal environmental protection authorities. We believe that our business model
is unique among biotechnology companies because we are jointly pursuing
longer-term development of cancer remedies, while simultaneously selling and/or
developing a line of SafeScience(R) consumer and agricultural products.
We are headquartered in Boston and currently have approximately 50
employees. As our operations have grown, we have added new professionals to our
executive management team. We have recently hired a Chief Financial Officer and
a Chief Operating Officer, each of whom brings over 20 years experience in
corporate finance, and operations and consumer products, respectively.
PHARMACEUTICAL PRODUCTS. The leading product in our drug development
pipeline, GBC-590, is designed to reduce primary tumors, the growth of cancerous
tumors, and the spread of cancer cells in prostate, pancreatic, colorectal, and
liver cancer patients.
GBC-590, a rationally designed carbohydrate molecule, acts by binding
to Galectin 3 receptors on cancer cells and has been shown to shrink primary
tumors and inhibit metastasis in animal models. In its Phase I human testing,
the drug was found to be well tolerated at all administered dose levels. We
expect to commence Phase IIA clinical trials of GBC-590 for prostate,
pancreatic, colorectal, and liver cancers in 2000, subject to institutional
review board (IRB) approval, and have targeted the following sites:
o MD Anderson Cancer Center in Houston, Texas;
o Beth Israel/Deaconess Hospital in Boston, Massachusetts;
o University of Chicago Pritzker School of Medicine;
o the University of Rochester; and
o Christiana Healthcare in Wilmington, Delaware.
IRB approval has been received at the Pritzker School of Medicine, Beth
Israel/Deaconess and Christiana Healthcare. Upon full patient enrollment, we
expect Phase IIA trials to be completed within approximately six to twelve
months. Each of the clinical trials for the four indications (prostate,
pancreatic, colorectal, and liver cancers) will have approximately 20 patients.
Subject to the results of our Phase IIA trials, we plan to conduct Phase
IIB/Phase III clinical trials for all four indications subsequent to review and
analysis of the Phase IIA data. We have retained Covance Inc., a leading
clinical trial research organization in the U.S., to assist in conducting these
studies.
1
<PAGE>
CONSUMER AND COMMERCIAL PRODUCTS. We are pursuing commercialization of
our SafeScience(R) line of household and institutional cleaning products, which
are designed to promote a chemically-safe environment within the home, office,
school, hospital and other institutional settings. The first major retailer to
stock the SafeScience(R) consumer line was Sainsbury plc's New England based
subsidiary, Shaw's supermarkets, which currently has approximately 124
locations, commencing in the third quarter of 1999. At present, eight products
are included in the Shaw's program: liquid laundry detergent, kitchen cleaner,
shower mist, dish detergent, all-purpose cleaner, glass/window cleaner, bathroom
cleaner (tub/tile) and floor cleaner. We have recently introduced a line of
insect repellents and garden products.
In addition, in October 1999 we initiated a rollout of our products by
selling through a major drug chain with approximately 4,200 locations
nationally. We have entered into an agreement with another regional retailer to
begin shipments of products in the second quarter of 2000.
At Shaw's, SafeScience(R) products are positioned as the "category
captain" displaying both the SafeScience brand and the retailer's own name. We
intend to pursue relationships in which our products will be similarly
positioned in other retail programs. We have entered into an agreement with
Daymon Associates, Inc., a leading corporate branding and retail sales company,
to market our products to supermarket, mass merchandise and drug store chains.
This form of co-branding has three advantages for us:
o we benefit from existing store brand loyalty;
o the retail partner shares in the promotion of the product, relieving
us of certain expenses and most slotting fees; and
o we are able to build brand recognition.
We believe that "SafeScience(R)" signifies more than simply another
product line, by addressing and conveying a set of values related to chemical
safety, food safety, human health and environmentalism. Independent test results
have demonstrated that our consumer cleaning products and lead agricultural
product are as effective as comparable, branded products. Our consumer cleaning
products do not require a warning label as to toxicity and the products' retail
prices are currently approximately 10-15% less than the branded equivalents.
Our business was founded in 1992 to pursue carbohydrate-based
pharmaceutical research for cancer therapeutics. In 1995, we merged with,
Alvarada, Inc., a publicly-traded corporation having no active operations. In
1995, our management elected to pursue the dual strategy of emphasizing
faster-to-market consumer and agricultural products while we pursued the longer
approval cycle for the pharmaceuticals we were developing. We changed our name
to SafeScience, Inc. in 1998. Our principal executive offices are located at 31
St. James Avenue, 8th Floor, Boston, MA 02116 and our telephone number is (617)
422-0674.
2
<PAGE>
THE OFFERING
Common stock offered by selling shareholders (1).........1,023,802 shares
Common stock to be outstanding after the offering(2)(3)..18,270,884 shares
Use of proceeds..........................................All proceeds from the
sale of the shares of
common stock in this
offering will be
received by the selling
stockholders. We will
receive $1,746,059 if
the warrants held by
the selling
stockholders are
exercised in full and
the exercise price is
paid in cash. These
funds will be used for
general corporate
purposes. See "Use of
Proceeds."
Nasdaq SmallCap Market Symbol............................SAFS
(1) Includes (i) 484,429 shares of common stock, (ii) 108,996 shares of
common stock issuable upon the exercise of closing warrants, and (iii)
430,377 shares of common stock issuable upon the exercise of adjustable
warrants.
(2) Based on the number of shares actually outstanding on April 14, 2000.
(3) Includes all the shares being offered pursuant to this prospectus and
excludes, as of April 14, 2000, (i) 541,294 shares of common stock
issuable on the exercise of outstanding options at a weighted average
price $11.24 per share, (ii) 150,758 shares of common stock issuable on
the exercise of outstanding warrants at a weighted average price of
$13.20 per share, and (iii) 1,047,777 shares of common stock available
for future issuance under our 1998 Stock Option Plan and 2000 Stock
Incentive Plan. See "Management -- 1998 Stock Option Plan" and "--2000
Stock Incentive Plan."
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth our consolidated statement of operations data for
the periods presented and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes appearing elsewhere in
this prospectus. The summary pro forma balance sheet data reflects the issuance
of 679,354 shares of common stock in March 2000 for net proceeds of $8.5
million.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue ........................................ -- -- -- -- 1,369
Cost of goods sold ............................. -- -- -- -- 1,411
Gross loss...................................... -- -- -- -- (42)
Loss from operations .......................... (647) (2,213) (4,818) (6,595) (12,647)
Net loss ....................................... (676) (2,300) (4,734) (6,474) (12,302)
Net loss per share: ...........................
Basic and diluted net loss per share ........ (0.09) (0.26) (0.43) (0.50) (0.77)
Basic and diluted weighted average
common shares outstanding ................ 7,290,615 8,700,146 11,022,577 13,000,259 16,060,783
DECEMBER 31, 1999
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ACTUAL PRO FORMA
------ ---------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents ................................................... $ 3,377 $11,882
Working capital ........................................................ 3,218 11,723
Total assets .......................................................... 5,670 14,175
Total stockholders' equity.............................................. $ 4,521 $ 13,026
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE EXPERIENCED SIGNIFICANT OPERATING LOSSES THROUGHOUT OUR
HISTORY, EXPECT THESE LOSSES TO CONTINUE AND WE MAY NOT ACHIEVE PROFITABILITY IN
THE FUTURE
We began operations more than seven years ago and began to generate
revenue only in the second quarter of 1999. Through the year end December 31,
1999, we have only generated $1,369,000 from product sales. We have incurred
approximately $26.7 million of operating losses since our inception, including
$12.3 million in the year ended December 31, 1999. Our operating losses can be
expected to continue for the foreseeable future.
MANY OF OUR PRODUCTS ARE STILL IN DEVELOPMENT AND THERE ARE
UNCERTAINTIES ASSOCIATED WITH RESEARCH AND DEVELOPMENT ACTIVITIES AND WE MAY BE
UNABLE TO BRING NEW PRODUCTS TO MARKET
Many of our proposed products require further research, development,
laboratory testing, regulatory approval and/or demonstration of commercial scale
manufacturing before they can be proven to be commercially viable. Many of these
proposed products are in the development stage and are subject to the risks
inherent in the development of new products, particularly those products based
upon biotechnology. Potential products that appear to be promising at early
stages of development may not reach the market for a number of reasons. Such
reasons include the possibilities that potential products are found during
testing to be ineffective, that they fail to receive necessary regulatory
approvals, are difficult or uneconomical to manufacture on a large scale, fail
to achieve market acceptance or are precluded from commercialization by
proprietary rights of third parties. We cannot predict with any degree of
certainty when, or if, the research, development, testing and/or regulatory
approval process for our proposed products will be completed. Our product
development efforts may be unsuccessful, required regulatory approvals from U.S.
or foreign authorities may not be obtained, and products, if introduced, may not
be capable of being produced in commercial quantities at reasonable costs or be
successfully marketed. The failure of our research and development activities to
result in any commercially viable products or technologies would materially
adversely affect our future prospects.
WE DERIVE ALMOST ALL OF OUR REVENUES FROM A SMALL NUMBER OF CUSTOMERS
AND OUR REVENUES MAY DECLINE SIGNIFICANTLY IF ANY CUSTOMER CANCELS OR DELAYS A
PURCHASE OF OUR PRODUCTS
We derive the majority of our revenues from a small number of
customers. Our business would be seriously harmed if we do not generate as much
revenue as expected from these customers or if any of these customers cease
purchasing our products. For the year ended December 31, 1999, 96% of our
revenues came from four customers. Present and future customers may terminate
their purchasing arrangements with us or significantly reduce or delay their
orders. The loss of any one of our major customers or the delay of significant
orders from such customers, even if only temporary, could reduce or delay our
recognition of revenues, harm our reputation in the industry and reduce our
ability to accurately predict cash flow, and, as a consequence, could seriously
harm our business, financial condition and results of operations.
IF WE ARE UNABLE TO SECURE A PATENT ON OUR CANCER DRUG GBC-590 OR IF
EXISTING PATENTS IMPAIR OUR RIGHTS TO OUR CANCER DRUG, OUR ABILITY TO GENERATE
REVENUES FROM GBC-590 WOULD BE SEVERELY HARMED
We rely significantly upon proprietary technology. To the extent that
we currently rely upon unpatented, proprietary technology, processes and
know-how and the protection of such intellectual property by confidentiality
5
<PAGE>
agreements, others may independently develop similar technology and know-how or
confidentiality may be breached.
We have applied for a patent on GBC-590 but no patent has been issued.
Our GBC-590 technology may not be granted patent protection, and may infringe on
patents owned by others. A patent has been granted on a compound which is
similar to GBC-590, the claims of which conflict with certain of the claims in
the GBC-590 patent application. The degree of patent protection, if any, we will
obtain for GBC-590 is unclear. The patent on GBC-590 may in fact not be granted
or, if granted, it may be limited in such a way as to materially affect our
ability to produce, market and sell GBC-590.
Any claims against us or any purchaser or user of our products or
patents, including GBC-590, asserting that our products or patents infringe or
may infringe proprietary rights of third parties, if determined adversely to us,
could have a material adverse effect on our business, financial condition or
results of operations. Any claims, with or without merit, could be
time-consuming, result in costly litigation, divert the efforts of our technical
and management personnel, cause product shipment delays, disrupt our
relationships with our customers or require us to enter into royalty or
licensing agreements, any of which could have a material adverse effect upon our
operating results. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to us, if at all. In the event a claim against us
is successful and we cannot obtain a license to the relevant technology on
acceptable terms, license a substitute technology or redesign our products to
avoid infringement, our business, financial condition and results of operations
would be materially adversely affected.
WE DEPEND ON TECHNOLOGY LICENSED TO US BY THIRD PARTIES AND IF WE ARE
UNABLE TO CONTINUE LICENSING THIS TECHNOLOGY WE MAY BE UNABLE TO SUSTAIN OR
INCREASE OUR REVENUES
We license technology from third parties for use with our products. We
anticipate that we will continue to license technology from third parties in the
future. This technology may not continue to be available on commercially
reasonable terms, if at all. Some of the technology we license from third
parties would be difficult to replace. The loss of any of these technology
licenses would result in delays in the availability of our products until
equivalent technology, if available, is identified, licensed and integrated. The
use of replacement technology from other third parties would require us to enter
into license agreements with these third parties, which could result in higher
royalty payments and a loss of product differentiation.
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE AGRICULTURAL AND MEDICAL
COMMUNITIES OUR BUSINESS WILL SUFFER
Two of our three principal divisions are agricultural products and
pharmaceuticals. Commercial sales of our proposed products in these areas, for
use as fungicides or therapeutics, will substantially depend upon the products'
efficacy and on their acceptance by the agricultural and medical communities.
Widespread acceptance of our products will require educating the agricultural
and medical communities as to the benefits and reliability of the products. Our
proposed products may not be accepted, and, even if accepted, we are unable to
estimate the length of time it would take to gain such acceptance.
IF THE THIRD PARTIES WE RELY ON FOR MANUFACTURING OUR PRODUCTS ARE
UNABLE TO PRODUCE THE NECESSARY AMOUNTS OF OUR PRODUCTS, DO NOT MEET OUR QUALITY
NEEDS OR TERMINATE THEIR RELATIONSHIPS WITH US, OUR BUSINESS WILL SUFFER
We do not presently have our own manufacturing operations, nor do we
intend to establish any unless and until in the opinion of our management, the
size and scope of our business so warrants. While we have established
manufacturing relationships with several firms that we believe will provide the
capability to meet our anticipated requirements for the foreseeable future, we
have not entered into any long-term arrangements for manufacturing and such
arrangements may not be obtained on desirable terms. Therefore, for the
foreseeable future, we will be dependent upon third parties to manufacture our
products.
6
<PAGE>
Our reliance on independent manufacturers involves a number of risks,
including the absence of adequate capacity, the unavailability of, or
interruptions in, access to necessary manufacturing processes and reduced
control over delivery schedules. If our manufacturers are unable or unwilling to
continue manufacturing our products in required volumes, we will have to
identify acceptable alternative manufacturers. The use of a new manufacturer may
cause significant interruptions in supply if the new manufacture has difficulty
manufacturing products to our specifications. Further, the introduction of a new
manufacturer may increase the variation in the quality of our products.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGES IN THE
MARKETS IN WHICH WE COMPETE, AND OUR FAILURE TO SUCCESSFULLY COMPETE OR ADOPT TO
CHANGING TECHNOLOGY COULD MAKE IT DIFFICULT TO ACQUIRE AND RETAIN CUSTOMERS
Many companies, including large pharmaceutical, chemical, biotechnology
and agricultural concerns, universities and other research institutions, with
financial resources and research and development staffs and facilities
substantially greater than ours, may develop or attempt to develop products that
compete with our products. These companies may have the ability to devote far
greater resources to researching, developing and marketing their products than
we are able to do. In addition, the biotechnology industry is one in which
technological change is extremely rapid. Our ability to anticipate changes in
technology and industry standards together with regulatory changes and to
successfully develop and introduce new and enhanced products on a timely basis
will be significant factors in our ability to grow and remain competitive. Any
products which we do develop may become technologically obsolete before we have
had the ability to realize significant revenues or profits.
OUR FAILURE TO MEET PRODUCT RELEASE SCHEDULES WOULD MAKE IT DIFFICULT
TO PREDICT OUR QUARTERLY RESULTS AND MAY CAUSE OUR OPERATING RESULTS TO VARY
SIGNIFICANTLY
Delays in the planned release of our products may adversely affect
forecasted revenues and create operational inefficiencies resulting from
staffing levels designed to support the forecasted revenues. Our failure to
introduce new products on a timely basis could delay or hinder market acceptance
and allow competitors to gain greater market share.
CERTAIN OF OUR BUSINESSES ARE SUBJECT TO SIGNIFICANT GOVERNMENT
REGULATION AND FAILURE TO ACHIEVE REGULATORY APPROVAL OF OUR PRODUCTS WOULD
SEVERELY HARM OUR BUSINESS
The FDA regulates the manufacture, distribution and promotion of
pharmaceutical products in the United States pursuant to the Federal Food Drug
and Cosmetic Act and related regulations. We must receive premarket approval by
the FDA for any commercial sale of our pharmaceutical products. Before receiving
such approval we must provide proof in human clinical trials of the nontoxicity,
safety and efficacy of our pharmaceutical products, which trials can take
several years. Premarket approval is a lengthy and expensive process. We may not
be able to obtain FDA approval for any commercial sale of our product. By
regulation, the FDA has 180 days to review an application for approval to market
a pharmaceutical product; however, the FDA frequently exceeds the 180-day time
period. In addition, based on its review, the FDA may determine that additional
clinical trials are required. We will not generate any revenues in connection
with our pharmaceutical products unless and until we obtain FDA approval to sell
our products in commercial quantities for human application.
The investigation, manufacture and sale of agricultural products is
subject to regulation by the EPA, including the need for approval before
marketing, and by comparable foreign and state agencies. Few of our agricultural
products, will be able to be commercially marketed for use either in the United
States or other countries without first obtaining the necessary approvals. While
we hope to obtain regulatory approvals for our proposed products, we may not
obtain these approvals on a timely basis, if at all.
REIMBURSEMENT PROCEDURES AND FUTURE HEALTHCARE REFORM MEASURES ARE
UNCERTAIN AND MAY ADVERSELY IMPACT THE SALE OF OUR PHARMACEUTICAL PRODUCTS
7
<PAGE>
Our ability to sell our pharmaceutical products successfully will
depend in part on the extent to which government health administration
authorities, private health insurers and other organizations will reimburse
patients for the costs of our pharmaceutical products and related treatments. In
the United States, government and other third-party payers have sought to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new pharmaceutical products approved for marketing by the FDA.
In some cases, these payers may refuse to provide any coverage for uses of
approved products to treat medical conditions even though the FDA has granted
marketing approval. Healthcare reform may increase these cost containment
efforts. We believe that managed care organizations may seek to restrict the use
of new products, delay authorization to use new products or limit coverage and
the level of reimbursement for new products. Internationally, where national
healthcare systems are prevalent, little if any funding may be available for new
products, and cost containment and cost reduction efforts can be more pronounced
than in the United States.
ISSUANCES OF OUR SECURITIES ARE SUBJECT TO FEDERAL AND STATE SECURITIES
LAWS AND CERTAIN PRIOR OFFERINGS OF OUR SECURITIES MAY NOT HAVE COMPLIED WITH
APPLICABLE SECURITIES LAWS
Issuances of securities are subject to federal and state securities
laws. Certain prior private placement offerings of our securities may not have
complied with requirements of applicable state securities laws. In such
situations a number of remedies may be available to regulatory authorities and
stockholders who purchased securities in such offerings, including, without
limitation, rescission rights.
WE HAVE LIMITED MARKETING ARRANGEMENTS IN PLACE AND OUR SALES FORCE IS
SMALL AND THUS MAY BE UNABLE TO INCREASE OR SUSTAIN OUR REVENUES
We may be unable to enter into arrangements with one or more
agricultural, chemical and/or pharmaceutical companies to market certain of our
products on favorable terms, and may therefore seek to market such products
through independent distributors. Any independent distributors through which we
distribute such products may also market competitive products. We may not be
able to enter into distribution arrangements with terms which are satisfactory
to us. We have only recently begun to develop our own sales force and its size
is presently limited and may be inadequate for the sales and marketing
activities that we plan to undertake with respect to our products. Our ability
to market and sell our products may be adversely affected if we are unable to
identify, employ and retain suitably qualified sales and marketing personnel.
OUR GROWTH MAY BE LIMITED IF WE ARE UNABLE TO RETAIN AND HIRE
ADDITIONAL QUALIFIED PERSONNEL AS NECESSARY
Our success will depend on our ability to retain key employees and our
continuing ability to attract and retain highly qualified scientific, technical
and managerial personnel. Competition for such personnel is intense and we may
not be able to retain existing personnel or attract qualified employees in the
future. We have recently hired a Chief Financial Officer and Chief Operating
Officer. At present, we employ approximately 50 full time employees and several
part-time consultants. We depend upon the personal efforts and abilities of our
officers and directors, and would be materially adversely affected if their
services ceased to be available for any reason and comparable replacement
personnel were not employed.
THE BUSINESSES IN WHICH WE ENGAGE HAVE A RISK OF PRODUCT LIABILITY, AND
IN THE EVENT OF A SUCCESSFUL SUIT AGAINST US, OUR BUSINESS COULD BE SEVERELY
HARMED
The testing, marketing and sale of agricultural and pharmaceutical
products entails a risk of product liability claims by consumers and others.
While we currently maintain product liability insurance which we believe to be
adequate, such insurance may not continue to be available at a reasonable cost
or may not be sufficient to fully cover any potential claims. In the event of a
successful suit against us, the lack or insufficiency of insurance coverage
could have a material adverse effect on our business and financial condition.
8
<PAGE>
WE ARE CONTRACTUALLY OBLIGATED TO ISSUE SHARES IN THE FUTURE, DILUTING
YOUR INTEREST IN US
We have entered into agreements with Strong River Investments, Inc. and
Montrose Investments, Ltd. which obligate us to issue additional shares of
common stock and warrants to purchase shares of common stock subject to certain
conditions, including market capitalization, trading volume and share price
conditions. In addition, pursuant to adjustable warrants we have issued to
Strong River Investments and Montrose Investments we are required to issue
additional shares of our common stock at $.01 per share, the number of such
shares to be determined by a formula based on the then market price per share
compared to the $14.45 per share purchase price paid by such entities. As of
April 14, 2000 there are outstanding and exercisable options to purchase
approximately 541,294 shares of common stock, at a weighted average exercise
price of $11.44 per share. Moreover, we may in the future issue additional
shares to raise capital, acquire other companies or technologies, to pay for
services, or for other corporate purposes. Any such issuances will have the
effect of further diluting the interest of the purchasers of the shares being
sold in this offering.
IF THE SELLING STOCKHOLDERS ENGAGE IN SHORT SELLING TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THEIR ADJUSTABLE
WARRANTS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE
Montrose Investments Ltd. and Strong River Investments, Inc. each owns
an adjustable warrant that will vest on three dates determined by the selling
stockholders over a period up to 18 months following the effectiveness of this
registration statement. The number of shares that will be issuable at each
vesting date will be determined according to a formula in which the number of
shares issuable will be greater the lower the price of our common stock. Since
the exercise price of the adjustable warrants is only $.01 per share, the
selling stockholders have an incentive to sell short our common stock prior to
each vesting date in order to cause the market price of our common stock to
decline and greater number of shares to vest under the adjustable warrants. The
selling stockholders could then exercise their adjustable warrants and use the
shares of common stock received upon exercise to cover their short positions.
The selling stockholders could thereby profit by the decline in the market price
of the common stock caused by their short selling.
THE TERMS OF OUR ADJUSTABLE WARRANTS MUST COMPLY WITH THE LISTING
REQUIREMENTS OF THE NASDAQ SMALLCAP MARKET OR OUR COMMON STOCK AND LIQUIDITY
WOULD DECLINE
To remain listed for trading on the Nasdaq SmallCap Market, we must
abide by Nasdaq's rules regarding the issuance of "future priced securities."
These rules apply to our adjustable warrants because additional shares of our
common stock are issuable upon exercise based on a future price of our common
stock.
Nasdaq rules regarding future priced securities prohibit an issuer of
listed securities from issuing 20% or more of its outstanding capital stock at
less than the greater of book value or then current market value without
obtaining prior stockholder consent. The number of shares issuable upon exercise
of the adjustable warrants could exceed 20% of the number of our outstanding
shares if the price of our common stock is substantially lower than $14.45 per
share as of the vesting dates of the adjustable warrants. Although we did not
obtain stockholder consent prior to issuing the adjustable warrants, we believe
that Nasdaq will not delist our shares if we obtain shareholder approval before
the adjustable warrants are actually exercised for a number of shares exceeding
20% of our outstanding shares. This is because the adjustable warrants contain
provisions that (1) prohibit us from issuing a number of shares upon exercise
that would exceed 19.999% of our outstanding shares, and (2) prevent the shares
issued from being voted to approve the adjustable warrants. However, if Nasdaq
disagrees with our interpretation of its rules, Nasdaq could delist our common
stock from the Nasdaq SmallCap Market.
If Nasdaq delisted our common stock, we would likely seek to list our
common stock for quotation on a regional stock exchange. However, if we are
unable to obtain listing or quotation on such market or exchange, trading of our
common stock would occur in the over-the-counter market on an electronic
bulletin board for unlisted securities or in what are commonly known as the
9
<PAGE>
"pink sheet." As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations for the price of, or common stock.
IF A SIGNIFICANT NUMBER OF SHARES BECOME AVAILABLE FOR SALE AFTER THIS
OFFERING, OUR STOCK PRICE COULD DECLINE
Many shares of common stock presently issued and outstanding are
"Restricted Securities" as that term is defined in Rule 144 promulgated under
the Act. In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may sell, within any
three month period, an amount which does not exceed the greater of 1% of the
then outstanding shares of common stock or the average weekly trading volume
during the four calendar weeks prior to such sale. Rule 144 also permits the
sale of shares, under certain circumstances, without any quantity limitation, by
persons who are not affiliates of SafeScience and who have beneficially owned
the shares for a minimum period of two years. The possible sale of these
restricted shares may, in the future, increase the number of free-trading shares
and may have a depressive effect on the price of our securities. Moreover, such
sales, if substantial, might also adversely effect our ability to raise
additional equity capital. For more information on securities available for
future sale, see "Share Eligible for Future Sale."
BECAUSE OUR CURRENT MANAGEMENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR
COMMON STOCK, THEY HAVE SUBSTANTIAL CONTROL OVER US
The holders of the common stock do not have cumulative voting rights.
Two of our executive officers, who are also Directors of SafeScience, own
approximately 32% of the outstanding shares of common stock. These stockholders
can substantially influence all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership could have the effect of delaying
or preventing a change in control or otherwise discouraging a potential acquirer
from attempting to obtain control of us, which in turn could materially
adversely affect our stock price.
THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES BY YOU
The market price of the common stock, which is traded on the National
Association of Securities Dealers Automated Quotation (NASDAQ - Small Cap) has
been, and may continue to be, highly volatile. The stock market has from time to
time experienced extreme price and volume fluctuations, particularly in the
biotechnology sector, which have often been unrelated to the operating
performance of particular companies. In addition, factors such as announcements
of technological innovations or new products, either by us or by our competitors
or third parties, as well as market conditions within the various industries in
which we compete, may have a significant impact on the market price of our
common stock.
AN INVESTMENT IN OUR STOCK IS SPECULATIVE AND ENTAILS A HIGH DEGREE OF
RISK
There is nothing at this time upon which to base an assumption that our
plans for our business will prove successful. If our plans prove unsuccessful,
the purchasers of the shares being sold in this offering may lose all or a
substantial part of their investment. Our operations are subject to numerous
risks associated with the development of agricultural, consumer and
pharmaceutical products, including the competitive and regulatory environment in
which we operate. In addition, we may encounter unanticipated problems,
including manufacturing, distributing and marketing difficulties, some of which
may be beyond our financial and technical abilities to resolve. The failure
adequately to address such difficulties could have a material adverse effect on
our prospects and our financial condition.
WE HAVE NOT PAID AND DO NOT INTEND TO PAY ANY DIVIDENDS
10
<PAGE>
To date, we have not paid any cash dividends on our common stock. Our
Board of Directors does not intend to declare any cash dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in our business operations. Furthermore, as we may be required to obtain
additional financing, there may be restrictions on our ability to declare any
cash dividends on common stock in the future.
11
<PAGE>
NOTE ON FORWARD-LOOKING STATEMENTS
Forward-looking statements are made throughout this prospectus.
Typically, the use of the words "believe", "anticipate", "plan", "expect",
"seek", "estimate" and similar expressions identify forward-looking statements.
Unless a passage describes a historical event, the statement should be
considered a forward-looking statement. In keeping with the "Safe Harbor"
provision of the Private Securities Litigation Reform Act of 1995, it should be
noted that forward-looking statements regarding our future expectations and
projections are not guarantees of future performance. They involve risks,
uncertainties and assumptions, and many of the factors that will determine our
future results are beyond our ability to control or predict. Therefore, actual
results may differ significantly from those suggested by forward-looking
statements. These risks include those detailed under the heading "Risk Factors "
described in the preceding pages and elsewhere in this prospectus.
USE OF PROCEEDS
All of the proceeds from the sale of the shares of common stock in this
offering will be received by the selling stockholders. We will receive
$1,746,059 if the warrants held by the selling stockholders are exercised in
full and the exercise price is paid in cash. Proceeds from such warrant
exercises, if any, will be used for general corporate purposes.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and do not currently anticipate paying any cash dividends
in the foreseeable future. Future dividends, if any, will be determined by our
Board of Directors after taking into account various factors, including our
financial condition, operating results, and current and anticipated cash needs.
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31,
1999:
o on an actual basis; and
o on a pro forma basis to give effect to the issuance of 679,354
shares of common stock in March 2000 for net proceeds of $8.5
million.
The information set forth below is unaudited and should be read in
conjunction with our Consolidated Financial Statements and Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------------
Actual Pro Forma
-------------------- --------------------
<S> <C> <C>
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued and
outstanding............................................................. - -
Common stock, $.01 par value, 100,000,000 shares authorized; actual issued
16,835,923, pro forma 17,515,277 shares................................. 168,359 175,153
Additional paid-in capital........................................................... 34,388,615 42,886,821
Note receivable from issuance of common stock........................................ (3,343,750) (3,343,750)
Accumulated deficit.................................................................. (26,692,107) (26,692,107)
-------------------- --------------------
Total stockholders' equity...................................................... 4,521,117 13,026,117
-------------------- --------------------
Total capitalization............................................................ $ 4,521,117 $ 13,026,117
==================== ====================
</TABLE>
The table above excludes as of December 31, 1999:
o 585,424 shares of common stock issuable upon exercise of
outstanding stock options at a weighted average exercise price of
$10.42 per share under our 1998 Stock Option Plan;
o 75,000 shares of common stock subject to outstanding warrants at a
weighted average exercise price of $10.40 per share; and
o 47,777 shares of common stock available for future issuance under
our 1998 Stock Option Plan.
13
<PAGE>
MARKET PRICE OF OUR COMMON STOCK
The following table sets forth, for the periods indicated, the range of
the high and low closing sales prices per share of our common stock as reported
on the Nasdaq SmallCap Market through April 27, 2000.
HIGH LOW
---- ---
1998
First Quarter....................... 5.25 3.50
Second Quarter...................... 7.50 4.13
Third Quarter....................... 6.31 2.88
Fourth Quarter...................... 8.00 4.25
1999
First Quarter....................... 9.63 4.75
Second Quarter...................... 23.75 9.50
Third Quarter....................... 29.00 14.50
Fourth Quarter...................... 20.88 11.63
2000
First Quarter ...................... 18.88 11.63
Through April 27, 2000.............. 12.19 8.50
On April 27, 2000, the closing sales price per share for our common
stock as reported on the Nasdaq SmallCap Market was $10.00. On April 14, 2000,
our common stock was held by approximately 7,300 holders of record or through
nominees in street name accounts with brokers.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are derived from our consolidated
financial statements. The consolidated statement of operations data for the
fiscal years ended December 31, 1997, 1998 and 1999, and the consolidated
balance sheets data at December 31, 1998 and 1999, are derived from our
consolidated financial statements, which have been audited by Arthur Andersen,
LLP, independent auditors, and are included in this prospectus. The consolidated
balance sheet data at December 31, 1997 are derived from our consolidated
financial statements, which have been audited by Arthur Andersen, LLP,
independent auditors, and are not included in this prospectus. The consolidated
statements of operations data for the fiscal years ended December 31, 1995 and
1996, and the consolidated balance sheets data at December 31, 1995 and 1996 are
derived from our consolidated financial statements, which have been audited by
Williams & Webster, P.S., independent auditors, and are not included in this
prospectus. When you read this selected consolidated financial data, it is
important that you also read the historical consolidated financial statements
and related notes included in this prospectus, as well as the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The historical results are not necessarily
indicative of the operating results to be expected in the future.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ....................................... $ - $ - $ - $ - $ 1,369
Cost of goods sold ............................ - - - - 1,411
------------ ------------ ------------- ------------ ------------
Gross loss .................................... - - - - (42)
------------ ------------ ------------- ------------ ------------
Sales and marketing ........................... - - - 82 3,195
Research and development ...................... 155 1,095 2,149 1,889 2,713
General and administrative ................... 492 559 1,286 2,625 3,882
Stock-based compensation .................... - 559 1,382 1,999 2,815
------------ ------------ ------------- ------------ ------------
Total operating expenses ................. 647 2,213 4,817 6,595 12,605
------------ ------------ ------------- ------------ ------------
Operating loss ................................ (647) (2,213) (4,817) (6,595) (12,647)
Other income (expense), net ................... (29) (87) 84 121 345
------------ ------------ ------------- ------------ ------------
Net loss ................................... $ (676) $ (2,300) $ (4,734) $ (6,474) $ (12,302)
------------ ------------ ------------- ------------ ------------
Basic and diluted net loss per share........... $ (0.09) $ (0.26) $ (0.43) $ (0.50) $ (0.77)
Basic and diluted weighted average common
shares outstanding.......................... 7,290,615 8,700,146 11,022,577 13,000,259 16,060,783
BALANCE SHEET DATA:
Cash and equivalents .......................... $ 250 $ 445 $ 2,594 $ 3,439 $ 3,377
Working capital ............................... 290 272 2,181 3,095 3,218
Total assets .................................. 308 489 2,907 3,969 5,670
Total stockholders' equity (deficit) .......... (271) 298 2,443 3,500 4,521
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with
"Selected Financial Data" and our financial statements and the notes to those
statements included elsewhere in this prospectus.
RESULTS OF OPERATIONS: DECEMBER 31, 1999 VERSUS DECEMBER 31, 1998
Revenues increased from $0 for the year ended December 31, 1998 to
$1,368,513 for the year ended December 31, 1999 and consisted of sales of our
household products. During 1999 we commenced a new program utilizing co-branding
of our household products with the second largest regional supermarket chain in
New England. In addition, we introduced a private label line of products with a
major pharmacy chain in the U.S. We also sold products through our participation
in a barter for advertising media program.
Cost of goods sold for the year ended December 31, 1999 was
$1,410,731, compared to $0 in 1998. Cost exceeded revenues for the period by
$42,218. The increase was primarily due to freight and warehousing costs of
$126,177 associated with operations of a warehouse to service local accounts,
delivery of sample product to potential customers and representatives, and
additional freight expense incurred in shipping less than truckload quantities
to distant warehouse locations. Start-up costs for new products were
significantly affected by expedited production to meet delivery schedules.
General and administrative expenses increased to $6,500,041 for the
year ended December 31, 1999 from $4,339,093 for the year ended December 31,
1998, an increase of $2,160,948 or 49.8%. This increase was principally
attributable to a combination of additional administrative compensation costs
and related employee benefits expenses resulting from our new product lines,
including an increase in the number of employees and increased travel expenses
due to our efforts to expand our distribution network. Non-cash compensation to
various consultants and advisors of $2,618,257 in 1999 and $1,713,918 in 1998
resulted from the issuance of stock grants; stock options and warrants to
purchase common stock.
Sales and marketing expenses increased $3,112,796 from $81,793 for
the year ended December 31, 1998 to $3,194,589 for the year ended December 31,
1999. Advertising and promotion expenses totaled $1,255,795 for the year ended
December 31, 1999. This includes amounts expended on a multi-media advertising
campaign that introduced our entire line of products as well as assisted the
promotional activities of two major customers. In addition, during 1999 we built
a marketing staff of experienced managers in consumer, industrial and
agricultural products. Sales and marketing employees increased from four in 1998
to 22 employees who were directly involved in marketing, promotion and customer
support.
Research and development expenses increased to $2,910,299 for the
year ended December 31, 1999 from $2,174,400 for the year ended December 31,
1998, an increase of $735,899 or 33.8%. This increase was principally
attributable to our ongoing research activities on GBC-590, our lead
pharmaceutical compound. Included in research and development costs are $197,143
in 1999 and $285,294 in 1998 of non-cash compensation resulting from the
issuance of stock grants, and stock options and warrants to purchase common
stock.
Interest income increased to $353,492 for the year ended December 31,
1999 from $122,173 for the year ended December 31, 1998, an increase of $231,319
or 189.3%. This increase was attributable to an increase in cash available for
investment due to cash proceeds received from six private placements of our
securities during 1999 and 1998 and interest charged on notes receivable from
related parties.
If non-cash compensation expenses were excluded from the results of
operations, net loss for the years ended December 31, 1999 and 1998 would
decrease from $(12,301,718) and $(6,473,505) to $(9,846,318) and $(4,474,293)
respectively. Loss per share for the periods would decrease from $(0.77) and
$(0.50) to $(0.61) and $(0.34) respectively.
16
<PAGE>
RESULTS OF OPERATIONS: DECEMBER 31, 1998 VERSUS DECEMBER 31, 1997
General and administrative expenses increased to $4,339,093 for the
year ended December 31, 1998 from $2,428,072 for the year ended December 31,
1997, a revenues sales and marketing increase of $1,992,894 or 82%. This
increase was principally attributable to a combination of additional
administrative compensation costs and related employee benefits expenses
resulting from our increased research and development activities, and marketing
and product promotion, an increase in the number of employees, increased travel
expenses due to our efforts to build worldwide distribution, and additional
costs associated with shareholder and public relations. Compensation payments to
various consultants and advisors of $1,141,750 in 1997 and $1,713,918 in 1998
resulted from the issuance of stock grants; stock options and warrants to
purchase common stock.
Research and development expenses decreased to $2,174,400 for the
year ended December 31, 1998 from $2,390,021 for the year ended December 31,
1997, a decrease of $215,621 or 9.0%. This decrease was principally attributable
to our discontinuance of certain subcontracted research activities in 1998.
Included in research and development costs is $240,710 resulting from the
issuance of stock grants, and stock options and warrants to purchase common
stock.
Interest income increased to $122,173 for the year ended December 31,
1998 from $83,618 for the year ended December 31, 1997, an increase of $38,555
or 46.1%. This increase was attributable to an increase in average cash
available for investment due to cash proceeds received from two private
placements of our securities during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily with the
proceeds from debt and equity securities totaling approximately $23,875,000. For
the year ended December 31, 1999, our operations utilized cash of $9,989,000
primarily to fund the operating loss. This use of cash was offset by equity
financing that resulted in net proceeds of $10,939,000 to us. In 1998 our
operations utilized cash of $4,493,000, which was offset by equity financings
that resulted in net proceeds of $5,531,000.
Capital expenditures for the year end December 31, 1999 were as
follows:
Computer Software $ 58,517
Office Equipment 11,883
Motor Vehicle 25,026
Furniture and Fixtures 95,601
Computer Equipment 165,068
Machinery and Equipment 68,955
--------
$ 425,050
========
We have no significant commitments for the purchase of equipment,
product manufacturing or marketing efforts at present. We lease office
facilities under an operating lease that ends in May 2004. Rent expense for this
space will be approximately $296,000 in 2000. We may also have the ability to
expand our space in our current location to meet our continuing needs; in such
event, our annual rent expense would be subject to increase.
We made loans to related parties totaling $ 574,177 during the year
ended December 31, 1999.
We have entered into various licensing agreements that require future
cash payments. Aggregate future payments under licensing agreements are
approximately $200,000 of which approximately $50,000 is payable in 2000.
17
<PAGE>
During the first quarter of 2000, we agreed to retain Covance Inc.
for the purpose of conducting studies to evaluate the effect of GBC-590 in
clinical trials. The duration of the pancreatic cancer study may cover
approximately 25 months and may cost approximately $900,000. The colorectal
cancer study may require 25 months and may cost approximately $1,650,000. A
separate services agreement in support of our CAN-296 product in an amount up to
$360,000 was executed on January 31, 2000.
As of December 31, 1999, our cash balances were approximately
$3,377,000, as compared to $3,439,000 as of December 31, 1998. We have no bank
lines of credit or other commercial financing sources at present but may seek
such sources in the future. It is not known whether additional funds could be
borrowed from stockholders or other sources.
During the first quarter of 2000, we raised $5,000,000 in a private
placement offering of common stock whereby 346,021 shares were sold at $14.45
per share. These shares included a warrant to purchase 108,996 additional shares
at $15.98 per share exercisable for five years, and a warrant to purchase shares
at $0.01 per share, the number of shares to be determined in the future
according to a formula based on the then price per share compared to the $14.45
common stock offering price. The purchasers have certain rights, including but
not limited to, demand and piggyback registration rights,
rights-of-first-refusal, and adjustments for certain events. Net proceeds from
the offering were $4,625,000. The purchasers have a commitment to purchase up to
$2,000,000 in additional shares upon the date at which the registration
statement for the initial shares becomes effective, provided the date is no
later than June 29, 2000. In addition, the purchasers have a commitment to
purchase $7,000,000 in additional shares at the price equal to the lesser of (i)
110% of the average of the closing bid prices of our common stock for the four
trading days preceding the closing date of the tranche and (ii) $16.00, with
additional warrants within 190 to 210 days from the closing of the initial
transaction subject to conditions, including but not limited to, market
capitalization, trading volume, and share price conditions. The shares to which
the purchasers have registration rights are being registered under this
registration statement.
Additionally, during the first quarter of 2000, we raised $4,000,000 in
a private placement offering of common stock whereby 333,333 shares were sold at
$12.00 per share. These shares included warrants to purchase 75,758 additional
shares at $15.98 per share exercisable for five years. The purchasers have
"piggyback" registration rights in any registered public offering of common
shares by us subject to standard underwriter consent and cut-backs and lock-ups.
As of March 31, 2000, our cash and cash equivalents was approximately $
9,250,000.
Our future is dependent upon our ability to obtain financing to fund
our operations. We expect to incur substantial additional operating costs,
including costs related to ongoing research and development activities, sales
and marketing activities, preclinical studies and clinical trials. We believe
that our existing funds will be sufficient to fund our operating expenses and
capital requirements as currently planned through the end of 2000.
YEAR 2000
We rely upon a diverse assortment of computer hardware and software,
the integrated operation of which is essential to the successful implementation
of our operations. In 1999, we began a comprehensive review of our information
technology systems and other systems and equipment and developed a year 2000
implementation program. Full compliance and testing was completed before the end
of 1999.
Subsequent to the end of 1999, our operations are fully functioning and
have not experienced any significant issues relating to the Year 2000. While we
are encouraged by the result of our Year 2000 efforts, monitoring for any
potential problems will continue throughout 2000.
18
<PAGE>
Although we do not believe that any continued exposure exists, we have
a contingency plan for possible Year 2000 issues and will continue to update
that plan based on assessments of any subsequent Year 2000 issues as additional
information becomes available.
MARKET RISK
We are exposed to market risk related to changes in interest rates as
well as changes in currency exchange rates as measured against the U.S. dollar
and each other which could positively or negatively affect results of operations
and retained earnings. As of December 31, 1999, we have evaluated our risk and
determined that any exposure to currency exchange is not significant to our
overall consolidated financial results. There can be no assurance that our
exposure will remain at these levels, especially in the event of significant and
sudden fluctuations in the value of local currencies. We do not use derivative
financial instruments for speculative or trading purposes.
INTEREST RATE SENSITIVITY
We maintain short-term investments in an overnight money market account
comprised of U.S. treasury bills. If market interest rates were to increase
immediately and uniformly by 10% from levels that existed at December 31, 1999,
the fair value of the portfolio would decline by an immaterial amount.
19
<PAGE>
BUSINESS
GENERAL
SafeScience is a "responsible science" company. We have chosen a
business model which spans multiple products, markets, industries and
technologies, all united through a common goal exemplified in our mission
"making chemical safety a lifestyle choice." We are focused on three distinct
business segments: biotechnology, agricultural products, and consumer products
tied together with a branding and marketing strategy. We have unified these
seemingly disparate businesses by seeking to fill an important need which exists
in many areas of modern life: to provide safe alternatives to products which
include hazardous chemicals. This concept is embodied in the word "SafeScience",
which is an idea and a lifestyle as well as a brand. Our mission is to build a
comprehensive world brand that introduces chemical safety and product
performance to human therapeutics and to many aspects of consumer, institutional
and agricultural life.
We began as a carbohydrate chemical company, and continue to build on
carbohydrate technology. Yet we have expanded our efforts to research, develop
and market products beyond carbohydrate chemistry and into many other safe and
innovative technologies, and are seeking to build a world brand based on our own
products as well as technology we have licensed from or developed with strategic
partners. All our products seek to achieve competitive standards of performance,
as well as a strong environmental, health and safety profile. The SafeScience
brand currently encompasses agricultural products, as well as, products for the
consumer and institutional markets.
We believe that the SafeScience trademark is an important asset. The
mark has been registered in the United States and is in the process of
registration in major markets throughout the world. It communicates our mission
and identity, creating the foundation for a world brand which identifies not
only products but the core principle behind them. The message of the SafeScience
brand has attracted retailers, distributors, consumers, scientists and
development partners to us, allowing us to grow through activities such as
licensing, partnering and joint ventures in research and development. It has
also allowed us to pursue a strategy which is novel in "corporate" or store
branding: a "better-than brand" positioning. Historically, corporate or store
brands have been marketed based purely on price since they are cheaper than
leading brands. Co-branding with SafeScience allows a corporate brand to offer a
qualitative difference, where "SafeScience" is used descriptively, not just as
an identifier of origin.
SAFESCIENCE PRODUCTS, INC.
We conduct our business through two wholly-owned subsidiaries. One
subsidiary, SafeScience Products, Inc. ("SafeScience Products"), operates our
consumer and institutional, agricultural, and horticultural products business.
This subsidiary is also responsible for the marketing and brand management of
all our products. SafeScience Products' consumer and institutional products
currently for sale include an innovative line of safe, industrial-strength
cleaning products, chemically safe consumer household cleaning products, a home
and garden care line, and automotive care products.
We recognized our first revenues in the second quarter of 1999 through
sales of consumer cleaning and home and garden products through various retail
channels. Additional products and product lines are in various stages of
development. In the agricultural sector, SafeScience Products has developed
and/or licensed an array of products that include a federal EPA-approved safe
fungicide and a line of nutrient fertilizers. Additional fungicide, herbicide
and insecticide products are in various stages of testing and development.
INTERNATIONAL GENE GROUP, INC.
Our second subsidiary, International Gene Group, Inc. ("IGG"), develops
human therapeutics. IGG has been focused on developing GBC-590, a complex
carbohydrate designed to combat cancer tumors and metastasis. Phase IIA United
States Food and Drug Administration ("FDA") clinical trials designed to
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determine the efficacy of GBC-590 for prostrate, pancreatic, colorectal, and
liver cancer are expected to begin in 2000. Phase IIA trials for pancreatic
cancer began in the second quarter of 2000. IGG has also developed CAN-296, a
complex carbohydrate antifungal agent, which is being tested in animals to
inhibit Candida infections.
As part of SafeScience, IGG has the opportunity to be part of a
revenue-generating group in which we believe the costs of research and
development (which are frequently financed by investment) may partially be
offset by revenues from the non-biopharmaceutical side of the business. At the
same time, we believe that SafeScience Products' consumer products business can
benefit from its affiliation with a company that is engaged in important
scientific research validating it as a health/science oriented company, not
simply a marketing organization.
BUSINESS STRATEGY
We have developed our products through internal research and
development, as well as, through licensing arrangements. This approach has
allowed us to gain access to a significantly wider array of products than we
would have been able to develop internally.
Our current strategy is focused on gaining a strong foothold in markets
for our cleaning products, and to commence marketing efforts of our home and
garden products and obtain EPA approval and commence sales for Elexa Plant
Defense Booster ("PDB") for the 2000 season.
In connection with this strategy, we have retained Daymon Associates, a
leading corporate branding and retail sales company, to represent our consumer
cleaning products to its retailing clients internationally. Daymon Associates
has a large customer base of supermarkets, drug stores and mass merchandisers
and works with numerous chains internationally. Our alliance with Daymon
Associates provides our products access to major supermarkets, mass
merchandisers, drug chains, wholesale clubs and food services stores, on both a
national and international level, thus allowing the SafeScience brand a broader
range of exposure than would have been possible had we attempted to approach
retailers on our own.
We have begun efforts to penetrate specific sectors of the
institutional market that seem particularly appropriate for our cleaning
products, targeting large wholesalers that distribute to restaurants, prisons,
hospitals, schools, hotels and office buildings.
While SafeScience Products is bringing products to market in the
consumer and institutional arenas, IGG, our subsidiary for human therapeutics,
has completed Phase I of human trials in the FDA approval process for GBC-590.
We plan to commence various human Phase IIA trials in 2000 for testing on
prostate, pancreatic, colorectal and liver cancers. Phase IIA trials for
pancreatic cancer began in the second quarter of 2000.
Our near-term objectives are as follows: to build sales and revenues
for our consumer products; to continue to expand our product lines by internal
research and development, partnering and licensing; and to proceed through the
various phases of FDA trials for our therapeutic products.
PRODUCTS
SAFESCIENCE PRODUCTS
The business of SafeScience Products may be divided into three broad
categories: consumer products, commercial products and agricultural products.
All three categories of products are sold under the SafeScience(R) brand name.
The agricultural products expected, subject to various regulatory approvals, to
begin sales in 2000 include a fungicide known as Elexa Plant Defense Booster
(PDB). Products in development include an organically-based fungicide and
outdoor and indoor bioinsecticides. Our consumer products include a line of
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chemically safe consumer household cleaning products and a home and garden care
line. The commercial product line presently consists of chemically-safe,
cleaning products.
CONSUMER CLEANING PRODUCTS. We believe that the issue of chemical
safety cannot be addressed in a meaningful way with a single product or even a
single technology. From the consumer's perspective, chemical safety must be a
lifestyle choice if it is to have a material impact on health. As the success of
natural-food supermarkets has demonstrated, a key to consumers' adopting a new
lifestyle is a "one-stop shopping" approach.
We envision the SafeScience brand as one for which consumers can
identify a wide range of products that fit the core value of chemical safety.
Our goal is to build a product line to be offered to all consumers through
multiple retail channels that ultimately can supply chemically-safe products for
many consumer needs, which perform as well as leading brands and are
competitively priced. This inclusive business model is designed to bring
together the resources of numerous technologies and products, so as to build the
SafeScience brand into a true lifestyle choice.
We have addressed the problems concerning indoor environments with a
line of chemically-safe cleaning products which have been shown to work as well
as the leading brands in independent laboratory testing. SafeScience Healthy
Cleaners are household cleaning products that offer leading-brand performance
without the associated chemical hazards to human health or the environment. They
are the result of many years of research, formulation, testing and use in
industrial, institutional and municipal settings. Our cleaners are based on
advanced surfactant technologies rather than harsh chemical solvents such as
chlorine, ammonia and petroleum distillates. Surfactants are molecules that
encapsulate dirt, reducing its adherence to surfaces so that it can be removed
easily. Alternative solvents chemically dissolve substances and are harsh. Our
cleaners contain a balanced blend of surfactants to address both safety and
performance. Products include an All-Purpose Cleaner, Bathroom Cleaner, Window
Cleaner, Floor Cleaner, Dish Liquid, Laundry Liquid, Shower Mist, Kitchen
Cleaner and Exterior Cleaner. These products, which we have licensed, are
presently available for sale.
COMMERCIAL CLEANING PRODUCTS. The commercial cleaning market represents
a significant opportunity for us. From hospitals to schools to office buildings,
administrators have become sensitive to demands for clean indoor air. A growing
body of evidence links a wide range of previously unidentified ailments, now
referred to as Multiple Chemical Sensitivity ("MCS") and Sick Building Syndrome
("SBS"), to poor air quality in buildings. We are addressing the critical issue
of indoor environments with a line of chemically-safe institutional cleaning
products.
The causes of sick buildings are numerous, ranging from poor
ventilation and the presence of mites or fungal spores in older buildings, to
chemicals off-gassed by office furniture, carpets and equipment which can be
particularly concentrated inside new, airtight buildings. Cleaning products are
now recognized as major contributors of indoor air pollutants. The EPA reports
that "cleaning agents may emit volatile organic compounds ("VOC"s). Research
shows that some VOCs can cause chronic and acute health effects at high
concentrations, and some are known carcinogens." Our commercial cleaning
products are industrial-strength cleaning concentrates that offer the
performance of the leading brands, without the harsh chemicals, thus providing a
non-hazardous alternative to petroleum-distillate based, chlorinated, caustic or
high-VOC content products.
We are focusing our marketing efforts on wholesalers who sell to
specific industries including restaurants, prisons, hospitals, schools, hotels
and office buildings. We particularly focused on the hospital industry, which
has recently been targeted by the EPA as a major source of pollution. Mercury,
in particular, has been marked as a problem, with the EPA citing the fact that
three grams of mercury is enough to pollute a 60 acre lake. Sources of mercury
in hospitals extend beyond thermometers and include many standard cleaning
products that have been recently found to be contaminated with significant
amounts of mercury. To address this concern, we have tested our commercial
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cleaning products at a major hospital. Those test results showed our products to
be mercury free.
Under the banner of the "SafeScience Environment," we are also reaching
out to hotels, schools and office buildings such as the first "SafeScience
Building", a 500,000-square-foot office building in Houston, Texas which is
cleaning with our products on a trial basis. We are in discussion with several
other municipalities and institutions, including a significant building
management company. Some of these organizations have already begun ordering our
products.
Some of the major benefits of our products are their competitive
performance, their non-corrosive and non-abrasive qualities, and the fact that
they are not hazardous to human health and are biodegradable. These products
have been tested and used by a major U.S. airline, metropolitan mass transit
systems, schools, hospitals and the U.S. Armed Forces, among others under a
licensor's trade name. Sales under the SafeScience(R) brand name began in the
second quarter of 1999.
AGRICULTURAL PRODUCTS. We are attempting to decrease reliance on toxic
agricultural chemicals. Our principal agricultural product, Elexa PDB, is
designed to improve a plant's natural ability to resist disease. Unlike
traditional fungicides (i.e., chemicals which are toxins that function as agents
to kill fungus directly) our lead fungicide product, Elexa PDB, contains
carbohydrate compounds, or natural complex "sugars", that are known to have low
toxicity and little impact on the environment.
Our lead agricultural product, Elexa PDB, has been designed to inhibit
the penetration and development of fungal pathogens in a variety of plants,
including many important agricultural crops. In 1998 and 1999, Elexa PDB was
tested in over 40 domestic and international field trials at several leading
agricultural universities, at independent professional testing sites and through
our overseas distributors. These trials showed that Elexa PDB is effective in
grapes and cucumbers in eliciting the plant's own defenses against the
commercially significant disease, powdery mildew. In 1999, Elexa PDB testing
expanded to include melons, lettuce, strawberries, grapes, cucumbers, apples,
zucchini and roses under both field and greenhouse conditions.
Elexa PDB 1% formulation has been approved by the United States
Environment Protection Agency, ("EPA"). However, we are still awaiting approval
by both EPA and certain state pesticide regulatory agencies for the Elexa PDB 4%
formulation. Subject to obtaining such approvals, we expect that sales of Elexa
PDB may begin in 2000.
HOME AND GARDEN PRODUCTS. We intend to sell a unique fertilizer
delivery granule for lawn, garden and shrub care in both the consumer and
agricultural markets. These granular fertilizer products include All-Purpose
Garden, Acid Care, Fruit & Flower and Healthy Lawn. These granular fertilizers
use technology in which nutrients are embedded within cellulose fiber granules
that are biodegradable and facilitate the controlled release of nutrients to the
plant or grass. The timed-release nitrogen formula promotes efficient plant
uptake, minimizing the leaching of nitrogen into groundwater. The essential
micronutrients, bioavailable potassium and specially processed humate also serve
as an energy source for beneficial soil microorganisms. Field trials have been
conducted and are continuing in the U.S. on grass. We expect to market several
of these products for the growing season 2000.
INTERNATIONAL GENE GROUP
THEORETICAL BACKGROUND. Cells recognize one another through pairs of
complementary structures on their surface. A structure on one cell carries
encoded biological information that a structure on another cell can decipher.
While nucleic acids and proteins were previously recognized as the major classes
of biological materials involved in cell recognition, it has recently been
theorized (though not scientifically established) that carbohydrates play a role
as well. The majority of a cell's surface components contain carbohydrate
structures on the cell, which change characteristics as the cell develops,
differentiates and sickens.
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It is contended that cell adhesion plays a key role in non-bacterial
diseases, cancer and cancer metastasis. Metastasis is the process by which
cancer cells spread throughout the body, beginning at the primary tumor. The
spread of the cancer cells throughout the body is the main cause of death for
cancer patients. These cells, once circulating in the bloodstream after their
detachment from the primary tumor, must adhere to new cells in other parts of
the body in order to proliferate to form new tumor colonies. Malignant cells may
thus recruit the very adhesion molecules that are part of the body's natural
defense mechanism to promote their own metastasis. We thus believe that drugs,
which inhibit this process of adhesion, may therefore inhibit metastasis
although this theory has not been scientifically established.
COMPLEX CARBOHYDRATE SUBSTANCE (GBC-590). GBC-590 may offer a novel
approach to controlling the progression of cancer, by disrupting the cellular
recognition process of roaming cancer cells and preventing them from reattaching
to each other and to normal tissue. The GBC-590 compound acts as a "molecular
decoy" by recognizing specific substances called "lectins" on cancer cells,
attaching itself to the lectins and preventing those cells from aggregating.
GBC-590 may thus prevent or even reverse metastasis, while the body's immune
system destroys the individual cancer cells marked with the carbohydrate
molecule.
Phase I clinical trials of GBC-590, at the MD Anderson Cancer Center in
Houston, Texas and at Pennsylvania Oncology and Hematology Associates, an
affiliate of the University of Pennsylvania - School of Medicine in
Philadelphia, Pennsylvania, were completed in 1999. Phase I is intended to
assess toxicity; GBC-590 was well tolerated in patients.
There can be no assurances at present that injection with GBC-590 will
prove effective in reducing or eliminating the spread of cancer in humans. We
expect Phase IIA studies of GBC-590 to commence at the MD Anderson Cancer Center
in Houston, Texas, Beth Israel/Deaconess Hospital in Boston, Massachusetts, the
University of Chicago Pritzker School of Medicine in Chicago, Illinois and
Christiana Healthcare in Wilmington, Delaware subject to IRB approval, in 2000.
Phase IIA trials for pancreatic cancer began in the second quarter of 2000.
CAN-296. CAN-296 is an anti-fungal agent derived from a naturally
occurring complex carbohydrate, designed for treatment of Candida and
Apsergillus infections. Candida, a common fungal disease, can take on two forms:
deep-seated infections which can be fatal and superficial infections such as
athlete's foot, skin infections and vaginitis. The former systemic Candida, as
well as, Apsergillus infections are prevalent in immuno-suppressed patients
including individuals undergoing cancer chemotherapy, and AIDS, leukemia and
severe/progressed diabetes patients, as well as patients undergoing transplant
surgery.
Current therapies for Candida have been in the marketplace for more
than 20 years and, when administered systemically, can have serious side
effects. Despite substantial advances in patient care, there remains a 30-40%
mortality rate from Candida in immuno-suppressed patients, and many strains of
Candida have developed resistance to current anti-fungal agents.
CAN-296 has been tested in vitro against many Candida pathogenic
isolates including resistant strains and demonstrated superior efficacy. It
killed or inhibited many fungal strains at concentrations lower than one
microgram per milliliter. We may file an Investigational New Drug application
("IND") with the FDA during 2000. There are no assurances that application of
CAN-296 will prove effective in reducing or eliminating Candida infection in
humans, and there have been no clinical studies or tests conducted to prove such
an effect.
MANUFACTURING
We have established manufacturing and distribution relationships with
several firms, that we believe will provide the capability to meet our
anticipated requirements for the foreseeable future. Certain products under
license from third parties are manufactured by the licensors, helping to ensure
that the proper attributes are conveyed directly to the end products. We audit
our contract-manufacturing firms for process capability, management control and
for the capacity to scale-up production in the event that larger volumes of
product are needed. Materials and components are selectively sourced from
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suppliers nationally. We have good working relationships with all our
manufacturing associates and suppliers.
GOVERNMENT REGULATION
Certain of our activities are subject to extensive federal and local
laws and regulations controlling the development, testing, manufacture and
distribution of pesticide and pharmaceutical products. The pharmaceutical
products of our IGG subsidiary are subject to regulation as therapeutics by FDA,
while many of our agricultural and home and garden products are regulated as
fungicides, insecticides or herbicides by the EPA and state regulatory agencies.
In addition, our products may also be subject to varying degrees of regulation
by a number of foreign governmental agencies. Compliance with FDA and EPA
regulations often results in substantial costs relating to laboratory and
clinical testing of new products, for the preparation and filing of documents in
required formats and for other testing. Moreover, there are no assurances that
we will receive the approvals necessary to commercially market our products.
FOOD AND DRUG ADMINISTRATION REGULATION
The FDA approval process consists of four steps that all new drugs,
antibiotics and biologicals must follow. These steps are:
1. investigational new drug application
2. clinical trials
3. new drug application (review and approval)
4. post-marketing surveys
In 1993 the FDA approved new procedures to accelerate the approval of
certain new drugs and biological products directed at serious or
life-threatening illnesses. These new procedures are intended to expedite the
approval process for patients suffering from terminal illness, if the drugs
subject to approval provide a therapeutic advantage over existing treatment. We
believe that GBC-590 may fall under the FDA guidelines for accelerated approval,
since they are targeted as potential treatments for cancer metastasis and
primary tumors, although there can be no assurance that they will be subject to
such accelerated approval standards.
Human clinical trials are conducted in three phases, normally involving
progressively larger numbers of patients. Phase I clinical trials are concerned
primarily with learning more about the safety of a drug, by determining the
drug's toxicity. Typically oncology related Phase I trials involve 20-40
patients, taking one to two years to complete. Phase I has been completed for
GBC-590.
Assuming the results of Phase I testing present no toxicity or
unacceptable safety problems, Phase II trials may begin. The primary objective
of this stage of clinical testing is to determine whether the drug is effective
in treating the disease or condition for which it is intended. Phase II studies
may take a year or longer and could involve 200 or more patients for each type
of disease or illness tested. These studies are randomized controlled trials
that also attempt to disclose short-term side effects and risks in people whose
health is impaired. Patients with the disease or illness receiving the treatment
will be compared against a control group. We intend to begin Phase IIA trials
for GBC-590 in prostate, pancreatic, colorectal and liver cancer in 2000. Phase
IIA trials for pancreatic cancer began the second quarter of 2000.
The objective of Phase III is to develop information that will allow
the drug to be marketed and used safely. Phase III trials involve hundreds of
people with the objective of expanding on the research carried out in Phase II.
Among the objectives of Phase III trial are to determine optimum dosage rates
and schedules, to discover less common or even rare side effects and adverse
reactions, and to generate information that will be incorporated into the drug's
labeling and the FDA-approved guidelines to physicians and others about how
properly to use the drug.
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The third step that is necessary prior to marketing a new drug is the
New Drug Application (NDA) submission and approval. In this step, all the
information generated by the clinical trials will be submitted for review and,
if successful, the drug will be approved for marketing.
The final step of the FDA approval process is the random surveillance
or surveys of patients being treated with the drug to determine its long-term
effects. This step has no effect on the marketing of the drug unless toxic
conditions arise. The time required to complete all four of these steps averages
seven years, but can take significantly longer. There is no assurance that we
will ever receive FDA approval of any of our products.
ENVIRONMENTAL PROTECTION AGENCY APPROVAL
Our subsidiary, SafeScience Products, is required to obtain the
approval of the EPA before beginning to sell products which constitute
fungicides, insecticides or herbicides.
The EPA approval process begins with the design and initiation of tests
to determine the chemistry of the compound being submitted and its toxicity in
animals. In addition, the manufacturing procedures must be clearly defined and
submitted with the registration. Once the EPA approval process begins, it
typically takes 12 to 14 months for approval of safer biological products. The
EPA regulatory process for the first generation (1%) Elexa PDB has been
completed. The EPA and state regulatory approvals for a new 4% formulation of
Elexa PDB are pending. We applied for California environmental protection agency
registration for both the original and new formulation during the second half of
1999 and we are still awaiting California state approval. We will also seek to
register our products with other state regulatory agencies.
The process of obtaining EPA approval for certain other products now in
development has already commenced. An application is currently being pursued for
the microbial agent BB447 as an alternative to the conventional use of toxic
chemicals to kill ants and cockroaches. Our nutrient and fertilizer products for
the home and garden markets do not require EPA approval.
We intend to pursue approvals to the extent required by foreign
environmental protection agencies.
MARKETING AND DISTRIBUTION
The name "SafeScience" is an important asset. It is not only a brand
name but also a statement of our philosophy. It has also served as the thesis of
our marketing strategy, tying together a variety of products in a cross-section
of categories. Our products will be marketed under the brand name "SafeScience",
as well as various co-branded and private labels, in the United States. Our
packaging communicates the products' performance and nontoxic profile. We have
either registered or are in the process of registering the trademark SafeScience
in all our targeted U.S. and foreign markets.
CONSUMER PRODUCTS. An important relationship is with Daymon Associates,
a leading corporate branding and retail sales company. Daymon Associates is
introducing our consumer cleaning product line to its client base of
supermarkets, mass merchandisers and drugstores as a "better brand" that offers
leading-brand performance and chemical safety at a competitive, corporate brand
price. We intend to use Daymon Associates for our other consumer product
categories as they may be introduced.
A significant milestone of our marketing efforts has been our program
with Shaw's Supermarkets of New England. On September 13, 1999, we announced a
program with Shaw's to co-brand eight household cleaning products under Shaw's
Own Label program. They lead the supermarket industry in sales of private label
products, at 40% of total sales. The "Shaw's SafeScience" cleaners represent the
first time Shaw's has ever offered co-branded products.
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Our relationships with Daymon Associates and Shaw's are two examples of
the acceptance of "SafeScience" as a retail branding concept. We hope to expand
our market penetration through additional alliances and judicious use of our
brand.
INSTITUTIONAL PRODUCTS. We are marketing our institutional cleaning
products through distributors as well as directly to building maintenance
businesses, state departments, municipalities, schools, prisons and merchants.
AGRICULTURE. We are testing our commercial agricultural products both
domestically and in foreign markets. We have established a network of
independent distributors in over 25 countries throughout the world. These
distributors recognize the combined business and social value of SafeScience and
are committed to advancing economic, environmental and health benefits in their
nations and worldwide. We anticipate that commercial sales may begin in 2000 for
certain of our agricultural products.
HOME & GARDEN. We are marketing our consumer home and garden products
through retailers such as home and garden centers, hardware stores and mass
merchandisers, as well as over the Internet. We hope to continue to generate
awareness of these products, the first of which we commenced advertisements for
on television, radio, print media and trade journals in early 1999.
THE INTERNET. The Internet provides us with an international online
audience that is self-selected for its interest in ideas concerning chemical and
environmental safety. It allows potential partners throughout the world with
ideas, information and products to contact us. We can be found at
http://www.safescience.com.
COMPETITION
Our products will encounter significant competition from firms
currently engaged in the pharmaceutical, biotechnology, agrochemical and
consumer products industries. The majority of these companies are substantially
larger than us, and have substantially greater financial, technical, marketing
and other resources, longer operating histories and greater name recognition.
We believe that the principal competitive factors affecting our markets
include product quality and performance, price and chemical safety. Although we
believe that our products currently compete favorably with respect to these
factors, we may not be able to maintain our competitive position against current
and potential competitors, especially those with significantly greater
financial, marketing and other resources.
PRODUCT LIABILITY
Because our products are used in a wide variety of applications
including human therapeutic, household or industrial cleaning and agricultural
commodities including food products, we may be exposed to significant product
liability claims. We have purchased product liability insurance for all our
products, which we believe is adequate; however, the amounts of coverage may not
be sufficient adequately to protect us in the event of a successful product
liability claim.
PATENT STATUS AND PROTECTION OF PROPRIETARY TECHNOLOGY
We own or license proprietary rights with respect to many of our
products. Some of the products we have either developed in house or licensed
from others have been issued patents, and many other product patents are
pending. We are continuing to pursue these patents; however, there can be no
assurance that our products or our technology will be granted patent protection,
or will not infringe on patents owned by others. A patent has been granted on a
compound which is similar to GBC-590, the claims of which conflict with certain
claims in the GBC-590 patent application. The GBC-590 patent application is
pending at the U.S. Patent and Trademark Office and based upon the claims of
this application we believe we will receive a patent for GBC-590 but there can
be no assurance that we will receive patent protection.
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Dr. David Platt, our Chairman and CEO as well as a Director, has
granted our IGG subsidiary an exclusive, world-wide license, including the right
to sublicense, for all products covered by patents, (if and when granted) or
patent applications that he has developed (including GBC-590). IGG is
responsible for payment of all costs connected with obtaining and maintaining
the patents. In the case of GBC-590, Dr. Platt is entitled to a royalty of 2% of
all net sales. See "Certain Relationships and Related Transactions" for more
information on our license with Dr. Platt.
To the extent that we currently rely upon unpatented, proprietary
technology, processes and know-how and the protection of such intellectual
property by confidentiality agreements, there can be no assurance that others
may not independently develop similar technology and know-how or that
confidentiality will not be breached. We believe our intellectual property
rights are significant and that the loss of all or a substantial portion of such
rights could have a material adverse effect on our business, financial condition
and results of operation. There is no assurance that any patents will ever be
granted on our unpatented intellectual property.
EMPLOYEES
At March 31, 2000 we had approximately 50 employees on a full-time
basis and also employed several part-time workers. Our full-time employment
roster grew by 34 employees since March 31, 1999 and we may hire additional
full-time and/or part-time employees, as well as consultants and other
professionals, as necessary to support the growth of our business.
PROPERTIES
Our offices are located at the Park Square Building, 8th Floor, 31 St.
James Avenue, Boston, Massachusetts 02116. We lease a total of 11,300 square
feet of office space, which we anticipate will be adequate for our space
requirements for the foreseeable future. In addition to our leased space in
Boston, we are conducting research at various facilities on a contract or
license basis.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors as of April 17, 2000 are as follows:
NAME AGE POSITION
---- --- --------
David Platt, Ph.D 46 Chief Executive Officer, Secretary and Chairman
Bradley J. Carver 38 President, Treasurer and Director
John W. Burns 54 Chief Financial Officer
Kenneth J. Smaha 52 Chief Operating Officer
Richard A. Salter 57 Vice President
David W. Dube 44 Director
Theodore J. Host 54 Director
Brian G.R. Hughes 45 Director
Our officers are elected by the Board of Directors at the annual
meeting of our shareholders and hold office until their death, or until they
resign or have been removed from office.
DAVID PLATT has been our Chief Executive Officer, Secretary and
Chairman of the Board of Directors since March 1995 and has been the Chief
Executive Officer, Secretary and the Chairman of the Board of Directors of
International Gene Group, Inc. ("IGG"), our wholly-owned subsidiary for the
development of human therapeutics since December 1992. Dr. Platt has been Chief
Executive Officer, Secretary and Chairman of the Board of Directors of
SafeScience Products, Inc., our wholly owned subsidiary, since its inception in
June 1995. Dr. Platt received a Doctor of Philosophy degree (1989), Masters of
Science degree (1983), and Bachelor of Science degree (1978) from the Hebrew
University of Jerusalem, Israel and a Bachelor of Engineering degree (1980) from
Technion, Haifa, Israel.
BRADLEY J. CARVER has been President and Treasurer and a member of the
Board of Directors of SafeScience since March 1995 and has been the President,
Chief Financial Officer, Treasurer and a member of the Board of Directors of IGG
since February 1993. Mr. Carver has been President, Chief Financial Officer,
Treasurer and a member of the Board of Directors of SafeScience Products, Inc
since its inception in June 1995. Mr. Carver received a Bachelor of Arts degree
in management from Michigan State University in 1983.
JOHN W. BURNS has been our Chief Financial Officer since January 2000.
Prior thereto, Mr. Burns was the CFO/Senior Vice President, Finance & Business
Operations for South Shore Hospital, a regional healthcare services provider
based in South Weymouth, MA, from February 1993 to February 1999. From 1989 to
1992, Mr. Burns was the Vice President/Treasurer and a subsidiary CFO/Vice
President, Finance for Eastern Enterprises, a NYSE company engaged in energy and
marine transportation. Mr. Burns has also held corporate finance and treasury
positions with Allied-Signal, Citicorp Investment Bank, and International Paper.
Mr. Burns holds a Master of Business Administration in Finance from New York
University and a Doctor of Philosophy in Mathematics from Stevens Institute of
Technology.
KENNETH J. SMAHA has been our Chief Operating Officer since November
1999. Prior thereto, Mr. Smaha was Executive Vice President of Webster
Industries, a private label manufacturer of consumer and institutional plastic
products, and a division of Chelsea Industries, Inc., from January 1995 through
October 1999. Mr. Smaha has a Bachelor of Science in Finance and Accounting from
the University of Maine, Orono, and a Master of Business Administration from
Babson College.
RICHARD A. SALTER has been a Vice President of SafeScience since April
2000. Mr. Salter served as a director of SafeScience from December 1998 to April
2000 and our Executive Vice President from January 1998 to April 2000. Prior
thereto, Mr. Salter was our Vice President - Corporate Development from June
1997 through January 1998 and served us as a consultant from June 1996 through
July 1997. From January 1989 through May 1996, Mr. Salter rendered consulting
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services in the areas of sales and marketing to a variety of small businesses
and companies. Mr. Salter received a Bachelor of Arts from the University of
Michigan and is a graduate of the Boston University School of Law.
DAVID W. DUBE has been a director of SafeScience since May 1998. Mr.
Dube is a private investor with active interests in various real estate,
financial services and giftware companies. Mr. Dube was Senior Vice President
and Chief Financial Officer of FAB Capital Corporation, a merchant banking and
securities investment firm and served in various other capacities from September
1997 through October 1999. Mr. Dube has been the President and Chief Executive
Officer of Optimax Industries, Inc., a publicly traded company with interests in
the horticultural, decorative giftware and truck part accessories industries
from July 1996 to September 1997. From February 1991 to June 1996, Mr. Dube had
been the principal of Dube & Company, a financial consulting firm. Mr. Dube
serves on the boards of directors of publicly traded Helmstar Group, Inc., Kings
Road Entertainment, Inc. and New World Wine Group, Ltd. Mr. Dube is a Certified
Public Accountant in the state of New Hampshire, and holds general and principal
securities licenses.
THEODORE J. HOST has been a director of SafeScience since December
1998. Since November 1999, Mr. Host has been the President and Chief Executive
Officer of Prestige Brands International, a consumer products company. From
October 1992 through February 1996, Mr. Host was the President and Chief
Operating Officer, and from February 1996 through November 1999 was the Chief
Executive Officer of The Scotts Company, a lawn care company. In addition, Mr.
Host worked with McCown DeLeeuw & Co. to create a consumer products startup
company from March 1996 to November 1999. Mr. Host serves on the board of
directors of, and on the compensation and audit committees of, Sarcom, Inc.
BRIAN G.R. HUGHES has been a director of SafeScience since December
1998. Mr. Hughes is president-select of the Association of Alumni and Alumnae of
the Massachusetts Institute of Technology (MIT). Since 1978, Mr. Hughes has held
a variety of positions with the MIT Corporation, the board which governs MIT.
From 1989 through 1995, Mr. Hughes was Vice Chairman and the Chief Executive
Officer of American Rocket Company, which worked to develop and commercialize
safe, clean low-cost hybrid rocket propulsion.
BOARD COMMITTEES
The Board of Directors has an Audit Committee, consisting of Mr. Dube,
Mr. Host and Mr. Hughes. The Audit Committee recommends the selection of
independent auditors, discusses and reviews the scope and the fees of the
prospective annual audit and reviews the results thereof with the independent
auditors, reviews compliance with our existing major accounting and financial
policies, reviews the adequacy of our financial organization and reviews
management's procedures and policies relevant to the adequacy of our internal
accounting controls and compliance with federal and state laws relating to
accounting practices. The Audit Committee held one meeting during 1999.
The Board of Directors also has a Compensation Committee, consisting of
Mr. Dube, Mr. Host and Mr. Hughes. The Compensation Committee administers our
1998 Stock Option Plan and 2000 Stock Incentive Plan and reviews and approves
the annual salary, bonus and other benefits, direct or indirect, of the members
of our senior management. The Compensation Committee is comprised of
non-employee directors as such term is defined under Rule 16b-3 of the Exchange
Act. The Compensation Committee held two meetings during 1999.
The Board of Directors may establish, from time to time, other
committees to facilitate the management of our business.
DIRECTOR COMPENSATION
Our non-employee directors receive cash compensation for their services
equal to $1,500 per meeting in addition to reimbursement for travel expenses
incurred in traveling to and from meetings. In addition, non-employee directors
receive a non-qualified option to purchase 20,000 shares of common stock, which
vests over two terms. Such options vest and become exercisable as follows:
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options to purchase 4,000 shares become exercisable at the time the optionee
becomes a director; and options to purchase an additional 2,000 shares become
exercisable at the end of each full calendar quarter thereafter. After the
expiration of two terms, each director may be granted options to purchase
additional shares for subsequent periods of service. The exercise price with
respect to all options granted to directors will be the average closing bid
price of the common stock during the twenty trading days prior to the date of
grant. The exercise price of currently outstanding options is $5.50 per share.
Such options are exercisable for a period of ten years from the date of grant.
All vesting of options will cease at such time as any optionee ceases to be a
non-employee director for any reason, and any options theretofore granted which
have not vested will be cancelled and forfeited to us.
Directors who are employees of SafeScience or its affiliates do not
receive any compensation for their services as a director. Accordingly, Dr.
Platt, Mr. Carver and Mr. Salter were not compensated as such for their services
as directors in 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serve on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of our Board of Directors or Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company has
furnished the following excerpt from minutes of their meetings with respect to
executive compensation:
On June 29, 1999, the Compensation Committee voted that the salaries
for the three senior executives, Dr. Platt, the Company's Chief Executive
Officer and Secretary, Mr. Carver, the Company's President and Treasurer, and
Mr. Salter, the Company's Vice President, be set at $180,000 per year and that
the Company enter into a three-year contract with each executive. The contracts
contain non-competition covenants that prohibit the officer from competing with
the Company during the term of the contract and thereafter for a period equal to
the longer of one year after termination or until the cessation of payments
under the contract.
The Compensation Committee also voted that option grants in the amount
of 100,000 shares per officer be approved.
The approval of the salary and option grant for senior management was
based on the Compensation Committee's review of grants to senior management in
comparable publicly traded companies.
The Compensation Committee recommended that the Company retain an
outside advisor to help the Company develop a formal compensation policy. Such a
policy should take into account practices at peer companies of a similar size
and stage, as well as the increase in the Company's market capitalization over
the long term. The Company intends to implement this recommendation during the
year 2000.
The above excerpts from minutes of the Compensation Committee's
meetings shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this registration statement into any filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934 and
shall not otherwise be deemed filed under such Acts.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued during
1999, 1998 and 1997 for services rendered during such period by our chief
executive officer and secretary, our president and treasurer and one of our vice
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presidents (the "named executive officers"). No other of our executive officers
had aggregate compensation from us exceeding $100,000 in 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM COMPENSATION
----------------------
RESTRICTED STOCK SECURITIES UNDERLYING
AWARDS OPTIONS
------ -------
POSITION YEAR SALARY BONUS
-------- ---- ------ -----
<S> <C> <C> <C> <C> <C>
David Platt, Chairman, Chief Executive 1999 $157,500 ___ ___ 100,000
Officer and Secretary 1998 $119,000 ___ ___ ___
1997 $106,000 ___ ___ ___
Bradley J. Carver, President and 1999 $157,500 ___ ___ 100,000
Treasurer 1998 $119,000 ___ ___ ___
1997 $104,000 ___ ___ ___
Richard A. Salter, Vice President 1999 $452,720 (1) ___ ___ 350,000 (4)
1998 $391,988 (2) ___ ___ 320,000 (5)
1997 $139,781 (3) ___ ___ ___
- ----------------------
(1) Mr. Salter's salary for the period January through June 1999 was paid
in the form of 40,000 shares of common stock valued at $352,720. For
the period July through December 1999, Mr. Salter received cash
compensation of $100,000.
(2) Mr. Salter's salary in 1998 was paid in the form of 90,000 shares of
our common stock with an aggregate value on their respective dates of
issuance totaling $391,988. Mr. Salter did not receive any cash
compensation from us.
(3) Mr. Salter's salary in 1997 was paid in the form of 30,000 shares of
our common stock with an aggregate value on their respective dates of
issuance totaling at $139,781. Mr. Salter did not receive any cash
compensation from us. In addition, prior to becoming an employee of
SafeScience in June 1997, he received 30,000 shares of common stock
as a consultant.
(4) Consists of options to purchase 250,000 shares of common stock at an
exercise price of $10.70 per share granted in exchange for
cancellation of options to purchase 100,000 shares at an exercise
price of $0.01 per share, and options to purchase 100,000 shares of
common stock at an exercise price of $13.375 per share.
(5) Consists of options to purchase 300,000 and 20,000 shares of common stock at an exercise price of $.01 per share.
</TABLE>
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OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted during the year ended December 31, 1999 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL
SECURITIES PERCENT OF TOTAL RATES OF STOCK PRICE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED EXERCISE OR TERM (2)
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE --------------------------------------------
NAME (#) FISCAL YEAR (1) ($/SHARE) EXPIRATION DATE 0%($) 5%($) 10%($)
---- --- --------------- --------- --------------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Platt 100,000 (3) 15.6% $13.375 6/21/02 ___ $210,823 $442,712
Bradley J. Carver 100,000 (3) 15.6% 13.375 6/21/02 ___ 210,823 442,712
Richard A. Salter 100,000 (3) 15.6% 13.375 6/21/02 ___ 210,823 442,712
Richard A. Salter 250,000 (4) 39.0% $10.70 6/15/02 $668,750 $1,195,808 $1,775,531
- ----------------------
(1) Based on options to purchase an aggregate of 641,000 shares granted
to officers and employees during the fiscal year ended December 31,
1999.
(2) These columns show the hypothetical gains or option spreads of the
options granted based on the fair market value of the common stock on
the date of grant and assumed annual compound share appreciation
rates of 0%, 5% and 10% over the full term of the options. The
assumed rates of appreciation are mandated by the SEC and do not
represent our estimate or projection of future share prices. Actual
gains, if any, on option exercises will depend on the timing of such
exercise and the future performance of the common stock. Values are
net of the option exercise prices, but do not include deductions for
taxes or other expenses associated with the exercise.
(3) Each of these grants vested immediately.
(4) Options granted to Mr. Salter in exchange for his surrender of
options for 100,000 shares exercisable at $.01 per share.
</TABLE>
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table set forth certain information regarding options
exercised during the year ended December 31, 1999 by the named executive
officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN THE MONEY
NUMBER OF SHARES VALUE UNEXERCISED OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END (2)
ACQUIRED ON REALIZED -------------------------------------- ------------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Platt ___ ___ 100,000 ___ 0 ___
Bradley J. Carver ___ ___ 100,000 ___ 0 ___
Richard Salter ___ ___ 100,000 ___ 0 ___
Richard A. Salter 100,000 (3) $500,000 ___ ___ ___ ___
Richard Salter 250,000 (4) 0 ___ ___ ___ ___
- -----------
(1) The values in this column represent the reported closing price on the
respective dates of exercise, less the respective option exercise
prices.
(2) Value is based on the closing price of the common stock on December
31, 1999 of $11.63, the last trading of our 1999 fiscal year, less
the applicable option exercise price.
(3) In January 1998, we granted Mr. Salter options to purchase 300,000
shares of common stock for a purchase price of $0.01 per share
vesting annually 100,000 shares, for each of the three years 1998,
1999 and 2000 at the commencement of which Mr. Salter remains with
us.
(4) On June 15, 1999, we entered into a transaction whereby Mr. Salter,
our vice president, relinquished an option to purchase 100,000 shares
of common stock for a price of $0.01 per share which would have
vested on January 1, 2000 and, in exchange, we issued to him a stock
option for 250,000 shares of common stock at an exercise price of
$10.70 per share, the estimated fair market value of the common stock
on the date of the transaction. The option was exercised immediately.
We loaned Mr. Salter an amount representing the entire exercise
price. The principal balance of this note is $2,675,000, and accrues
interest at 4.92% per annum, compounded semi-annually. Mr. Salter
pledged the 250,000 shares of common stock as collateral. The note is
non-recourse and is secured by the pledged shares. All outstanding
principal, together with accrued interest in the unpaid principal
balance of this note, will be due on June 15, 2004. The balance
outstanding at December 31, 1999 is $2,750,000.
</TABLE>
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2000 STOCK INCENTIVE PLAN
The 2000 Stock Incentive Plan permits us to grant (i) incentive and
non-qualified stock options, (ii) stock appreciation rights, (iii) stock awards
and (iv) performance awards (collectively, "Awards") to certain of our and our
subsidiaries' employees, officers, consultants and advisors, and non-employee
directors. The 2000 Stock Incentive Plan allows for the issuance of 1,000,000
shares of common stock. As of March 31, 2000, no shares were issued and
outstanding under the 2000 Stock Incentive Plan.
The 2000 Stock Incentive Plan is administered by our Compensation
Committee. Subject to the provisions of the 2000 Stock Incentive Plan, the
Compensation Committee may select the individuals eligible for participation in
the 2000 Stock Incentive Plan and determine the form, amount and other terms and
conditions of Awards, and generally administer and interpret the plan. The
Compensation Committee also has the power to modify or waive restrictions on
Awards, to amend Awards and to grant extensions and accelerations of Awards. The
maximum aggregate number of shares of common stock underlying all Awards
measured in shares of common stock (whether payable in cash, common stock, or a
combination of both) that may be granted to any single participant during the
life of the 2000 Stock Incentive Plan is 300,000 shares (subject to adjustment).
The Compensation Committee will determine the number of shares subject
to the option, the manner and time of the option's exercise, and the option's
exercise price, which cannot be lower than the fair market value of our common
stock on the date of grant; however, the exercise price of any non-qualified
stock option may be lower than the fair market value of the common stock on the
date of grant if the Compensation Committee, in its sole discretion and due to
special circumstances, determines otherwise on the date of grant. Stock options
cannot be exercised after the tenth anniversary of their date of grant, and the
Compensation Committee will otherwise determine when each stock option becomes
vested and exercisable. The stock option exercise price may be paid in cash or,
in the sole discretion of the Compensation Committee, by the delivery of shares
of common stock then owned by the participant, or by a combination of these
methods. In the sole discretion of the Compensation Committee, payment may also
be made by delivering a properly executed exercise notice together with a copy
of irrevocable instructions to a broker to deliver promptly to us the amount of
sale or loan proceeds to pay the exercise price. The Compensation Committee may
prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the 2000 Stock Incentive Plan,
including, without limitation, in lieu of the exercise of a stock option by
delivery of shares of common stock then owned by a participant, providing us
with a notarized statement attesting to the number of shares owned by the
participant, where, upon verification by us, we would issue to the participant
only the number of incremental shares to which the participant is entitled upon
exercise of the stock option.
A stock appreciation right is a right to receive a payment, in cash,
common stock, or a combination thereof, equal to the excess of (x) the fair
market value, or other specified valuation (which shall not be greater than the
fair market value), of a specified number of shares of common stock on the date
the right is exercised over (y) the fair market value, or other specified
valuation (which shall not be less than fair market value), of such shares of
common stock on the date the right is granted, all as determined by the
Compensation Committee. Each stock appreciation right shall be subject to such
terms and conditions as the Compensation Committee shall impose in its sole
discretion.
A stock award consists of a grant of shares of common stock that are
subject to such terms and conditions as the Compensation Committee, in its sole
discretion, determines appropriate - including, without limitation, restrictions
on the sale or other disposition of such shares and our right to reacquire such
shares for no consideration upon termination of the participant's employment
within specified periods. A participant who has been granted a stock award will
have all of the rights of a holder of shares of common stock, including the
right to receive dividends and to vote the shares, unless the Compensation
Committee determines otherwise on the date of grant.
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<PAGE>
A performance award consists a right to receive a specified number of
shares of common stock or cash at the end of a specified period, subject to such
terms and conditions as the Compensation Committee, in its sole discretion,
determines appropriate - including, without limitation, determining the
performance goal or goals which, depending on the extent to which such goals are
met, will determine the number and/or value of the performance awards that will
be paid out or distributed to the participant who has been granted performance
awards.
Certain Awards granted under the 2000 Stock Incentive Plan may be
granted in a manner such that the Award qualifies for the performance-based
compensation exemption to Section 162(m) of the Code ("Performance-Based
Awards"). As determined by the Compensation Committee in its sole discretion,
either the granting or vesting of such Performance-Based Awards will be based
upon one of more of the following factors: net sales; pre-tax income before
allocation of corporate overhead and bonus; budget; cash flow; earnings per
share; net income; division, group or corporate financial goals; return on
stockholders' equity; return on assets; attainment of strategic and operational
initiatives; appreciation in and/or maintenance of the price of our common
stock; market share; gross profits; earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; economic value-added
models; comparisons with various stock market indices; and/or reductions in
costs; or any combination of the foregoing.
With respect to Performance-Based Awards that are not stock options or
stock appreciation rights based solely on the increase in the fair market value
of our common stock after the grant of Awards: (i) the Compensation Committee
shall establish in writing, (x) the objective performance-based goals applicable
to a given period and (y) the individuals or class of individuals to which such
performance-based goals apply no later than 90 days after the commencement of
such period (but in no event after 25% of such period has elapsed); (ii) no
Performance-Based Award shall be payable to, or vest with respect to, as the
case may be, any participant for a given fiscal period until the Compensation
Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied; and (iii)
the Compensation Committee may reduce or eliminate the number of shares of
common stock or cash granted or the number of shares of common stock vested upon
attainment of the performance goal.
If we experience a change in control, the Compensation Committee, in
its sole discretion, may determine that all or a portion of each outstanding
Award shall become fully exercisable, if applicable, upon the change in control
or at such other date or dates that the Compensation Committee may determine,
and that any vesting and forfeiture restrictions shall lapse at such date or
dates. In addition, the Compensation Committee, in its sole discretion, may
determine that, upon the occurrence of a change in control, all or a portion of
certain outstanding stock options and stock appreciation rights will terminate
within a specified number of days after notice to the holders, and each such
holder will receive, with respect to each share of common stock subject to a
stock option or stock appreciation right, an amount equal to the excess of the
fair market value of such shares of common stock immediately prior to the
occurrence of such change in control over the exercise price per share of such
stock option or stock appreciation right. Such amount will be payable in cash,
in one or more kinds of property (including the property, if any, payable in the
transaction) or in a combination thereof, as the compensation committee, in its
sole discretion, will determine. Also, the Compensation Committee may, in its
sole discretion, provide that an Award may be assumed by any entity which
acquires control of us, or that an Award may be substituted by a similar award
under such entity's compensation plans.
If a participant's employment or service as an employee, officer,
director, advisor or consultant is terminated due to death or disability, all
non-vested portions of stock options held by the participant will immediately be
forfeited and all vested portions of stock options held by the participant will
remain exercisable until the earlier of (i) the end of the 12-month period
following the date of death or termination of employment, or (ii) the date the
stock options would otherwise expire. If a participant's employment is
terminated by us for cause, all stock options held by a participant, whether
vested or non-vested, will immediately be forfeited by such participant. If a
participant's employment is terminated for any reason other than for cause or
other than due to death or disability, all non-vested portions of stock options
held by the participant will immediately be forfeited and all vested portions of
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<PAGE>
stock options held by the participant will remain exercisable until the earlier
of (i) the end of the 90-day period following the date of the termination of
employment, or (ii) the date the stock options would otherwise expire.
The effect of a termination of employment or service under Awards other
than stock options shall be as provided in the grant agreement for the Award.
1998 STOCK OPTION PLAN
The 1998 Stock Option Plan permits us to grant incentive stock options
and nonstatutory stock options to our directors, employees and consultants. The
1998 Stock Option Plan allows for the issuance of 600,000 shares of common
stock. As of April 14, 2000, options to purchase 541,294 shares were issued and
outstanding under the 1998 Stock Option Plan.
The 1998 Stock Option Plan is administered by our Compensation
Committee. Subject to the provisions of the 1998 Stock Option Plan, the
Compensation Committee may select the individuals eligible to receive awards,
determine the number of shares to be covered by each option, the terms and
conditions of the option granted and the option exercise price of each option
granted, and generally administer and interpret the plan. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation may not be granted at an exercise price less than the fair market
value of the common stock at the date of grant, or less than 110% of the fair
market value in the case of incentive stock options granted to optionees holding
more than 10% of the voting power of the company. Non-qualified stock options
may be granted at prices that are less than the fair market value of the
underlying shares or the date granted. Options are typically subject to vesting
schedules and terminate ten years from the date of grant (except five years for
optionees holding more than 10% of the voting power of the company).
Upon the exercise of options, the option exercise price must be paid in
full in cash, shares of common stock, outstanding options or other
consideration. The exercise price may also be delivered to us (a) by the
optionee in the form of a promissory note if the loan of such funds to the
optionee has been authorized by the compensation committee and (b) by a broker
assisted cashless exercise program.
EMPLOYMENT AGREEMENTS
We have employment agreements with each of Dr. Platt, our Chairman and
Chief Executive Officer, Mr. Carver, our President, and Mr. Salter, our Vice
President, each dated as of June 29, 1999. These employment agreements expire on
June 29, 2002. Messrs. Platt, Carver and Salter are entitled to an annual base
salary of $180,000, and to receive bonuses, in the discretion of the
Compensation Committee, based upon us and the executive meeting certain
performance targets established under the our stock plans by the Compensation
Committee.
Under the terms of these employment agreements, if we terminate the
employment of any of Messrs. Platt, Carver or Salter, other than for Cause (as
defined in the employment agreements), or Messrs. Platt, Carver or Salter
terminates his employment because of a material breach by us of his employment
agreement, then we shall continue to pay such executive his annual base salary
in effect at the time of termination for the duration of the term of the
employment agreement, to be paid at the time otherwise due, and any bonus not
yet paid to such executive earned in the year prior to termination, to be paid
at the time otherwise to have been paid, as if employment had not been
terminated.
In the event of termination of the employment of any of Messrs. Platt,
Carver or Salter by reason of death or permanent disability (as defined in the
employment agreements) of such executive, we shall pay to such executive or his
estate or other successor in interest, at the time otherwise due, his annual
base salary and any benefits due to such executive through the date of
termination, but reduced in the case of permanent disability by any payments
received under any disability plan, program or policy paid for by us.
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If we terminate the employment of any of Messrs. Platt, Carver or
Salter for Cause, or Messrs. Platt, Carver or Salter terminates his employment
with us other than because of a material breach by us of his employment
agreement, we shall pay such executive his annual base salary and benefits
earned through the date of termination, and we shall have no further obligations
to such executive under his employment agreement.
Under the terms of the employment agreements, Messrs. Platt, Carver and
Salter are prohibited from competing with us during the periods of their
employment with us and for one year following the end of the scheduled term of
such employment. However, in the event of termination of Messrs. Platt, Carver
or Salter employment by us for other than Cause, or by Messrs. Platt, Carver or
Salter because of the material breach by us of his employment agreement, such
executive is prohibited from competing with us after any such termination only
for so long as such executive is entitled to receive his annual base salary from
us.
In addition, Messrs. Platt, Carver and Salter are subject to
nondisclosure and confidentiality provisions under the employment agreements,
which provisions survive any termination of the employment agreements.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons of
SafeScience as described above, we have been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
On January 7, 1994, we entered into a licensing agreement which was
amended April 14, 1999, with Dr. Platt, our Chief Executive Officer and a
director, to pay Dr. Platt a royalty of two percent (2%) of the net sales of our
GBC-590 product. Starting in the ninth year of the licensing agreement and each
year thereafter, Dr. Platt has the right to terminate the licensing agreement if
royalties of at least $50,000 are not paid in such year, subject to a 30-day
cure period by us. For 1999, no royalty was paid by us to Dr. Platt.
In March 1997, we loaned Mr. Carver, our President and Treasurer and a
stockholder, $65,000 and received a promissory note in that principal amount
from Mr. Carver. The term of the note is sixty (60) months with installments of
$375.61 and an interest rate of 5.66% with a final balloon payment on the fifth
anniversary thereof. The note is secured by a pledge of 25,000 shares of common
stock owned by Mr. Carver. As of March 31, 2000, the outstanding balance of such
note is $62,298.
During the second quarter of 1999, we advanced $72,000 to Mr. Salter,
our Vice President, and in the third quarter of 1999, advanced an additional
$200,000 to Mr. Salter under two non-recourse promissory notes. The outstanding
principal balance of the $72,000 promissory note accrues interest at 4.92% per
annum, compounded semi annually and the outstanding principal balance of the
$200,000 promissory note accrues interest at 5.35% per annum, compounded
semi-annually. Mr. Salter pledged 5,970 shares of the common stock held by him
as collateral for the $72,000 promissory note and 9,553 shares of the commons
stock held by him as collateral for the $200,000 promissory note. All
outstanding principal, together with accrued interest on the unpaid principal
balance of the $72,000 and $200,000 promissory notes, are due August 4, 2000 and
May 5, 2000, respectively. Pursuant to such promissory notes, Mr. Salter agreed
not to sell any shares of our common stock prior to April 1, 2000 with respect
to the $72,000 promissory notes and January 1, 2000 with respect to the $200,000
promissory note.
On June 15, 1999, we entered into a transaction whereby Mr. Salter, our
Vice President and a director and stockholder of SafeScience, relinquished an
option to purchase 100,000 shares of common stock for a price of $0.01 per share
which would have vested on January 1, 2000 and, in exchange, we issued to him a
stock option for $250,000 shares of common stock at an exercise price of $10.70
per share, the estimated fair market value of the common stock on the date of
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the transaction. The option was exercised immediately. We loaned Mr. Salter an
amount representing the entire exercise price. The principal balance of this
note is $2,675,000, and accrues interest at 4.92% per annum, compounded
semi-annually. Mr. Salter pledged the 250,000 shares of common stock as
collateral. The note is non-recourse and is secured by the pledged shares. All
outstanding principal, together with accrued interest in the unpaid principal
balance of this note, will be due on June 15, 2004. The balance outstanding at
December 31, 1999 is $2,750,000.
On March 30, 2000, in connection with the private placement of 333,334
shares of our common stock and warrants to purchase 75,755 shares of our common
stock for an aggregate of $4,000,000, Britannia Holdings, Limited and George
Strawbridge, Jr., each principal stockholders of SafeScience, and Brian G.R.
Hughes, a director of SafeScience purchased 166,667, 83,333 and 41,667 shares of
our common stock, respectively, at $12.00 per share and warrants to purchase
37,879, 18,939 and 9,470 shares of our common stock at $15.98 per share,
respectively.
REGISTRATION RIGHTS AGREEMENTS
Certain holders of our common stock have certain registration rights with
respect to their shares of common stock. See "Description of Capital Stock -
Registration Rights of Certain Holders."
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SELLING STOCKHOLDERS
On March 29, 2000 we entered into a securities purchase agreement with
Strong River Investments, Inc., a British Virgin Island corporation and Montrose
Investments Ltd., a Cayman Island corporation. Under that agreement, we issued
and sold the following securities for a total cash consideration of $7.0
million, of which $2.0 million will be received upon effectiveness of this
registration statement if such effectiveness occurs on or prior to June 29,
2000:
o a total of 484,429 shares of our common stock, of which 138,409 will
be issued to the selling shareholders upon effectiveness of this
registration statement if such effectiveness occurs on or prior to
June 29, 2000;
o closing warrants to purchase 108,996 shares of common stock at an
exercise price of $15.98 per share; and
o adjustable warrants to purchase a number of shares of common stock to
be determined at three vesting dates determined by the selling
stockholders over a period up to 18 months following the effectiveness
of this registration statement at an exercise price of $0.01 per
share.
The number of shares of common stock issuable at each vesting date
under the adjustable warrants, if any, will be determined by a formula in the
adjustable warrant and is based on the four lowest closing bid prices of our
common stock during the 40 consecutive trading days preceding each vesting date.
A greater number of shares of common stock are issuable the lower the price of
our common stock. However, if after the effective date of this registration
statement the closing bid price of our common stock for 20 consecutive trading
days exceeds approximately $19.51 per share, then no shares are issuable
pursuant to the adjustable warrants for any subsequent vesting dates.
Pursuant to a registration rights agreement with Strong River
Investments, Inc., and Montrose Investments Ltd., we filed a registration
statement, of which this prospectus forms a part, in order to permit the selling
stockholders to resell to the public the shares of common stock that they
purchased pursuant to the securities purchase agreement and that they acquire
upon any exercise of the warrants. We have registered the number of shares
required pursuant to such registration rights agreement which number is based
upon the actual number of shares sold to the selling stockholders pursuant to
the securities purchase agreement, the number of shares issuable upon any
exercise of the closing warrants, and an estimate of the number of shares
issuable upon exercise of the adjustable warrants.
The selling stockholders may sell up to 1,023,802 shares of our common
stock pursuant to this prospectus. That number of shares includes an estimate of
the number of shares issuable upon exercise of the adjustable warrants based on
a formula included in the adjustable warrant, and assumes that the adjustment
price specified in the formula was $6.44, or 50% of the closing bid price of our
common stock on March 29, 2000, the trading day immediately preceding the
closing date of the securities purchase agreement, in order to cover potential
downward movements in the market price of our common stock. The number of shares
offered by this prospectus is not a prediction as to the future market price of
our common stock or as to the number of shares which may vest pursuant to the
adjustable warrants.
A holder of the warrants cannot exercise the warrants if the exercise
would cause the holder, together with any affiliate of the holder, to have
beneficial ownership of more than 4.999% of our outstanding shares of common
stock. This restriction in the warrants can be waived by the holder of the
warrant if the holder gives us at least 61 days notice. However, the 4.999%
limitation would not prevent the selling stockholders from acquiring and selling
in excess of 4.999% of our common stock through a series of exercise and sales
under the warrants.
40
<PAGE>
In addition, as long as our common stock is listed for trading on
Nasdaq, we may not issue common stock on exercise of the adjustable warrants in
an amount which exceeds 19.999% of our outstanding common stock without
obtaining prior shareholder approval.
The following table sets forth information regarding beneficial
ownership of our common stock by the selling stockholders as of March 31, 2000.
The number of shares of common stock listed as potentially offered by this
prospectus represents the number of shares of common stock owned as of March 31,
2000, the number of shares issuable upon exercise of the closing warrants, and a
number of shares issuable upon exercise of the adjustable warrants, based on the
above assumptions as to the price of our common stock. The actual number of
shares issuable upon exercise of the adjustable warrants will be determined at
each of three vesting dates.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NUMBER OF SHARES AFTER OFFERING
BENEFICIALLY OWNED NUMBER OF SHARES -------------------------
PRIOR TO OFFERING OFFERED NUMBER PERCENT
----------------- ------- ------ -------
<S> <C> <C> <C> <C>
Strong River Investments, Inc ....................... 227,508 511,901 0 0
Montrose Investments Ltd. ........................... 227,508 511,901 0 0
</TABLE>
41
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of common stock as of April 14, 2000 and as adjusted to reflect the
sale of the common stock offered hereby, by:
o all persons who own beneficially 5% or more of our common stock;
o each of the named executive officers;
o each of our directors; and
o all directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares of common stock beneficially
owned, subject to community property laws, where applicable. Beneficial
ownership is determined in accordance with the rules issued by the SEC. Under
these rules, beneficial ownership includes any shares which the individual or
entity has sole or shared voting or investment power and shares of common stock
subject to options held that are currently exercisable or exercisable within 60
days of April 14, 2000. The applicable percentage of "beneficial ownership"
after the offering is based upon 18,270,883 shares of common stock outstanding,
plus any shares subject to such options held by that individual or entity.
<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY OWNED
NUMBER OF SHARES ------------------------
BENEFICIALLY BEFORE THE AFTER THE
OWNED OFFERING OFFERING
----- ---------- --------
<S> <C> <C> <C> <C>
David Platt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,059,550 (1) 17.3% 16.7%
Bradley J. Carver . . . . . . . . . . . . . . . . . . . . . . . . . 2,657,686 (1) 15.0% 14.5%
David W. Dube . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 (2) * *
Richard A. Salter . . . . . . . . . . . . . . . . . . . . . . . . . 603,330 (1) 3.4% 3.3%
Theodore J. Host. . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 (2) * *
Brian G.R. Hughes . . . . . . . . . . . . . . . . . . . . . . . . . 70,650 (2) * *
Britannia Holdings Limited(3) . . . . . . . . . . . . . . . . . . . 1,630,744 (5) 9.2% 8.9%
George Strawbridge, Jr. (4) . . . . . . . . . . . . . . . . . . . . 1,088,293 (6) 6.2% 6.0%
All directors, executive officers and nominees for directors as a
group (8 persons). . . . . . . . . . . . . . . . . . . . . . . . . 6,419,416 (7) 35.8% 34.5%
- ----------------
* Less than 1%
(1) Includes 100,000 shares issuable upon the exercise of vested options.
(2) Includes 14,000 shares issuable upon the exercise of vested options and in
the case of Mr. Hughes 9,470 shares issuable on the exercise of warrants.
(3) The address of Britannia Holdings Ltd. is P.O. Box 556 Main Street,
Charlestown, Nevis.
(4) The address of George Strawbridge, Jr. is 3801 Kennett Pike, Building
B-100, Wilmington, DE 19807.
(5) Includes 37,879 shares issuable upon the exercise of warrants.
(6) Includes 18,939 shares issuable upon the exercise of warrants.
42
<PAGE>
(7) Includes 351,470 shares issuable upon the exercise of vested options or
warrants.
</TABLE>
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of (1) 105,000,000 shares
consisting of 100,000,000 shares of common stock, $0.01 par value per share, of
which 17,593,102 were outstanding as of April 14, 2000 and 5,000,000 shares of
undesignated preferred stock issuable in one or more series to be designated by
our board of directors, of which no shares are issued and outstanding, (2)
warrants to purchase 259,754 shares of common stock and (3) options to purchase
an aggregate of 541,294 of common stock.
COMMON STOCK
Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to the holders of outstanding shares of preferred stock, if any, the
holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. In the event of our liquidation, dissolution or
winding up, and subject to the prior distribution rights of the holders of
outstanding shares of preferred stock, if any, the holders of shares of common
stock shall be entitled to receive pro rata all of our remaining assets
available for distribution to our stockholders. Our common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to our common stock.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
shares of preferred stock in one or more series, to establish from time to time
the number of shares to be included in each such series, to fix the
designations, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding) without any further vote or action by
the stockholders. The Board of Directors may authorize and issue preferred stock
with voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our outstanding securities.
WARRANTS
As of April 14, 2000 there were outstanding warrants to purchase up to
259,754 shares of common stock at a weighted exercise price of approximately
$14.37 per share.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Under the terms of our Registration Rights Agreement with the selling
stockholders we are required to file a registration statement for the
registration of all their shares under the Securities Act and keep such
registration statement effective for a period of the lesser of two years from
the effectiveness of this registration statement or such time as when the shares
covered by this registration statement may be sold without volume limitations
pursuant to Rule 144(k) under the Securities Act. This registration statement is
intended to meet the requirements of such Registration Rights Agreement.
In addition, we have granted to stockholders holding 333,334 shares of
our common stock piggyback registration rights in connection with any
registration by us of securities for our own account. If we propose to register
any shares of common stock under the Securities Act for our own account, we are
required to give those stockholders notice of the registration and to include
their shares in the registration statement, provided that such stockholders may
not sell such shares until March 29, 2001 unless we sell shares in a firm
commitment underwritten public offering under such registration statement prior
to that date.
44
<PAGE>
We are generally required to bear all of the expenses of all demand and
piggyback registrations, except underwriting discounts and commissions. We also
have agreed to indemnify those stockholders under the terms of the Registration
Rights Agreement.
NEVADA ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
We are incorporated under the laws of the State of Nevada and are
therefore subject to various provisions of the Nevada corporation laws which may
have the effect of delaying or deterring a change in our control or management.
Nevada's "Combination with Interested Stockholders Statute," Nevada
Revised Statutes 78.411-78.444, which applies to Nevada corporations like us
having at least 200 stockholders, prohibits an "interested stockholder" from
entering into a "combination" with the corporation, unless specific conditions
are met. A "combination" includes:
o any merger with an "interested stockholder," or any other corporation
which is or after the merger would be, an affiliate or associate of
the interested stockholder;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets, in one transaction or a series of transactions,
to an "interested stockholder," having:
o an aggregate market value equal to 5% or more of the aggregate
market value of the corporation's assets,
o an aggregate market value equal to 5% or more of the aggregate
market value of all outstanding shares of the corporation, or
o representing 10% or more of the earning power or net income of
the corporation;
o any issuance or transfer of shares of the corporation or its
subsidiaries, to the "interested stockholder," having an aggregate
market value equal to 5% or more of the aggregate market value of all
the outstanding shares of the corporation,
o the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by the "interested
stockholder,"
o transactions which would have the effect of increasing the
proportionate share of outstanding shares of the corporation owned by
the "interested stockholder," or
o the receipt of benefits, except proportionately as a stockholder, of
any loans, advances or other financial benefits by an "interested
stockholder."
An "interested stockholder" is a person who:
o directly or indirectly owns 10% or more of the voting power of the
outstanding voting shares of the corporation;
o an affiliate or associate of the corporation which at any time within
three years before the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the then
outstanding shares of the corporation.
45
<PAGE>
A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the board of directors before the interested stockholder
acquired the shares. If this approval was not obtained, then after the
three-year period expires, the combination may be consummated if all the
requirements in the articles of incorporation are met and either:
o the board of directors of the corporation approves, prior to such
person becoming an "interested stockholder," the combination or the
purchase of shares by the "interested stockholder" or the combination
is approved by the affirmative vote of holders of a majority of voting
power not beneficially owned by the "interested stockholder" at a
meeting called no earlier than three years after the date the
"interested stockholder" became such; or
o the aggregate amount of cash and the market value of consideration
other than cash to be received by holders of common shares and holders
of any other class or series of shares meets the minimum requirements
set forth in Sections 78.411 through 78.443, inclusive, and prior to
the consummation of the combination, except in limited circumstances,
the "interested stockholder" will not have become the beneficial owner
of additional voting shares of the corporation.
Nevada's "Control Share Acquisition Statute," Nevada Revised Statute
Sections 78.378-78.379, prohibits an acquirer, under some circumstances, from
voting shares of a target corporation's stock after crossing threshold ownership
percentages, unless the acquirer obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations with at least 200 stockholders, including at least 100
record stockholders who are Nevada residents, and which do business directly or
indirectly in Nevada. While we do not currently exceed these thresholds, we may
do so in the near future. In addition, although we do not presently "do
business" in Nevada within the meaning of the Control Share Acquisition Statute,
we may do so in the future. Therefore, the Control Share Acquisition Statute may
apply to us in the future. The statute specifies three thresholds: at least
one-fifth but less than one-third, at least one-third but less than a majority,
and a majority or more, of all the outstanding voting power. Once an acquirer
crosses one of the above thresholds, shares which it acquired in the transaction
taking it over the threshold or within ninety days become "Control Shares" which
are deprived of the right to vote until a majority of the disinterested
stockholders restore that right. A special stockholders' meeting may be called
at the request of the acquirer to consider the voting rights of the acquirer's
shares no more than 50 days, unless the acquirer agrees to a later date, after
the delivery by the acquirer to the corporation of an information statement
which sets forth the range of voting power that the acquirer has acquired or
proposes to acquire and other information concerning the acquirer and the
proposed control share acquisition. If no such request for a stockholders'
meeting is made, consideration of the voting rights of the acquirer's shares
must be taken at the next special or annual stockholders' meeting. If the
stockholders fail to restore voting rights to the acquirer or if the acquirer
fails to timely deliver an information statement to the corporation, then the
corporation may, if so provided in its articles of incorporation or bylaws, call
some of the acquirer's shares for redemption. Our articles of incorporation and
bylaws do not currently permit us to call an acquirer's shares for redemption
under these circumstances. The Control Share Acquisition Statute also provides
that the stockholders who do not vote in favor of restoring voting rights to the
Control Shares may demand payment for the "fair value" of their shares. This
amount is generally equal to the highest price paid in the transaction
subjecting the stockholder to the statute.
By-law Provisions. Our by-laws provide that any director may be removed
without cause at any special meeting of shareholders called for such purpose by
the vote of the holders of two-thirds of the voting power entitling them to
elect directors in place of those to be removed, provided that unless all the
directors, or all the directors of a particular class are removed no individual
director shall be removed if the votes of a sufficient number of shares are cast
against his removal which, if cumulatively voted at on election of directors, or
of all directors of a particular class, as the case may be, would be sufficient
to elect at least one director.
46
<PAGE>
Ability to Adopt Stockholder Rights Plan. The Board of Directors may in
the future resolve to issue shares of preferred stock or rights to acquire such
shares to implement a stockholder rights plan. A stockholder rights plan
typically creates voting or other impediments that would discourage persons
seeking to gain control of SafeScience by means of a merger, tender offer, proxy
contest or otherwise if the Board of Directors determines that such change in
control is not in the best interests of our stockholders. The Board of Directors
has no present intention of adopting a stockholder rights plan and is not aware
of any attempt to obtain control of SafeScience.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of shares of our common stock in
the public market could adversely affect prevailing market prices.
After this offering, 18,270,884 shares of common stock will be
outstanding. The number of shares outstanding after this offering is based on
the number of shares outstanding as of April 14, 2000 and includes all of the
shares being offered pursuant to this prospectus, and assumes no exercise of
outstanding options. The 1,023,802 shares sold in this offering, plus an
additional 6,035,577 shares, will be freely tradable without restriction under
the Securities Act. The remaining 11,211,505 shares of common stock outstanding
upon completion of the offering are restricted securities in that they may be
sold in the public market only if registered or if they qualify for an exemption
from registration under the Securities Act or Rules 144 of the Securities Act.
Restricted shares may be sold in the public market only if registered
or if they qualify for an exception from registration under Rules 144 or 144(k)
promulgated under the Securities Act, which are summarized below. Of these
restricted shares, 8,482,798 shares are currently available for resale in the
public market in reliance on Rule 144. The remaining 2,728,707 shares become
eligible for resale in the public market at various dates thereafter.
In general, under Rule 144 as currently in effect, an affiliate of
SafeScience or a person, or persons whose shares are aggregated, who has
beneficially owned restricted securities for at least one year, including the
holding period of any prior owner except an affiliate of SafeScience, would be
entitled to sell within any three month period a number of shares that does not
exceed the greater of 1% of our then outstanding shares of common stock or the
average weekly trading volume of our common stock on the Nasdaq SmallCap Market
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of current public information about SafeScience. Any person, or
persons whose shares are aggregated, who is not deemed to have been an affiliate
of SafeScience at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least two years including any period of
ownership of preceding non-affiliated holders, would be entitled to sell such
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.
At March 31, 2000, we had reserved an aggregate of 600,000 shares of
common stock for issuance pursuant to the 1998 Stock Option Plan and options to
purchase approximately 541,294 shares were outstanding under the 1998 Stock
Option Plan and we had reserved an aggregate of 1,000,000 shares of common stock
for issuance pursuant to the 2000 Stock Incentive Plan and no shares were
outstanding under the 2000 Stock Incentive Plan. We intend to file a
registration statement under the Securities Act to register shares of common
stock reserved for issuance under the 1998 Stock Option Plan and the 2000 Stock
Incentive Plan. Any shares issued under our stock plans will be eligible for
immediate public sale.
Following the offering, some of our stockholders will have rights to
require us to register their shares of common stock under the Securities Act,
and they will have rights to participate in any future registration of
securities by us. See "Description of Capital Stock - Registration Rights of
Certain Holders."
48
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares, including up to $7,500 of the fees and disbursements
of counsel to the selling stockholders. We have has agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
49
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for us by McDermott, Will & Emery.
EXPERTS
The consolidated financial statements at December 31, 1997, 1998 and
1999 and for each of the three years in the period ended December 31, 1999
included in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen, LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements of the Company at December 31, 1995 and 1996
and for the years ending December 31, 1995 and 1996 appearing in this Prospectus
and the Registration Statement have been examined by the accounting firm of
Williams & Webster, P.S., Certified Public Accountants, Spokane, Washington.
Such financial statements are included in this Prospectus in reliance upon the
said report, given upon such firm's authority as an expert in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under
the Securities Act and the rules and regulations thereunder, for the
registration of the common stock offered hereby. This prospectus, which forms a
part of the registration statement, does not contain all the information
included in the registration statement, parts of which have been omitted as
permitted by the SEC rules and regulations. For further information about us and
our common stock, you should refer to the registration statement. Statements
contained in this prospectus as to any contract or other document are not
necessarily complete. Where the contract or other document is an exhibit to the
registration statement, each statement is qualified by the provisions of that
exhibit.
The registration statement can be inspected and copied at the public
reference facility maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the registration statement can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.
We will also file annual, quarterly and current reports, proxy
statements and other information with the SEC. You can also request copies of
these documents, for a copying fee, by writing to the SEC.
50
<PAGE>
SAFESCIENCE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Reports of Independent Auditors..............................................F-2
Consolidated Balance Sheets..................................................F-3
Consolidated Statement of Liabilities and Stockholders' Equity...............F-4
Consolidated Statements of Operations........................................F-5
Consolidated Statements of Stockholders' Equity..............................F-6
Consolidated Statements of Cash Flows........................................F-7
Notes to Consolidated Financial Statements...................................F-8
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
SafeScience, Inc.:
We have audited the accompanying consolidated balance sheets of
SafeScience, Inc. and subsidiaries (the Company) (formerly IGG International,
Inc., a Nevada corporation) as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ Arthur Andersen
Boston, Massachusetts
February 23, 2000
(except for the matter discussed in Note 11,
for which the date is March 30, 2000)
F-2
<PAGE>
<TABLE>
SAFESCIENCE, INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 3,377,067 $ 3,439,408
Accounts receivable, net of allowance for doubtful
accounts of approximately $43,000 at December 31,
1999.............................................. 95,222 --
Inventory............................................... 356,211 --
Prepaid expenses, trade credits and other current assets 538,823 112,673
----------- ------------
Total current assets ........................ 4,367,323 3,552,081
----------- ------------
PROPERTY AND EQUIPMENT, AT COST
Computer, office and laboratory equipment .............. 470,614 187,255
Furniture, fixtures and leasehold improvements ......... 210,274 114,673
Motor vehicles ......................................... 46,100
Subtotal ......................................... 726,988 301,928
----------- ------------
Less accumulated depreciation .......................... (207,267) (81,704)
Total ....................................... 519,721 220,224
----------- ------------
OTHER ASSETS
Note receivable-- related parties ...................... 661,005 86,827
Restricted cash ........................................ 108,128 108,128
Deposits ............................................... 14,068 1,328
----------- ------------
Total other assets ............................... 783,201 196,283
----------- ------------
Total assets ................................ $ 5,670,245 $ 3,968,588
=========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
<PAGE>
<TABLE>
SAFESCIENCE, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
DECEMBER 31,
-----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Current Liabilities:
Current portion of capital lease obligation ........... $ -- $ 4,608
Accounts payable ...................................... 484,208 246,813
Accrued liabilities ................................... 644,945 185,443
Deferred revenue ...................................... 19,975 19,975
------------- -------------
Total current liabilities .................. 1,149,128 456,839
------------- -------------
Capital lease obligation, less current portion ........ -- 11,300
Commitments and contingencies (Note 8) ................ -- --
Stockholders' equity:
Preferred stock, .01 par value; authorized - 5,000,000
shares; issued and outstanding - None .................. -- --
Common stock, $.01 par value; authorized - 100,000,000
shares; issued and outstanding:
16,835,923 shares at December 31, 1999
14,107,216 shares at December 31, 1998 .............. 168,359 141,072
Additional paid-in capital ............................ 34,388,615 17,749,766
Note receivable from officer - issuance of common stock (3,343,750) --
Accumulated deficit ................................... (26,692,107) (14,390,389)
Total stockholders' equity ................. 4,521,117 3,500,449
------------- -------------
Total liabilities and stockholders' equity ............ $ 5,670,245 $ 3,968,588
============= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
<TABLE>
SAFESCIENCE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
DECEMBER 31,
-------------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Sales ..................................... $ 1,368,513 $ -- $ --
Costs of Goods Sold ....................... 1,410,731 -- --
------------ ------------ ------------
Gross Loss .......................... (42,218) -- --
------------ ------------ ------------
General and administrative expenses ....... 6,500,041 4,339,093 2,428,072
Marketing expenses ........................ 3,194,589 81,793 --
Research and development expenses ......... 2,910,299 2,174,400 2,390,021
------------ ------------ ------------
Operating loss ...................... (12,647,147) (6,595,286) (4,818,093)
------------ ------------ ------------
Other income (expense):
Interest expense .......................... (8,063) (392) --
Interest income ........................... 353,492 122,173 83,618
------------ ------------ ------------
Total other income (expense) ........ 345,429 121,781 83,618
------------ ------------ ------------
Basic and diluted net loss ................ $(12,301,718) $ (6,473,505) $ (4,734,475)
============ ============ ============
Basic and diluted net loss per common share $ (0.77) $ (0.50) $ (0.43)
Basic and diluted weighted average number
of common shares outstanding........... 16,060,783 13,000,259 11,022,577
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
<TABLE>
SAFESCIENCE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK
------------------------
FOR THE YEARS ENDED DECEMBER 31 NOTE
1999, 1998, AND 1997 ADDITIONAL RECEIVED STOCKHOLDER
NUMBER OF PAID-IN FROM ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL OFFICER DEFICIT (DEFICIT)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 .................... 9,462,641 $ 94,626 $ 3,385,874 -- $ (3,182,409) $ 298,091
Common stock issued for cash at $2.00 to
$3.00 per share with warrants attached,
net of costs of $175,000 ...................... 750,000 7,500 1,567,500 -- 1,575,000
Common stock issued as part of a private
placement at $2.50 per share with warrants
attached, net of issuance costs of $63,375 .... 463,000 4,630 1,076,995 -- 1,081,625
Common stock issued as part of a private
placement at $3.00 per share with warrants
attached ...................................... 533,867 5,339 1,596,478 -- 1,601,817
Common stock issued for common stock of
International Gene Group, Inc. minority
interests ..................................... 205,469 2,055 717,087 -- 719,142
Common stock issued for consulting
services and wages valued at $2.00 to
$5.81 per share ............................... 195,800 1,958 822,300 -- 824,258
Stock options for 141,426 shares of
common stock issued for consulting and
professional services valued at $2.90
to $5.83 per option ........................... -- -- 557,662 -- 557,662
Stock options exercised ....................... 187,799 1,878 (1,878) -- 520,000
Warrants exercised ............................ 300,000 3,000 517,000 -- --
Net loss ...................................... -- -- -- -- (4,734,475) (4,734,474)
---------- ------------ ------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 1997 .................... 12,098,576 120,986 10,239,018 -- (7,916,884) 2,443,120
Common stock issued as part of a private
placement at $2.75 per share with warrants
attached ...................................... 181,818 1,818 498,182 -- 500,000
Common stock issued as part of a private
placement at $3.00 per share with warrants
attached ...................................... 145,999 1,460 436,540 -- 438,000
Common stock issued as part of a private
placement at $4.25 per share, net of
$101,200 in issuance costs .................... 406,206 4,062 1,621,114 -- 1,625,176
Common stock issued as part of a private
placement at $3.50 per share net of
$97,220 in issuance costs ..................... 646,918 6,469 2,155,275 -- 2,161,744
Common stock issued as part of a private
placement at $4.50 per share .................. 179,222 1,792 804,710 -- 806,502
Common stock issued for services and
wages valued at $2.88 to $6.94 per share ...... 332,263 3,323 1,289,926 -- 1,293,249
Common stock issued as charitable
contribution at $3.55 to $4.30 per share ...... 5,000 50 18,450 -- 18,500
Stock options issued for consulting and
professional services valued at $3.63 to
$7.66 per option .............................. -- -- 687,463 -- 687,463
Stock options exercised ....................... 111,214 1,112 (912) -- 200
Net loss ...................................... -- -- -- -- (6,473,505) (6,473,505)
---------- ------------ ------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 1998 .................... 14,107,216 141,072 17,749,766 -- (14,390,389) 3,500,449
Options exercised ............................. 71,153 712 (127) -- 585
Options granted to non-employees .............. -- -- 528,233 -- 528,233
Private placements net of $445,259 in
issuance costs ................................ 1,615,706 16,157 9,119,944 -- 9,136,101
Stock issued for services ..................... 218,276 2,183 1,413,727 -- 1,415,910
Warrants exercised ............................ 545,396 5,454 1,812,374 -- 1,817,828
Notes receivable from issuance of
common stock .................................. 250,000 2,500 3,341,250 (3,341,250) --
Common stock issued as legal settlement ....... 20,453 204 306,590 -- 306,794
Cashless options exercised .................... 7,723 77 116,858 -- 116,935
Net loss ...................................... -- -- -- -- (12,301,718) (12,301,718)
---------- ------------ ------------ ------------ ------------- ------------
BALANCE, DECEMBER 31, 1999 .................... 16,835,923 $ 168,359 $ 34,388,615 $(3,341,250) $(26,692,107) $ 4,521,117
========== ============ ============ ============ ------------- ===========-
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
<TABLE>
SAFESCIENCE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ................................................... $(12,301,718) $ (6,473,505) $ (4,734,475)
Adjustments to reconcile net loss to net cash used in
operating activities:
Operating expenses paid in common stock and options .... 2,367,871 1,999,212 1,382,460
Issuance of stock for minority interest ................ -- -- 719,142
Depreciation and amortization .......................... 125,563 53,684 15,545
Changes in assets and liabilities:
Accounts receivable .................................... (95,222) -- --
Inventory .............................................. (356,211) -- --
Prepaid expenses, trade credits and other current assets (426,150) (61,354) (31,678)
Accounts payable ....................................... 237,395 97,959 86,206
Accrued liabilities .................................... 459,503 (119,320) 176,663
Deferred revenue ....................................... -- 9,975 10,000
------------ ------------ ------------
Net cash used in operating activities ............ (9,988,969) (4,493,349) (2,376,137)
------------ ------------ ------------
Cash Flows from Investing Activities:
Purchases of property and equipment .................... (425,060) (205,188) (39,744)
Loans to related parties ............................... (574,177) -- (90,000)
Repayment of stockholders' loans ....................... -- 1,167 767
Decrease (increase) in deposits, net ................... (12,741) 5,000 (4,539)
Net cash paid in acquisition ........................... -- -- --
Decrease in restricted cash ............................ -- 11,010 (119,138)
------------ ------------ ------------
Net cash used in investing activities ............ (1,011,978) (188,011) (252,654)
------------ ------------ ------------
Cash Flows from Financing Activities: ...................... -- -- --
Short-term borrowing ................................... -- -- --
Payment on short-term borrowing ........................ -- -- --
Payments on notes payable .............................. (15,908) -- --
Payments for obligations under capital lease ........... -- (5,166) --
Proceeds from issuance of common stock ................. 9,136,101 5,531,422 4,778,442
Proceeds from exercise of warrants ..................... 1,817,828 -- --
Proceeds from issuance of common stock ................. 585 -- --
Net cash provided by financing activities ......... 10,938,606 5,526,456 4,778,442
------------ ------------ ------------
Net (Decrease) Increase in Cash ............................ (62,341) 845,096 2,149,665
Cash and Cash Equivalents, beginning of period ............ 3,439,408 2,594,312 441,661
------------ ------------ ------------
Cash and Cash Equivalents, end of period .................. $ 3,377,067 $ 3,439,408 $ 2,594,312
============ ============ ============
Supplemental Disclosure of Cash Flow Information: .......... -- -- --
Equipment acquired under capital lease obligations ......... -- 21,074 --
Note receivable from issuance of common stock .............. 3,343,750 -- --
Supplemental Disclosure of Cash Flow Information: .......... -- -- --
Cash paid for interest ..................................... 319 392 --
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
<PAGE>
SAFESCIENCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
SafeScience, Inc. (f/k/a IGG International, Inc.) (the Company) was
formed in 1992 for the research and development of pharmaceutical products based
on carbohydrate chemistry. Today, the Company has two wholly owned subsidiaries:
International Gene Group, Inc. and SafeScience Products, Inc. The Company has
expanded its focus to include other pharmaceuticals, agricultural, consumer and
home and garden products. International Gene Group, Inc. focuses on the
development of carbohydrate-based pharmaceutical products related to two major
areas of disease: cancer and fungal infections. SafeScience Products, Inc.
focuses on developing agricultural, consumer and home and garden applications
for products some of which are also based upon carbohydrate chemistries. These
products will be either licensed from or jointly developed with third parties
(Note 9). SafeScience, Inc., International Gene Group, Inc. and SafeScience
Products, Inc. maintain an office in Boston, Massachusetts.
The Company was a development stage enterprise from inception until
1998.
The Company is producing and marketing its consumer and industrial
products while continuing its efforts toward product research and development
and raising capital. Management anticipates that additional revenues may be
derived from products under development or those developed in the future.
Principal risks to the Company include the successful development and marketing
of products to obtain profitable operations, dependence on collaborative
partners, the need to obtain adequate financing to fund future operations,
United States Food and Drug Administration approval and other regulatory
agencies, clearance and regulation, dependence on key individuals and
competition from substitute products and larger companies.
PRINCIPLES OF CONSOLIDATION
The Company's consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, International Gene Group, Inc.,
and SafeScience Products, Inc. All material intercompany transactions and
accounts have been eliminated in the consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of operational expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue related to product sales upon shipment
of the product. The Company provides for anticipated product returns at the time
of product shipment. Approximately $703,000 or 51.4% of the Company's revenues
for the year ended December 31, 1999 were derived from a barter transaction.
F-8
<PAGE>
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents. Cash and
cash equivalents at December 31, 1999 and 1998 include approximately $1,042,000
and $254,000, and approximately $2,335,000 and $3,122,000, respectively, held in
an overnight investment account, which is reinvested daily in government
securities funds and money market funds. Restricted cash represents funds held
under an irrevocable standby letter of credit. The letter of credit serves as a
security for the Company's facility lease. The funds are being held in an
investment account.
INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
DECEMBER 31, 1999
Raw Materials.................... $266,702
Finished goods................... 89,509
---------
Total inventory.................. $356,211
=========
DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization using
straight-line and accelerated declining balance methods to allocate the cost of
property and equipment over their estimated useful lives as follows:
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
-------------------- ---------------------
Computer, office & laboratory
equipment.......................... 3 - 5 years
Furniture and fixtures............. 7 years
Motor vehicles..................... 4 years
RESEARCH AND DEVELOPMENT
Research and development costs, which consist primarily of expenses for
consultants, supplies and testing, are charged to operations as incurred.
NET LOSS PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings per Share. Basic loss per share is
computed using the weighted-average number of common shares outstanding. Diluted
net loss per share is the same as basic net loss per share as the inclusion of
common stock equivalents would be antidilutive. Antidilutive securities that are
not included in diluted net loss per common share were 660,424, 840,532 and
601,763 for 1999, 1998 and 1997, respectively.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
Comprehensive income loss is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. The Company's comprehensive net loss is the same as net
loss for all periods presented.
F-9
<PAGE>
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended December 31, 1998.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision-maker, or decision-making group, in making decisions how to allocate
resources and assess performance. The Company's chief decision-maker, as defined
under SFAS No. 131, is the chief executive officer. The Company's sales are
primarily confined to one geographic area. During the year ended December 31,
1999, 99.3% of all sales were in the United States. To date, the Company has
viewed its operations and manages its business as one principal operating
segment. In addition, the Company does not prepare financial statement
information for other than one segment. As a result, the financial information
disclosed herein represents all of the material financial information related to
the Company's principal operating segment.
CONCENTRATIONS OF CREDIT RISK
SFAS No. 105, Disclosure of Information About Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk, requires disclosure of any significant off-balance-sheet risk and
credit risk concentrations. The Company has no significant off-balance-sheet
risk or credit risk concentrations. The Company maintains its cash and cash
equivalents with multiple financial institutions and invests in investment-grade
securities.
FINANCIAL INSTRUMENTS
The estimated fair values of the Company's consolidated financial
instruments, which include cash equivalents, notes receivable and accounts
payable, approximate their carrying value due to the short maturity of these
instruments. The estimated fair value of the Company's capital lease obligations
approximates its carrying value based upon the current rates offered to the
Company for similar type arrangements. As of January 31, 1999 there were no
capital lease obligations.
POST RETIREMENT BENEFITS
The Company has no obligations for post retirement benefits.
RECLASSIFICATION
Certain items in the prior years consolidated financial statements have
been reclassified to conform to their 1999 presentation.
DERIVATIVE INSTRUMENTS AND HEDGING ACCOUNTING
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The statement as amended by SFAS No. 137 is
effective for the year ended December 31, 2001. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. The Company does not expect adoption of
this statement to have a material impact on its consolidated financial position
or results of operations.
F-10
<PAGE>
2. NOTES RECEIVABLE - RELATED PARTIES
Notes receivable from related parties includes $85,514 of promissory
notes from two officers/stockholders of the Company. The loans are payable in
monthly installments of $375 and $160, including interest at 5.66% and 6.65%,
respectively, with final payments of $60,601 due on March 11, 2002 and $23,603
due on June 20, 2002. Each note is collateralized by shares of the Company's
common stock held by each individual.
During the year, the Company advanced $ 150,000 to one of its
suppliers. The outstanding principal balance accrues interest at 8.25% per
annum, with interest payable quarterly in arrears commencing three months after
the date of the first advance. All outstanding principal, together with accrued
interest on the unpaid principal balance of this note, will be due and payable
on May 14, 2001.
During the second quarter of 1999, the Company advanced $72,000 to a
senior executive and in the third quarter of 1999 advanced an additional
$200,000 under two non-recourse promissory notes. The outstanding principal
balance of the $72,000 promissory note accrues interest at 4.92% per annum,
compounded semi annually and the outstanding principal balance of the $200,000
promissory note accrues interest at 5.35% per annum, compounded semi-annually.
The executive has pledged 5,970 shares of the Company's common stock as
collateral for the $72,000 promissory note and 9,553 shares of the Company's
common stock as collateral for the $200,000 promissory note. All outstanding
principal, together with accrued interest on the unpaid principal balance of the
$72,000 and $200,000 promissory notes, are due August 4, 2000 and May 5, 2000,
respectively. Pursuant to such promissory notes, the executive agreed not sell
any shares of the Company's common stock prior to April 1, 2000 with respect to
the $72,000 promissory notes and January 1, 2000 with respect to the $200,000
promissory note.
On June 15, 1999, the Company entered into a transaction whereby a
senior executive relinquished an option to purchase 100,000 shares of common
stock for a price of $0.01 per share which would have vested on January 1, 2000
and, in exchange, the Company issued to the executive a stock option for 250,000
shares of common stock at an exercise price of $10.70 per share, the estimated
fair market value of the common stock on the date of the transaction. The option
was exercised immediately. The Company loaned the executive an amount
representing the entire exercise price. The principal balance of this note
receivable from the issuance of common stock represents 80% of the value of the
purchase price of $3,343,750 for the shares issued or $2,675,000 and accrues
interest at 4.92% per annum, compounded semi-annually. The difference of $
668,750 was recorded as a non-cash compensation expense. The executive has
pledged the 250,000 shares of common stock as collateral. The note is
non-recourse and is secured only by the pledged shares. All outstanding
principal, together with accrued interest on the unpaid principal balance of
this note, will be due on June 15, 2004. The balance outstanding at December 31,
1999 is $ 2,750,000 and is shown in the accompanying statement of stockholders'
equity.
3. CAPITAL LEASE OBLIGATION
During the year ended December 31, 1999, the Company purchased a
vehicle that was previously leased. The capital lease obligations at December
31, 1998 consisted of the following:
1998
----
Capital lease, due in monthly installments of $418,
including interest at 2.96% through
April 2002, secured by a motor vehicle........................... $ 15,908
Less-Current portion............................................. 4,608
--------
$ 11,300
========
F-11
<PAGE>
Property and equipment under capital leases are capitalized using
interest rates appropriate at the inception of each lease. The net book value of
property and equipment under capital leases amounted to $16,859 at December 31,
1998. Property and equipment under capital leases were net of accumulated
amortization of $4,215 at December 31, 1998.
4. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES
On June 29, 1999, at the 1999 Stockholders' meeting, the Company's
Articles of Incorporation were amended to increase the authorized common shares
from 25,000,000 to 100,000,000.
SALES OF COMMON STOCK
In November 1996, the Company began a private placement offering of
common stock. As of December 31, 1996, 190,000 shares had been sold at $2.50 per
share. In 1997, the Company sold an additional 463,000 shares at $2.50 per
share. These shares included a detachable warrant to purchase one share of
common stock for $3.50 for every four shares of common stock purchased. As of
December 31, 1999, all warrants had been exercised.
In September 1997, the Company completed an additional sale of 250,000
shares of common stock for $675,000 under regulation S of the Securities and
Exchange Commission's regulations. These shares also include an attached warrant
to purchase one share of common stock for $4.75 for every four shares of common
stock purchased. As of December 31, 1999, no warrants were outstanding.
In January 1997, the Company completed a sale of 500,000 shares of
common stock for $900,000 under regulation S of the Securities and Exchange
Commission's regulations. These shares also included an attached warrant to
purchase one share of common stock for $3.50 for every four shares of common
stock purchased. As of December 31, 1999, no warrants were outstanding as all
warrants had been exercised.
In March 1998, the Company completed a sale of 181,818 shares of common
stock at $2.75 per share. These shares also included a detachable warrant to
purchase one share of common stock for $4.75 for every four shares of common
stock purchased. As of December 31, 1999 all warrants had been exercised.
In June 1998, the Company completed a private placement offering of
common stock. During the period January 1, 1998 through June 30, 1998, the
Company sold 146,000 shares of common stock at $3.00 per share. The Company had
sold 533,867 shares of common stock at $3.00 per share as of December 31, 1997.
These purchases included an attached warrant to purchase one share of common
stock for $4.75 for every four shares purchased. As of December 31, 1999, all
warrants had been exercised.
In September 1998, the Company completed a private placement offering
of common stock. During the year ended December 31, 1998, the Company sold
406,206 shares of common stock at $4.25 per share.
During the period from September 1998 through December 1998, the
Company completed a private placement of common stock. During the four months
ended December 31, 1998, the Company sold 561,133 shares of common stock at
$3.50 per share. The Company had sold 85,714 shares of common stock at $3.50 per
share as of September 30, 1998.
In November 1998, the Company began a new private placement of common
stock. Through December 31, 1998, the Company sold 179,222 shares of common
stock at $4.50 per share. During the year ended December 31, 1999 the Company
sold 1,398,480 shares of common stock at $ 4.50 per share.
F-12
<PAGE>
In July 1999 the Company began a new private placement of common stock.
During the period from July 1, 1999 through December 31, 1999 the Company sold
216,605 shares of common stock. The price per share has been calculated for each
investor based upon the average fair market value of the stock for a specified
period preceding the purchase date.
STOCK OPTION PLAN
The Company has a Nonqualified Stock Option Plan (1996 Plan) and has
registered 500,000 shares of common stock with the Securities and Exchange
Commission for future issuance under option agreements. The exercise price of
each option will be determined by the Board of Directors and must be exercised
within ten years from May 1, 1996. The Company may issue these options to its
officers, directors, employees and consultants. As of December 31, 1998, options
to purchase 11,659 shares were available for future grant.
Effective December 1, 1998, the Company adopted the 1998 Incentive
Stock Option Plan under which 600,000 shares of common stock were reserved for
issuance under option agreements. As with the 1996 Plan, the exercise price of
the each option will be determined by the Board of Directors and may be issued
to officers, directors, employees and consultants. Additionally, the options
must be exercised within ten years from December 1, 1998. As of December 31,
1999, options to purchase 35,000 shares were available for future grant.
The Company has entered into agreements with various employees and
consultants for the grant of stock options and shares of common stock at $0.01
per share. During 1999 and 1998, the Company granted options and shares totaling
246,452 and 153,517 shares, respectively, and recorded charges to operations of
approximately $2,815,400 and $1,999,000 respectively, relating to these grants.
The charge to operations represented the fair market value of the underlying
common stock or option.
The following table summarizes all stock option activity to employees
and consultants for services and all warrant activity in connection with equity
financings as of December 31, 1999.
WEIGHTED AVERAGE EXERCISE PRICE
NUMBER OF SHARES PER SHARE
---------------- ---------
BALANCE, DECEMBER 31, 1996 154,706 $ 0.01
Granted 141,426 0.01
Exercised (187,799) 0.01
---------
BALANCE, DECEMBER 31, 1997 108,333 $ 0.01
Granted 193,028 1.72
Exercised (111,214) 0.01
---------
BALANCE, DECEMBER 31, 1998 190,147 $ 1.74
Granted 486,931 12.94
Exercised (78,877) 3.67
Forfeited (12,777) 13.38
---------
BALANCE, DECEMBER 31, 1999 585,424 $ 10.42
---------
Exercisable December 31, 1997 108,333 0.01
Exercisable December 31, 1998 108,597 1.74
Exercisable December 31, 1999 561,424 10.42
The following table presents weighted-average price and life
information about significant option groups outstanding at December 31, 1999:
F-13
<PAGE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------- ---------------------------------
RANGE OF EXERCISE NUMBER WEIGHTED AVERAGE REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------ ----------- -------------------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.01 70,912 8.3 years $ 0.01 70,912 $ 0.01
3.00 30,000 8.0 years 3.00 30,000 3.00
5.50 60,000 9.0 years 5.50 36,000 5.50
11.00 to 14.56 5,112 9.5 years 13.94 5,112 13.94
13.38 419,400 2.5 years 13.38 419,400 13.38
------- -------
585,424 561,424
</TABLE>
PRO FORMA DISCLOSURES OF STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options or warrants granted to employees
to be included in the statement of operations or, alternatively, disclosed in
the notes to financial statements. The Company has determined that it will
continue to account for stock-based compensation for employees under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and elect the disclosure-only alternative under SFAS No. 123. The Company
records the fair market value of stock options and warrants granted to
non-employees in the consolidated statement of operations. The Company has
computed the pro forma disclosures required under SFAS No. 123 for stock options
granted in 1999, 1998 and 1997 using the Black-Scholes option pricing model.
The weighted average assumptions used for 1999, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate . . . . . . . . . . . . . 5.8% 4.2% - 5.6% 5.8% - 6.8%
Expected dividend yield . . . . . . . . . . . . . - - -
Expected life . . . . . . . . . . . . . . . . . . 5 years 5 years 5 years
Expected volatility. . . . . . . . . . . . . . . 60% 60% 60%
Weighted average fair value of options granted . $ 8.84 $ 2.52 $ 2.49
</TABLE>
Had compensation cost for the Company's stock option plans been
determined consistent with SFAS No. 123, net loss would have been as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
As Reported Net loss . . . . . . . . . . . . . . $ (12,301,718) $ (6,473,505) $ (4,734,475)
Pro Forma Net loss. . . . . . . . . . . . . . . (12,792,904) (6,516,065) (4,734,475)
Basic and diluted net loss per common share . . . $ (0.77) $ (0.50) $ (0.43)
Basic and diluted net loss per common share . . . $ (0.80) $ (0.50) $ (0.43)
</TABLE>
F-14
<PAGE>
WARRANTS
The following table summarizes all warrant activity in connection with
equity financing as of December 31, 1999:
<TABLE>
<CAPTION>
WARRANTS
-------------------------------------------
NUMBER WEIGHTED AVERAGE EXERCISE
OF SHARES PRICE PER SHARE
<S> <C> <C>
BALANCE, DECEMBER 31, 1996 . . . . . . . . . . . . . . . . 747,500 $ 3.59
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 445,930 4.06
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . (300,000) 1.73
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . (400,000) 5.00
---------
BALANCE, DECEMBER 31, 1997 . . . . . . . . . . . . . . . . 493,430 4.00
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 156,955 7.45
---------
BALANCE, DECEMBER 31, 1998 . . . . . . . . . . . . . . . . 650,385 4.10
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 14,750 4.75
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . (551,678) 4.75
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . (38,457)
---------
BALANCE, DECEMBER 31, 1999 . . . . . . . . . . . . . . . . 75,000 10.40
=========
Exercisable, December 31, 1997 . . . . . . . . . . . . . . 493,430 4.00
Exercisable, December 31, 1998 . . . . . . . . . . . . . . 650,385 4.10
Exercisable, December 31, 1999 . . . . . . . . . . . . . . 75,000 10.40
</TABLE>
ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY
In 1997, the Company acquired the remaining minority interest in its
subsidiary, International Gene Group, Inc. by issuing 205,469 shares of
restricted stock in exchange for outstanding shares in the subsidiary. Research
and development costs have been charged for $719,142, which represented the fair
market value of the shares issued.
5. RELATED PARTY TRANSACTIONS
In January 1994, the Company agreed that its founder, Dr. David Platt,
would receive a royalty of 2% of net sales, in exchange for the licensed patent
rights on certain products being developed. The Company has agreed to pay all of
the costs to procure and maintain any patents granted under this agreement. The
agreement includes a requirement that the royalties paid in the sixth year of
this agreement and all subsequent years meet a minimum requirement of $50,000.
If this requirement is not met, Dr. Platt may terminate the agreement and retain
the patent rights. The Company may terminate the agreement on sixty days'
notice. The Company has not made any royalty payments under the agreement. The
parties executed an amendment to the agreement to delay the first year of this
minimum threshold from 1999 to 2002.
On December 6, 1996, Dr. Platt signed a Confidentiality and Invention
Agreement with the Company. The Agreement provides that Dr. Platt assigns all
his rights, title and interest in any invention, data or idea, made or conceived
or reduced to practice either alone or jointly with others to the Company.
Further, the agreement provides all rights thereto shall remain the sole
property of the Company and Dr. Platt agreed not to disclose any information
about the Company's confidential information.
6. TRADE CREDITS
The Company has entered into a trade agreement with a barter company
for the exchange of goods and services. This barter company purchased
approximately $718,000 of products from the Company and paid for these products
F-15
<PAGE>
by issuing $718,000 of advertising credits. The barter company acquires
advertising media on behalf of the Company; 55% of the net cost of all media
utilized by the Company is payable in cash and the remaining 45% is charged
against the trade credit. As of December 31, 1999 advertising credits in the
amount of $ 387,776 are included in other current assets.
The Company plans to utilize these credits during the year ended
December 31, 2000.
7. LEASE COMMITMENTS
CLINICAL TRIALS
During the first quarter of 2000, the Company agreed to retain Covance
Inc. for the purpose of conducting two studies to evaluate the effect of GBC-590
in clinical trials. The duration of the pancreatic cancer study may cover
approximately 25 months and may cost approximately $ 900,000. The colorectal
cancer study may also require 25 months and may cost approximately $ $1,650,000.
A separate services agreement in support of the Company's CAN-296 product in an
amount up to $360,000 was executed on January 31, 2000.
LEASES
The Company leases office space in Boston, Massachusetts, under an
operating lease expiring in May 2004. The Company also leases certain equipment
under operating leases.
Minimum future payments under the operating leases as of December 31,
1999 for each of the next five calendar years are approximately as follows:
YEARS ENDING
DECEMBER 31,
------------
2000................. $308,000
2001................. 307,000
2002................. 316,000
2003................. 337,000
2004................. 142,000
-----------
$1,410,000
===========
Rent expense in the accompanying consolidated statements of operations
was approximately $223,000 $100,000 and $45,700 in 1999, 1998, and 1997
respectively.
8. LICENSING AGREEMENTS
During the year ended December 31, 1999, the Company and Volcani
Institute agreed not to continue their research program, however, the Company
retained the exclusive right to sell licensed products Elexa PDB under a royalty
agreement. No products were sold in 1999 or 1998 therefore no royalty payments
where due. The company paid $200,000, $200,000 and $327,000 in 1999, 1998 and
1997, respectively, related to this agreement.
During the year ended December 31, 1999 the Company terminated its
agreement with Agrogene Ltd. No payments were made during 1998 or 1999.
In October 1997, the Company entered into an agreement to license
certain patented technology from Leket-Bar Chemicals, Ltd. The Company is
required to pay license fees totaling $400,000 over the next four years as well
as royalties on future product sales. The Company paid $39,000 during 1999 and
$175,000 in 1998.
F-16
<PAGE>
During the Year ended December 31, 1999 the Company terminated its
agreement with Dominion BioSciences, Inc. ("DBI"). The Company made payments to
DBI of $ 0 and $ 100,000 in 1999 and 1998, respectively.
9. INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, Accounting
for Income Taxes, the objective of which is to recognize the amount of current
and deferred income taxes payable or refundable at the date of the consolidated
financial statements as a result of all events that have been recognized in the
accompanying consolidated financial statements, as measured by enacted tax laws.
At December 31, 1999, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $25,168,000, which expire
through 2019. The Company also has certain tax credits available to offset
future federal and state income taxes, if any. Net operating loss carryforwards
and credits are subject to review and possible adjustments by the Internal
Revenue Service and may be limited in the event of certain cumulative changes in
excess of 50% in the ownership interests of significant stockholder over a
three-year period.
The components of the Company's deferred tax asset follow:
1999 1998
------------ -----------
Net operating loss carryforwards $ 10,067,000 $ 5,405,000
Tax credit carryforwards 465,000 296,000
Temporary differences (42,000) 174,000
Total deferred tax assets 10,490,000 5,875,000
Less Valuation allowance (10,490,000) (5,875,000)
DEFERRED TAX ASSETS $ - $ -
============ ===========
In evaluating realizability of these deferred tax assets, management
has considered the Company's short operating history, the volatility of the
market in which it competes and the operating losses incurred to date, and it
believes that given the significance of this evidence, a full valuation reserve
against its deferred tax assets is required as of December 31, 1999 and 1998.
The increase in the valuation allowance during these periods primarily relates
to the increase in the Company's net operating loss carryforwards.
10. EMPLOYEE BENEFIT PLAN
The Company instituted the SafeScience 401(k) Plan (the Plan) in 1998,
pursuant to which employees may defer compensation for income tax purposes under
Section 401(k) of the Internal Revenue Code. Substantially all of the Company's
employees are eligible to participate in the Plan. Participants may contribute
up to 20% of their annual compensation to the Plan, subject to certain
limitations. The Company could match a discretionary amount as determined by the
Board of Directors. The Company did not make any contributions to the Plan
during 1998 and 1999.
11. SUBSEQUENT EVENTS
During the first quarter of 2000, the Company has raised $5,000,000 in
a private placement offering of common stock whereby 346,021 shares were sold at
$14.45 per share. These shares included a warrant to purchase 108,996 additional
shares at $15.98 per share exercisable for five years, and a warrant to purchase
shares at $0.01 per share, the number of shares to be determined in the future
according to a formula based on the then price per share compared to the $14.45
common stock offering price.
The purchasers have certain rights, including but not limited to,
registration rights, rights-of-first-refusal, and adjustments for certain
events. Net proceeds from the offering were $4,625,000. The purchasers have a
F-17
<PAGE>
commitment to purchase up to $2,000,000 additional shares also at $14.45 per
share upon the date at which the registration statement for the initial shares
becomes effective, provided the date is no later than June 29, 2000. In
addition, the purchasers have a commitment to purchase $7,000,000 in additional
shares at the price equal to the lesser of (i) 110% of the average of the
closing bid prices of the Company's Common Stock for the four trading days
preceding the closing date of the tranche and (ii) $16.00, with additional
warrants within 190 - 210 days from closing of the initial transaction subject
to conditions, including but not limited to, market capitalization, trading
volume, and share price conditions.
During the first quarter of 2000, the Company raised $4,000,000 in a
private placement offering of common stock whereby 333,334 shares were sold at
$12.00 per share. These shares included warrants to purchase 75,758 additional
shares at $15.98 per share exercisable for five years. The purchasers have
"piggyback" registration rights in any registered public offering of common
shares by the Company subject to standard underwriter consent and cut-backs and
lock-ups.
F-18
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):
NATURE OF EXPENSE AMOUNT
- ----------------- --------
SEC Registration Fee.......................................... $ 2,695
NASD Filing Fee............................................... *
Nasdaq National Market Listing Fee............................ 10,238
Accounting Fees and Expenses.................................. *
Legal Fees and Expenses....................................... *
Blue Sky Qualification Fees and Expenses...................... *
Transfer Agent's Fee.......................................... *
Miscellaneous................................................. *
---------
Total......................................................... *
---------
* To be completed by amendment.
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq SmallCap
Market fees, are in each case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection 1 of Section 78.7302 of Chapter 78 of the Nevada General
Corporation Law ("NGCL") provides that a corporation may indemnify any person
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (except in an action brought by or on behalf of
the corporation) if that person is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by that person in connection with
such action, suit or proceeding, if that person acted in good faith and in a
manner which that person reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, alone, does not
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in, or not opposed to, the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, the person had reasonable cause to believe his action was unlawful.
Subsection 2 of Section 78.7502 of the NGCL provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit brought by or on
behalf of the corporation to procure a judgment in its favor because the person
acted in any of the capacities set forth above, against expenses, including
amounts paid in settlement and attorneys' fees, actually and reasonably incurred
by that person in connection with the defense or settlement of such action or
suit, if the person acted in accordance with the standard set forth above,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom to be liable to the
corporation or for amounts paid in settlement to the corporation unless and only
to the extent that the court in which such action or suit was brought or other
court of competent jurisdiction determines that, in view of all the
II-1
<PAGE>
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 78.751 of the NGCL provides that unless indemnification is
ordered by a court, the determination to provide indemnification must be made by
the stockholders, by a majority vote of a quorum of the board of directors who
were not parties to the action, suit or proceeding, or in specified
circumstances by independent legal counsel in a written opinion. In addition,
the articles of incorporation, bylaws or an agreement made by the corporation
may provide for the payment of the expenses of a director or officer of the
expenses of defending an action as incurred upon receipt of an undertaking to
repay the amount if it is ultimately determined by a court of competent
jurisdiction that the person is not entitled to indemnification. Section 78.751
of the NGCL further provides that, to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsection (1) and (2), or in the
defense of any claim, issue or matter therein, that person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
that person in connection therewith; that indemnification provided for by
Section 78.751 of the NGCL shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled and that the scope of
indemnification shall continue as to directors, officers, employees or agents
who have ceased to hold such positions, and to their heirs, executors and
administrators.
Finally, Section 78.752 of the NGCL provides that a corporation may
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the authority to indemnify him against such
liabilities and expenses.
Article V of our by-laws provides SafeScience shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened or pending action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, his testator, or
intestate is or was a director or officer of SafeScience, or is or was serving
at the request of SafeScience as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
as a member of any committee or similar body against all expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding (including appeals) or the defense or settlement thereof or any
claim, issue, or matter therein, to the fullest extent permitted by the laws of
Nevada as they may exist from time to time.
Under Section 5 of the registration rights agreement to be filed as
Exhibit 10.20 hereto, the underwriters have agreed to indemnify, under certain
conditions, SafeScience, its directors, officers, agents, employees and persons
who control SafeScience within the meaning of the Securities Act against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the
number of shares of capital stock issued by the Registrant during the past three
years. Further included is the consideration, if any, received by the Registrant
for such shares, and information relating to the section of the Securities Act
or rule of the Securities and Exchange Commission under which exemption from
registration was claimed.
1. In January 1997, the Company issued 500,000 shares of common stock
and warrants to purchase 125,000 shares of Common Stock at $3.50 per
share for an aggregate amount of $900,000 under Regulation S of the
Securities Act.
II-2
<PAGE>
2. In September 1997, the Company issued 250,000 shares of common stock
and warrants to purchase 62,500 shares of Common Stock at $4.75 per
share for an aggregate amount of $ 675,000 under Regulation S of the
Securities Act.
3. From February 1997 to March 1997, the Company issued an aggregate of
463,000 shares of Common Stock for $2.50 per share and warrants to
purchase 115,750 shares of Common Stock for $3.50 per share to 24
accredited investors for an aggregate purchase price of $1,145,000.
4. From October 1997 to December 1997, the Company issued an aggregate
of 533,867 shares of Common Stock for $3.00 per share and warrants to
purchase 133,467 shares of Common Stock for $4.75 per share to 31
accredited investors for an aggregate purchase price of $1,601,817.
5. In 1997, the Company issued an aggregate of 205,469 shares of Common
Stock in exchange for the minority interest in International Gene
Group, Inc. These shares represent an aggregate value of $719,142.
6. During 1997, the Company issued an aggregate of 195,800 shares of
Common Stock to consultants for services rendered with various values
between $2.00 and $5.81 per share for an aggregate value of $824,258.
7. During 1997, the Company issued an aggregate of 300,000 shares of
Common Stock upon the exercise of outstanding warrants. These shares
represent an aggregate value of $520,000.
8. From January 1998 to June 1998, the Company issued an aggregate of
145,999 shares of Common Stock to 10 accredited investors for $3.00
per share for an aggregate purchase price of $438,000. These shares
also had attached warrants.
9. In March 1998, the Company issued an aggregate of 181,818 shares of
Common Stock to one accredited investor for $2.75 per share for an
aggregate purchase price of $500,000. These shares also had attached
warrants.
10. From June 1998 to August 1998, the Company issued an aggregate of
406,206 shares of Common Stock to 17 accredited investors for $4.25
per share for an aggregate purchase price of $1,726,376.
11. From September 1998 to December 1998, the Company issued an aggregate
of 646,918 shares of Common Stock to 39 accredited investors for
$3.50 per share for an aggregate purchase price of $2,258,964.
12. In October 1998, the Company issued an aggregate of 5,000 shares of
Common Stock to charitable organizations with various values between
$3.55 to $4.30 per share for an aggregate value of $18,500.
13. From November 1998 to December 1998, the Company issued an aggregate
of 179,222 shares of Common Stock to 18 accredited investors for
$4.50 per share for an aggregate purchase price of $806,502.
14. In 1998, the Company issued an aggregate of 332,263 share of Common
Stock to individuals for services and wages with various values
between $2.88 and $6.94 per share for an aggregate value of
$1,293,249.
15. From January 1999 to June 1999, the Company issued an aggregate of
1,399,101 shares of Common Stock to 38 accredited investors for $4.50
per share or an aggregate purchase price of $6,280,959.
II-3
<PAGE>
16. From June 1999 to September 1999, the Company issued an aggregate of
216,605 shares of Common Stock to 34 accredited investors for $15.24
per share or an aggregate purchase price of $3,300,401.
17. On June 15, 1999, the Company issued an aggregate of 250,000 shares
of Common Stock to Richard A. Salter, its Senior Vice President, for
$10.70- per share for an aggregate purchase price of $2,675,000.
These shares were issued in connection with an employment agreement.
18. On June 24, 1999, the Company issued an aggregate of 307,500 shares
of Common Stock to 22 accredited investors for $3.50 per share for an
aggregate purchase price of $1,076,250. These shares represent an
exercise of warrants.
19. From June 1999 to December 31, 1999, the Company issued an aggregate
of 237,896 shares of Common Stock to 45 accredited investors for an
aggregate purchase price of $741,580. These shares represent an
exercise of warrants.
20. From January 1999 to July 1999, the Company issued 17,500 shares of
Common Stock to Richard A. Salter, its Senior Vice President, for
$0.01 per share, or an aggregate purchase price of $175.
21. In 1999, the Company issued 22,273 shares of Common Stock to its
employees, for $0.01 per share, for an aggregate purchase price of
$228.
22. In 1999,the Company issued 56,603 shares of Common Stock to six
consultants, for $0.01 per share, for an aggregate purchase price of
$566.
No underwriters were used in connection with these sales and
issuances. The sales and issuances of these securities were exempt from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act on the basis that the transactions did not involve a public offering or
pursuant to Regulation S under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following documents are incorporated herein by reference from the
Registrant's Form 10, as filed with the Securities and Exchange Commission, SEC
file No. 0-26476:
3.1 Articles of Incorporation of Alvarada, Inc.
3.2 Amendment to the Articles of Incorporation dated March 1, 1995
3.3 Amendment to the Articles of Incorporation dated March 3, 1995
3.4 Amendment to the Articles of Incorporation dated May 23, 1995
3.5 Bylaws of Alvarada, Inc.
3.6 Articles of Incorporation of International Gene Group
3.7 Bylaws of the Company of International Gene Group
3.8 Articles of Incorporation of Agricultural Glycosystems, Inc.
3.9 Bylaws of the Company of Agricultural Glycosystems, Inc.
II-4
<PAGE>
4.1 Specimen Stock Certificate
10.1 Agreement and Plan of Reorganization
10.2 Licensing Agreement with Dr. Platt
10.3 Office Lease
10.4 Licensing Agreement with The Government of Israel.
The following documents are incorporated herein by reference from the
Registrant's Form S-8 Registration Statement filed with the Commission on May
14, 1996, SEC file No. 333-04764:
10.5 Incentive Stock Option Plan
The following documents are incorporation herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1996:
10.6.1 Employee Confidentiality and Invention Agreement between Dr. David
Platt and the Company.
The following documents are incorporated herein by reference from the
Registrant's Registration Statement on Form SB-2, filed with the Commission on
November 20, 1996, SEC file no. 333-16087:
10.6.2 Warrant Agreement with Trinity American Corporation.
10.7 Consulting Agreement with Richard Salter and Amendment thereto.
10.8 Consulting Agreement with Keith Greenfield.
10.9 Consulting Agreement with James C. Czirr.
10.10 Warrant Agreement with James C. Czirr.
The following documents are incorporated herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1997:
10.11 Amendment to Consulting Agreement with Keith Greenfield
10.12 Licensing Agreement with Agrogene Ltd.
10.13 Trademark Sales and License Agreement with Elk Mound Feed and Farm
Supply, Inc.
10.14 Consulting Agreement with Michelangelo, LLC, dated May 1997
10.15 Consulting Agreement with Michelangelo LCC, dated September 1997.
10.16 Agreement with Leket-Bar Chemicals, Ltd., dated October 1997
99.1 Office Lease
The following documents are incorporated herein by reference from the
Registrant's Form 8-K filed on April 7, 2000:
10.17 Securities Purchase Agreement by and among SafeScience, Inc., Strong
River Investments, Inc. and Montrose Investments Ltd. dated March 29,
2000.
II-5
<PAGE>
10.18 Form of Closing Warrant dated March 29, 2000.
10.19 Form of Adjustment Warrant dated March 29, 2000.
10.20 Registration Rights Agreement by and among SafeScience, Inc., Strong
River Investments, Inc. and Montrose Investments, Ltd. dated March
29, 2000.
10.21 Letter Agreement by and among SafeScience, Inc., Strong River
Investments, Inc. and Montrose Investments Ltd. dated March 29, 2000.
The following documents are an exhibit hereto:
5.1 Opinion of McDermott, Will & Emery as to the validity of the
securities being offered.
10.22 Employment Agreement between SafeScience, Inc. and David Platt dated
June 29, 1999.
10.23 Employment Agreement between SafeScience, Inc. and Bradley J. Carver
dated June 29, 1999.
10.24 Employment Agreement between SafeScience, Inc. and Richard A. Salter
dated June 29, 1999.
10.25 Partnership Agreement between SafeScience, Inc. and Daymon
Associates, Inc. dated May 20, 1999.
10.26 Agreement between SafeScience, Inc. and Shaw's Supermarkets dated
December 3, 1999.
10.27 1998 Stock Option Plan
21.1 Subsidiaries
23.1 Consent of McDermott, Will & Emery (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Williams & Webster. P.S.
24.1 Powers of Attorney (included on page II-8).
27.1 Financial Data Schedule.
*To be filed by amendment to this Registration Statement
(b) Consolidated Financial Statement Schedules
All schedules have been omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements or Notes to those statements.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
II-6
<PAGE>
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To reflect any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b), if, in the aggregate, the changes in volume and price present
no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on April 28, 2000.
SAFESCIENCE, INC
By: /s/ David Platt
-------------------------------------------------
David Platt, Ph.D.
Chief Executive Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints each of Bradley J. Carver and John W.
Burns such person's true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David Platt Chief Executive Officer, Secretary April 28, 2000
- ------------------------------------------------------ and Chairman of the Board of Directors
David Platt, Ph.D (Principal Executive Officer)
/s/ John W. Burns Chief Financial Officer April 28, 2000
- ------------------------------------------------------ (Principal Financial Officer and Principal
John W. Burns Accounting Officer)
/s/ Bradley J. Carver Director April 28, 2000
- ------------------------------------------------------
Bradley J. Carver
/s/ David W. Dube Director April 28, 2000
- ------------------------------------------------------
David W. Dube
/s/ Theodore J. Host Director April 28, 2000
- ------------------------------------------------------
Theodore J. Host
/s/ Brian G. R. Hughes Director April 28, 2000
- ------------------------------------------------------
Brian G. R. Hughes
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
The following documents are incorporated herein by reference from the
Registrant's Form 10, as filed with the Securities and Exchange Commission, SEC
file No. 0-26476:
3.1 Articles of Incorporation of Alvarada, Inc.
3.2 Amendment to the Articles of Incorporation dated March 1, 1995
3.3 Amendment to the Articles of Incorporation dated March 3, 1995
3.4 Amendment to the Articles of Incorporation dated May 23, 1995
3.5 Bylaws of Alvarada, Inc.
3.6 Articles of Incorporation of International Gene Group
3.7 Bylaws of the Company of International Gene Group
3.8 Articles of Incorporation of Agricultural Glycosystems, Inc.
3.9 Bylaws of the Company of Agricultural Glycosystems, Inc.
4.1 Specimen Stock Certificate
10.1 Agreement and Plan of Reorganization
10.2 Licensing Agreement with Dr. Platt
10.3 Office Lease
10.4 Licensing Agreement with The Government of Israel.
The following documents are incorporated herein by reference from the
Registrant's Form S-8 Registration Statement filed with the Commission on May
14, 1996, SEC file No. 333-04764:
10.5 Incentive Stock Option Plan
The following documents are incorporation herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1996:
10.6.1 Employee Confidentiality and Invention Agreement between Dr. David
Platt and the Company.
The following documents are incorporated herein by reference from the
Registrant's Registration Statement on Form SB-2, filed with the Commission on
November 20, 1996, SEC file no. 333-16087:
10.6.2 Warrant Agreement with Trinity American Corporation.
10.7 Consulting Agreement with Richard Salter and Amendment thereto.
10.8 Consulting Agreement with Keith Greenfield.
10.9 Consulting Agreement with James C. Czirr.
10.10 Warrant Agreement with James C. Czirr.
II-9
<PAGE>
The following documents are incorporated herein by reference from the
Registrant's Form 10-K for the period ending December 31, 1997:
10.11 Amendment to Consulting Agreement with Keith Greenfield
10.12 Licensing Agreement with Agrogene Ltd.
10.13 Trademark Sales and License Agreement with Elk Mound Feed and Farm
Supply, Inc.
10.14 Consulting Agreement with Michelangelo, LLC, dated May 1997
10.15 Consulting Agreement with Michelangelo LCC, dated September 1997.
10.16 Agreement with Leket-Bar Chemicals, Ltd., dated October 1997
99.1 Office Lease
The following documents are incorporated herein by reference from the
Registrant's Form 8-K filed on April 7, 2000:
10.17 Securities Purchase Agreement by and among SafeScience, Inc., Strong
River Investments, Inc. and Montrose Investments Ltd. dated March 29,
2000.
10.18 Form of Closing Warrant dated March 29, 2000.
10.19 Form of Adjustment Warrant dated March 29, 2000.
10.20 Registration Rights Agreement by and among SafeScience, Inc., Strong
River Investments, Inc. and Montrose Investments, Ltd. dated March
29, 2000.
10.21 Letter Agreement by and among SafeScience, Inc., Strong River
Investments, Inc. and Montrose Investments Ltd. dated March 29, 2000.
The following documents are an exhibit hereto:
5.1 Opinion of McDermott, Will & Emery as to the validity of the shares
being offered.
10.22 Employment Agreement between SafeScience, Inc. and David Platt dated
June 29, 1999.
10.23 Employment Agreement between SafeScience, Inc. and Bradley J. Carver
dated June 29, 1999.
10.24 Employment Agreement between SafeScience, Inc. and Richard A. Salter
dated June 29, 1999.
10.25 Partnership Agreement between SafeScience, Inc. and Daymon
Associates, Inc. dated May 20, 1999.
10.26 Agreement between SafeScience, Inc. and Shaw's Supermarkets dated
December 3, 1999.
10.27 1998 Stock Option Plan
21.1 Subsidiaries
23.1 Consent of McDermott, Will & Emery (included in Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Williams & Webster, P.S.
II-10
<PAGE>
24.1 Powers of Attorney (included on page II-8).
27.1 Financial Data Schedule.
*To be filed by amendment to this Registration Statement
II-11
[MCDERMOTT, WILL & EMERY LETTERHEAD]
__________, 2000
SafeScience, Inc.
31 St. James Avenue, 8th Floor
Boston, MA 02116
Re: Registration Statement on Form S-1
----------------------------------
Dear Ladies & Gentlemen:
At your request, we have examined the form of Registration
Statement on Form S-1 (the "Registration Statement"), to be filed by
SafeScience, Inc., a Nevada corporation (the "Company"), with the Securities and
Exchange Commission in connection with the registration under the Securities Act
of 1933 for resale of an aggregate of up to 1,195,952 shares (the "Shares") of
Common Stock, par value $.01 per share, of the Company (the "Common Stock"). The
shares being registered for resale include: (i) 484,429 shares of Common Stock
which were sold to two investors pursuant to a Securities Purchase Agreement
dated March 29, 2000 (the "Purchase Agreement") between the Company and the
selling stockholders named in the Registration Statement (the "Selling
Stockholders"); (ii) 108,996 shares of Common Stock which are currently issuable
upon exercise of outstanding warrants issued to the Selling Stockholders on
March 29, 2000 (the "Closing Warrants"); and (iii) up to 602,527 shares of
Common Stock which may be issuable upon exercise of outstanding warrants issued
to the Selling Stockholders on March 29, 2000 (the "Adjustable Warrants") (the
Closing Warrants and the Adjustable Warrants are referred to herein collectively
as the "Warrants"). The shares may be sold from time to time for the account of
the Selling Stockholders.
We have examined the proceedings heretofore taken by the
Company in connection with the authorization, issuance and sale of the
securities referred to above.
Based on the foregoing, and assuming that the full
consideration for each share issuable upon exercise of the Warrants is received
by the Company in accordance with the terms of the Warrants, it is our opinion
that the Shares covered by the Registration Statement will, when issued, be
validly issued and outstanding, fully paid and nonassessable.
<PAGE>
SafeScience, Inc.
__________, 2000
Page 2
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
SAFESCIENCE, INC.
Employment Agreement
THIS EMPLOYMENT AGREEMENT, dated as of this 29th day of June, 1999
(this "Agreement"), is between SafeScience, Inc., a Nevada corporation
(hereinafter called the "Employer"), and David Platt (hereinafter called the
"Employee").
WHEREAS, the Employer desires to employ the Employee as its Chairman
and Chief Executive Officer, and the Employee desires to accept such employment,
all upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto hereby mutually agree as
follows:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon and subject to the terms and conditions
set forth herein.
2. Effective Date and Term. The term (the "Term") of employment of
the Employee hereunder shall commence as of the date first above written (the
"Effective Date" ) and shall continue until the third anniversary of the
Effective Date unless terminated earlier in accordance with the provisions
hereof or unless extended in writing by the Employer and Employee.
3. Title, Powers and Duties; Extent of Services. The Employee shall
promote the business and affairs of the Employer as its Chairman and Chief
Executive Officer. The Employee shall report and be responsible to the Board of
Directors of the Employer (the "Board"), and, except for vacations and absences
due to temporary illness or disability, shall devote his full efforts, time,
attention and energies to the business and affairs of the Employer. As its
Chairman and Chief Executive Officer, the Employee shall have the duties and
responsibilities normally inherent in his position and such other duties and
responsibilities, consistent with his position, as may be reasonably assigned to
him by the Board from time to time. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Employer and
any changes therein which may be adopted from time to time by the Employer.
<PAGE>
4. Compensation.
4.1 Salary. During the Term, the Employer shall pay the
Employee a base salary at the annual rate of $180,000, payable in accordance
with the Employer's standard payroll practices. The base salary to which the
Employee is entitled pursuant to this Section 4.1 is hereinafter referred to as
the "Salary".
4.2 Expense Reimbursement. The Employer shall reimburse the
Employee for any actual expenses incurred by the Employee within the scope of
his employment under this Agreement so long as such expenses are reasonable and
necessary, appropriately documented, and in compliance with budgetary and policy
guidelines of the Employer. The Employee will be responsible for reporting and
documenting his own tax deductions for un-reimbursed business expenses.
4.3 Benefits. The Employee shall be entitled to receive
such employee or fringe benefits as may be offered or made available by the
Employer from time to time to its employees (the "Benefits").
4.4 Bonuses. The Employee will be eligible to receive
bonuses in accordance with individual and company performance criteria
established under the Employer's stock option plan, as determined by the
Compensation Committee of the Board.
5. Termination.
5.1 Termination upon Death. This Agreement and the
Employee's employment hereunder shall terminate immediately upon the Employee's
death.
5.2 Termination. The Employer may at any time immediately
terminate the employment of the Employee under this Agreement with or without
Cause (as defined below). The Employee may at any time immediately terminate his
employment under this Agreement with or without Good Reason (as defined below).
The rights and obligations of the parties upon any termination of the Employee's
employment shall be as set forth in Section 5.3 hereof.
(a) For purposes of this Agreement, the term
"Cause" shall mean (i) any act of dishonesty, gross negligence or
willful misconduct with respect to the Employer, including without
-2-
<PAGE>
limitation, fraud or theft, on the part of the Employee, (ii)
conviction of the Employee for a felony, or (iii) the Employee's
sustained failure, as determined by the Employer's Board of
Directors, to perform significant duties hereunder (which duties are
not inconsistent with the terms of this Agreement) after notice and a
thirty (30) day opportunity to cure.
(b) For purposes of this Agreement, the term
"Good Reason" shall mean a material breach by the Employer of any term of this
Agreement.
5.3 Rights Upon Termination. In the event that:
(a) the employment of the Employee is terminated
by the Employee for Good Reason or by the Employer without Cause,
then for the remainder of the Term, the Employer shall pay to the
Employee, at the time otherwise due under Section 4 all Salary at the
rate in effect at the time of termination plus, if not yet paid to
the Employee, the Employee's bonus, if any, earned in the year prior
to such termination at such time as such bonus would be paid had the
Employee's employment hereunder not been terminated. The obligations
of the Employer pursuant to this Section 5.3(a) shall be in lieu of
any other rights of the Employee to compensation or Benefits
hereunder, and no other compensation of any kind or any other amounts
shall be due to the Employee by the Employer under this Agreement,
except that Employee shall be entitled to continue to receive health
benefits for the remainder of the Term.
(b) the Employee's employment terminates by
reason of Employer's death or Permanent Disability, then the Employer
shall pay and provide to the Employee or Employee's estate or other
successor in interest at the time otherwise due under Section 4 all
Salary and Benefits due to the Employee under Section 4 through the
end of the day on which the termination occurs, but reduced in the
case of disability by any payments received under any disability
plan, program or policy paid for by the Employer. For purposes of
this Agreement, "Permanent Disability" shall mean the Employee's
inability to perform his or her duties hereunder for a continuous
period of six (6) months by reason of his or her physical or mental
illness or incapacity. In the event of any dispute concerning the
existence of a Permanent Disability, such question shall be
determined by a licensed physician selected by the Employer and
-3-
<PAGE>
reasonably acceptable to the Employee, whose determination shall be
final and binding upon the parties. The Employee shall submit to such
examinations and furnish such information as such physician may
reasonably request.
(c) the employment of the Employee is terminated
by the Employee without Good Reason or by the Employer for Cause, the
Employee shall not be entitled to compensation or Benefits granted
hereunder beyond the date of the termination of the Employee's
employment, and no other compensation of any kind or any other
amounts shall be due to the Employee by the Employer under this
agreement.
5.4 Diminution of Responsibilities. For purposes of this
Section 5, a substantial diminution of the Employee's responsibilities or
authority as they relate to the Employer's business as a whole shall be deemed a
"termination" by the Company.
6. Confidential Information.
6.1 Definitions. For purposes of this Agreement, the term
"Confidential Information" shall mean (i) confidential information, knowledge or
data of the Employer, (ii) trade secrets of the Employer and (iii) any other
information of the Employer disclosed to the Employee or to which the Employee
is given access prior to the termination of the Employee's employment with the
Employer. Without limiting the generality of the foregoing, the term
Confidential Information shall include (A) all inventions, improvements,
developments, ideas, processes, prototypes, plans, drawings, designs, models,
formulations, specifications, methods, techniques, shop-practices, discoveries,
innovations, creations, technologies, formulas, algorithms, data, computer
databases, reports, laboratory notebooks, papers, writings, photographs, source
and object codes, software programs, other works of authorship, and know-how
(including all records pertaining to any of the foregoing), whether or not
reduced to writing and whether or not patented or patentable or registered or
registrable under patent, copyright, trademark or similar statute, that are
owned by the Employer or that are required to be assigned to the Employer by any
person, including, without limitation, the Employee or any other employee or
consultant of the Employer, or that are licensed to the Employer by any person
(all of the foregoing items listed or described in this clause (A) are
hereinafter referred to, collectively, as "Inventions"), (B) information
-4-
<PAGE>
regarding the Employer's plans for research and development or for new products,
(C) information regarding regulatory matters pertaining to the Employer, (D)
information regarding any acquisition or strategic alliance effected by the
Employer or any proposed acquisition or strategic alliance being considered by
the Employer, (E) information regarding the status or outcome of any
negotiations engaged in by the Employer, (F) information regarding the existence
or terms of any contract entered into by the Employer, (G) information regarding
any aspect of the Employer's intellectual property position, (H) information
regarding prices or costs of the Employer, (1) information regarding any aspect
of the Employer's business strategy, including, without limitation, the
Employer's marketing, selling and distribution strategies, (J) information
regarding customers or suppliers of the Employer, (K) information regarding the
skills, compensation and other terms of employment or engagement of the
Employer's employees and consultants, (L) business plans, budgets, unpublished
financial statements and unpublished financial data of the Employer, (M)
information regarding marketing and sales of any actual or proposed product or
services of the Employer and (N) any other information that the Employer may
designate as or reasonably deem to be confidential. "Confidential Information"
shall exclude information known to the Employee prior to the date of employment.
6.2 Nondisclosure. The Employee acknowledges that, except
to the extent otherwise provided below in this Section 6.2 or in Section 6.4
hereof, all Confidential Information disclosed to or acquired by the Employee is
a valuable, special, and unique asset of the Employer and is to be held in trust
by the Employee for the Employer's sole benefit. Except as otherwise provided
below in this Section 6.2 or in Section 6.4 hereof, the Employee shall not, at
any time during or after the Term, use for himself or others, or disclose or
communicate to any person for any reason, any Confidential Information without
the prior written consent of the Employer. Notwithstanding anything in this
Section 6.2 to the contrary, it is understood that, except to the extent
otherwise expressly prohibited by the Employer, (A) the Employee may disclose or
use Confidential Information in performing his duties and responsibilities to
the Employer but only to the extent required or necessary for the performance of
such duties and responsibilities in the ordinary course and within the scope of
his employment, and (B) the Employee may disclose any Confidential Information
pursuant to a request or order of any court or governmental agency, provided
that the Employee promptly notifies the Employer of any such request or order
-5-
<PAGE>
and provides reasonable cooperation (at the Employer's expense) in the efforts,
if any, of the Employer to contest or limit the scope of such request or order.
6.3 Third Party Confidential Information. The Employee
acknowledges and agrees that the Employer has received, and may receive in the
future, confidential or proprietary information from third parties ("Third Party
Confidential Information") subject to a duty on the Employer's part to maintain
the confidentiality of such Third Party Confidential Information and to use it
only for certain limited purposes. During the Term and thereafter, the Employee
shall hold Third Party Confidential Information in the strictest confidence and
will not use or disclose to anyone any Third Party Confidential Information,
unless expressly authorized in writing by the Employer or unless otherwise
provided below in this Section 6.3 or in Section 6.4 below. Notwithstanding
anything in this Section 6.3 to the contrary, it is understood that, except to
the extent otherwise expressly prohibited by the Employer, (A) the Employee may
disclose or use Confidential Third Party Information in performing his duties
and responsibilities to the Employer but only to the extent required or
necessary for the performance of such duties and responsibilities in the
ordinary course and within the scope of his employment and (B) the Employee may
disclose any Third Party Confidential Information pursuant to a request or order
of any court or governmental agency, provided that the Employee promptly
notifies the Employer of any such request or order and provides reasonable
cooperation (at the Employer's expense) in the efforts, if any, of the Employer
to contest or limit the scope of such request or order.
6.4 Permitted Disclosures. The Employee's obligations under
Section 6.2 and/or Section 6.3 hereof not to use, disclose or communicate
Confidential Information or Third Party Confidential Information to any person
without the prior written consent of the Employer shall not apply to any
Confidential Information or Third Party Confidential Information which (i) is or
becomes publicly known (as demonstrated by written evidence provided by the
Employee) under circumstances involving no breach by the Employee of this
Agreement and/or (ii) was or is approved for release by the Board or an
authorized officer of the Employer.
6.5. Other Duties. The obligations of the Employee under
this Section 6 are without prejudice, and are in addition to, any other
obligations or duties of confidentiality, whether express or implied or imposed
-6-
<PAGE>
by applicable law, that are owed to the Employer or any other person to whom the
Employer owes an obligation of confidentiality.
7. No Improper Disclosure or Use of Materials. The Employee shall not
improperly use or disclose to the Employer or for the Employer's benefit any
confidential information or trade secrets of (i) any former or future employer,
(ii) any person to whom the Employee has previously provided, currently provides
or may in the future provide consulting services or (iii) any other person to
whom the Employee owes an obligation of confidentiality. The Employee shall not
bring onto the premises of the Employer any unpublished documents or any
property belonging to any person referred to in any of the foregoing clauses
(i), (ii) or (iii) unless consented to, in writing, by such person.
8. Right to Inspect. The Employee agrees that any property situated
on the Employer's premises, including disks and other storage media, filing
cabinets or other work areas, is subject to inspection by Employer personnel at
any time with or without notice.
9. Inventions: Assignment.
9.1. Definitions. For purposes of this Agreement, the term
"Assigned Inventions" shall mean any and all Inventions that (i) are made,
conceived, invented, discovered, originated, authored, created, learned or
reduced to practice by the Employee, either alone or together with others, in
the course of performing his duties and responsibilities hereunder or in the
course of otherwise rendering any services to the Employer (in either case,
regardless of whether or not such Inventions were made, conceived, invented,
discovered, originated, authored, created, learned or reduced to practice by the
Employee at the Employer's facilities or during regular business hours or
utilizing resources of the Employer) or (ii) arise out of or are based upon any
Confidential Information or Third Party Confidential Information. For purposes
of this Agreement, the term "Proprietary Rights" shall mean (x) any and all
rights under or in connection with any patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications, service marks,
service mark applications, trade names, trade name applications, mask works,
trade secrets and/or other intellectual property rights with respect to Assigned
Inventions and (y) the goodwill associated with any and all of the rights
referred to in the foregoing clause (x).
-7-
<PAGE>
9.2. Assignment; Notice. The Employee hereby agrees to hold
any and all Assigned Inventions and Proprietary Rights in trust for the sole
right and benefit of the Employer and such other person or persons as the
Employer shall designate in writing, and the Employee hereby assigns to the
Employer and such other person or persons as the Employer shall designate in
writing all of his right, title and interest in and to any and all Assigned
Inventions and Proprietary Rights. The Employee agrees to give the Employer
prompt written notice of any Invention or Proprietary Right and agrees to
execute such instruments of transfer, assignment, conveyance or confirmation and
such other documents as the Employer may request to evidence, confirm or perfect
the assignment of all of the Employee's right, title and interest in and to any
Assigned Invention or Proprietary Right pursuant to the foregoing provisions of
this Section 9.2. The Employee hereby waives and quitclaims to the Employer any
and all claims of any nature whatsoever that the Employee may now or hereafter
have for infringement of any Proprietary Rights assigned hereunder to the
Employer.
9.3. Works Made for Hire. The Employee hereby acknowledges
and agrees that those Assigned Inventions that are original works of authorship
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
9.4. Duties to Assist. At the request of the Employer, the
Employee will assist the Employer in every proper way (including, without
limitation, by executing patent applications) to obtain and enforce in any
country in the world Proprietary Rights relating to any or all Assigned
Inventions. The Employee's obligation under this Section 9.4 shall continue
beyond the Term. If and to the extent that, at any time after the Term, the
Employer requests assistance from the Employee with respect to obtaining and
enforcing in any country in the world any Proprietary Rights relating to
Assigned Inventions, the Employer shall compensate the Employee at a reasonable
rate for the time and expenses actually spent by the Employee on such
assistance.
9.5. Power of Attorney. By this Agreement, the Employee
hereby irrevocably constitutes and appoints the Employer as his attorney-in-fact
for the purpose of executing, in the Employee's name and on his behalf, (i) such
instruments or other documents as may be necessary to evidence, confirm or
-8-
<PAGE>
perfect any assignment pursuant to the provisions of this Section 9, (ii) such
instruments or other documents as may be necessary to assign, transfer or convey
any Assigned Invention to any third party to whom the Employer desires to
assign, transfer or convey any Assigned Invention or any interest therein or
(iii) such applications, certificates, instruments or documents as may be
necessary to obtain or enforce any Proprietary Rights in any country of the
world. This power of attorney is coupled with an interest on the part of the
Employer and is irrevocable.
9.6. Filings. Without the prior written consent of the
Employer, the Employee shall not, at any time, file any patent, trademark,
service mark, trade name or copyright application with respect to, or claiming,
any Assigned Inventions.
9.7. Other Duties. The obligations of the Employee under
this Section 9 are without prejudice, and are in addition to, any other
obligations or duties of the Employee, whether express or implied or imposed by
applicable law, to assign to the Employer all Assigned Inventions and all
Proprietary Rights.
10. Agreement Not to Compete.
10.1. Noncompetition. In view of the unique nature of the
business of the Employer and the need of the Employer to maintain its
competitive advantage in the industry, the Employee agrees that, during the
Restricted Period (as defined in Section 10.2 below), the Employee shall not,
directly or indirectly, within the United States of America or its Territories
or Possessions or within any other country in the world in which the Employer
has conducted or is then conducting business, engage in, own an interest in
(except as a holder of no more than five percent (5%) of the shares of any
publicly traded corporation), be employed by, consult for, act as an advisor to,
or otherwise in any way participate in or become associated with, any
Competitive Business (as defined in Section 10.2 below) or any corporation,
partnership, limited liability company, business, enterprise, venture or other
person or entity that is engaged or participates in any Competitive Business
(each, a "Competitive Business Entity"), unless in each case the Employee shall
have given to the Board notice of the Employee's intention to be employed by,
consult for, act as an advisor to, or otherwise in any way participate in or
become associated with, any Competitive Business or any Competitive Business
Entity and the Board shall have approved the Employee's relationship with or
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<PAGE>
engagement in such Competitive Business or Competitive Business Entity;
provided, however, that, notwithstanding anything in the foregoing provisions of
this Section 10.1 to the contrary, the Employee may be employed by, consult for,
act as an advisor to, or otherwise participate in any way with, any person or
entity that is engaged in any Competitive Business if, but only if, the services
being rendered by the Employee to such person or entity (whether in the nature
of employment services, consulting services or otherwise) do not pertain or in
any way relate to such Competitive Business. During the Restricted Period, the
Employee also shall not solicit, or arrange to have any other person or entity
solicit, any person or entity engaged by the Employer as an employee, customer
or supplier of, or consultant or advisor to, the Employer to terminate such
party's relationship with the Employer.
10.2. Definitions. For purposes of this Section 10, the
following terms shall have the meanings provided therefor below:
(a) "Competitive Business" shall mean any
business that is engaged in a business in competition with the
activities of the Company as they may exist from time to time.
(b) "Restricted Period" shall mean the period
commencing on the date of this Agreement and ending on the first
anniversary of the effective date of the termination of the
Employee's employment with the Employer unless: (a) Employer
terminates the employment of the Employee under this Agreement
without Cause or (b) Employee terminates employment with Good Reason,
in which case "Restricted Period" shall mean the period commencing on
the date of this Agreement and ending on the date the Employee ceases
being entitled to receive Salary pursuant to the provisions of
Section 5.3(a).
10.3. Time Periods; Divisibility. The time periods provided
for in this Section 10 shall be extended for a period of time equal to any
period of time in which the Employee shall be in violation of any provision of
this Section 10 and any period of time required for litigation to enforce the
provisions of this Section 10. If at any time the provisions of this Section 10
shall be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10 shall be
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considered divisible and shall become and be automatically amended to apply only
to such area, duration and scope of activity as shall be determined to be
reasonable by the court or other body having jurisdiction over the matter; and
the Employee agrees that this Section 10, as so amended, shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
11. Return of Documents. Employee will promptly deliver to the
Employer, upon the termination of the Employee's employment with the Employer
or, if earlier, upon the request of the Employer, all documents and other
tangible media (including all originals, copies, reproductions, digests,
abstracts, summaries, analyses, notes, notebooks, drawings, manuals, memoranda,
records, reports, plans, specifications, devices, formulas, storage media,
including software, and computer printouts) in the Employee's actual or
constructive possession or control that contain, reflect, disclose or relate to
any Confidential Information, Third Party Confidential Information, Assigned
Inventions or Proprietary Rights. The Employee will destroy any related computer
entries on equipment or media not owned by the Employer.
12. No Use of Name, Etc. Without the prior written consent of the
Employer, the Employee shall not, at any time (including, without limitation, at
any time after the termination of the Employee's employment with the Employer),
use, for himself or on behalf of any other person, any name that is identical or
similar to or likely to be confused with the name of the Employer or the name of
any product or service produced or provided by the Employer, provided that the
Employee prior to termination may use the Employer's name in performing his or
her duties and responsibilities to the Employer but only to the extent required
or necessary for the performance of such duties and responsibilities in the
ordinary course and within the scope of his employment. Without the prior
written consent of the Employer, the Employee shall not, at any time after the
termination of the Employee's employment with the Employer, directly or
indirectly represent himself, whether on his behalf or on behalf of any other
person, as then being in any way connected or associated with the Employer.
13. No Conflicting Obligation. Employee represents that he is free to
enter into this Agreement and that his performance of all of the terms of this
Agreement and of all of his duties and responsibilities as an employee of the
Employer do not and will not breach (i) any agreement to keep in confidence
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information acquired by the Employee in confidence or in trust, (ii) any
agreement to assign to any third party inventions made by the Employee and/or
(iii) any agreement not to compete against the business of any third party.
Employee further represents that he has not made and will not make any
agreements in conflict with this Agreement.
14. Indemnification. The Employer agrees to indemnify, defend and
hold harmless the Employee and his respective successors, heirs and assigns
("Indemnitees") against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any of them in connection with any claims, suits,
actions, demands or judgments arising from the good faith performance by the
Employee of his duties and responsibilities hereunder.
15. Unique Nature of Agreement; Specific Enforcement. The Employer
and the Employee agree and acknowledge that the rights and obligations set forth
in this Agreement are of a unique and special nature and that the Employer is,
therefore, without an adequate legal remedy in the event of the Employee's
violation of any of the covenants set forth in this Agreement. The Employer and
the Employee agree, therefore, that, in addition to all other rights and
remedies, at law or in equity or otherwise, that may be available to the
Employer, each of the covenants made by the Employee under this Agreement shall
be specifically enforceable in equity.
16. Survival. The provisions of Sections 6, 7, 9, 10, 12 and
14 shall survive the termination of this Agreement.
17. Miscellaneous.
17.1. Entire Agreement. This Agreement represents the
entire agreement of the parties with respect to the arrangements contemplated
hereby. No prior agreement, whether written or oral, shall be construed to
change, amend, alter, repeal or invalidate this Agreement. This Agreement may be
amended only by a written instrument executed in one or more counterparts by the
parties.
17.2. Waiver. No consent to or waiver of any breach or
default in the performance of any obligations hereunder shall be deemed or
construed to be a consent to or waiver of any other breach or default in the
performance of any of the same or any other obligations hereunder. Failure on
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the part of either party to complain of any act or failure to act of the other
party or to declare the other party in default, irrespective of the duration of
such failure, shall not constitute a waiver of rights hereunder and no waiver
hereunder shall be effective unless it is in writing, executed by the party
waiving the breach or default hereunder.
17.3. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may be assigned by the Employer to any
Affiliate of the Employer and to a successor of its business to which this
Agreement relates (whether by purchase or otherwise). "Affiliate of the
Employer" means any person which, directly or indirectly, controls or is
controlled by or is under common control with the Employer and, for the purposes
of this definition, "control" (including the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of another
whether through the ownership of voting securities or holding of office in
another, by contract or otherwise. The Employee may not assign or transfer any
or all of his rights or obligations under this Agreement.
17.4. Arbitration. (a) Disputes to be Arbitrated Any
controversy, claim, or dispute arising out of or relating to this
Agreement, including its formation, validity, or breach thereof,
whether arising during or after the period of this Agreement, shall
be settled by arbitration in accordance with the rules of the
American Arbitration Association, and the decision of the arbitrator
shall be final and binding upon the parties. Nothing in this
paragraph, however, shall prevent the parties from seeking injunctive
relief from a state or federal court of competent jurisdiction.
(b) Arbitration Procedure. The arbitration shall
be conducted by one neutral arbitrator, who shall be selected in
accordance with the rules of the American Arbitration Association.
The arbitration shall take place in Boston, Massachusetts. The
arbitrator shall issue a written decision and set forth the reasons
for said decision. Judgment upon the award rendered by the arbitrator
may be entered in any federal or state court having competent
jurisdiction thereof. The costs of arbitration, including the fees of
the arbitrator, shall be borne equally. Each side shall bear its own
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attorney's fees and costs, and punitive damages shall not be allowed.
17.5. Severability. All headings and subdivisions of this
Agreement are for reference only and shall not affect its interpretation. In the
event that any provision of this Agreement should be held unenforceable by a
court of competent jurisdiction, such court is hereby authorized to amend such
provision so as to be enforceable to the fullest extent permitted by law, and
all remaining provisions shall continue in full force without being impaired or
invalidated in any way.
17.6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding choice of law rules thereof.
IN WITNESS WHEREOF, the parties have signed this agreement as of the date
written above as a sealed instrument.
SAFESCIENCE, INC.
By:/s/Bradley J. Carver
-------------------------
Name:
Title:
/s/ David Platt
----------------------------
Name: David Platt
SAFESCIENCE, INC.
Employment Agreement
--------------------
THIS EMPLOYMENT AGREEMENT, dated as of this 29th day of June, 1999
(this "Agreement"), is between SafeScience, Inc., a Nevada corporation
(hereinafter called the "Employer"), and Bradley J. Carver (hereinafter called
the "Employee").
WHEREAS, the Employer desires to employ the Employee as its President,
and the Employee desires to accept such employment, all upon the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto hereby mutually agree as
follows:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon and subject to the terms and conditions
set forth herein.
2. Effective Date and Term. The term (the "Term") of employment of the
Employee hereunder shall commence as of the date first above written (the
"Effective Date") and shall continue until the third anniversary of the
Effective Date unless terminated earlier in accordance with the provisions
hereof or unless extended in writing by the Employer and Employee.
3. Title, Powers and Duties; Extent of Services. The Employee shall
promote the business and affairs of the Employer as its President. The Employee
shall report and be responsible to the Board of Directors of the Employer (the
"Board"), and, except for vacations and absences due to temporary illness or
disability, shall devote his full efforts, time, attention and energies to the
business and affairs of the Employer. As its President, the Employee shall have
the duties and responsibilities normally inherent in his position and such other
duties and responsibilities, consistent with his position, as may be reasonably
assigned to him by the Board from time to time. The Employee agrees to abide by
the rules, regulations, instructions, personnel practices and policies of the
Employer and any changes therein which may be adopted from time to time by the
Employer.
4. Compensation.
4.1 Salary. During the Term, the Employer shall pay the
Employee a base salary at the annual rate of $180,000, payable in accordance
with the Employer's standard payroll practices. The base salary to which the
Employee is entitled pursuant to this Section 4.1 is hereinafter referred to as
the "Salary".
4.2 Expense Reimbursement. The Employer shall reimburse the
Employee for any actual expenses incurred by the Employee within the scope of
his employment under this Agreement so long as such expenses are reasonable and
necessary, appropriately documented, and in compliance with budgetary and policy
guidelines of the Employer. The Employee will be responsible for reporting and
<PAGE>
documenting his own tax deductions for un-reimbursed business expenses.
4.3 Benefits. The Employee shall be entitled to receive such
employee or fringe benefits as may be offered or made available by the Employer
from time to time to its employees (the "Benefits").
4.4 Bonuses. The Employee will be eligible to receive bonuses
in accordance with individual and company performance criteria established under
the Employer's stock option plan, as determined by the Compensation Committee of
the Board.
5. Termination.
5.1 Termination upon Death. This Agreement and the Employee's
employment hereunder shall terminate immediately upon the Employee's death.
5.2 Termination. The Employer may at any time immediately
terminate the employment of the Employee under this Agreement with or without
Cause (as defined below). The Employee may at any time immediately terminate his
employment under this Agreement with or without Good Reason (as defined below).
The rights and obligations of the parties upon any termination of the Employee's
employment shall be as set forth in Section 5.3 hereof.
(a) For purposes of this Agreement, the term "Cause"
shall mean (i) any act of dishonesty, gross negligence or willful
misconduct with respect to the Employer, including without limitation,
fraud or theft, on the part of the Employee, (ii) conviction of the
Employee for a felony, or (iii) the Employee's sustained failure, as
determined by the Employer's Board of Directors, to perform significant
duties hereunder (which duties are not inconsistent with the terms of
this Agreement) after notice and a thirty (30) day opportunity to cure.
(b) For purposes of this Agreement, the term "Good
Reason" shall mean a material breach by the Employer of any term of
this Agreement.
5.3 Rights Upon Termination. In the event that:
(a) the employment of the Employee is terminated by
the Employee for Good Reason or by the Employer without Cause, then for
the remainder of the Term, the Employer shall pay to the Employee, at
the time otherwise due under Section 4, all Salary at the rate in
effect at the time of termination plus, if not yet paid to the
Employee, the Employee's bonus, if any, earned in the year prior to
such termination at such time as such bonus would be paid had the
Employee's employment hereunder not been terminated. The obligations of
the Employer pursuant to this Section 5.3(a) shall be in lieu of any
other rights of the Employee to compensation or Benefits hereunder, and
no other compensation of any kind or any other amounts shall be due to
the Employee by the Employer under this Agreement, except that Employee
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shall be entitled to continue to receive health benefits for the
remainder of the Term.
(b) the Employee's employment terminates by reason of
Employer's death or Permanent Disability, then the Employer shall pay
and provide to the Employee or Employee's estate or other successor in
interest at the time otherwise due under Section 4 all Salary and
Benefits due to the Employee under Section 4 through the end of the day
on which the termination occurs, but reduced in the case of disability
by any payments received under any disability plan, program or policy
paid for by the Employer. For purposes of this Agreement, "Permanent
Disability" shall mean the Employee's inability to perform his or her
duties hereunder for a continuous period of six (6) months by reason of
his or her physical or mental illness or incapacity. In the event of
any dispute concerning the existence of a Permanent Disability, such
question shall be determined by a licensed physician selected by the
Employer and reasonably acceptable to the Employee, whose determination
shall be final and binding upon the parties. The Employee shall submit
to such examinations and furnish such information as such physician may
reasonably request.
(c) the employment of the Employee is terminated by
the Employee without Good Reason or by the Employer for Cause, the
Employee shall not be entitled to compensation or Benefits granted
hereunder beyond the date of the termination of the Employee's
employment, and no other compensation of any kind or any other amounts
shall be due to the Employee by the Employer under this agreement.
5.4 Diminution of Responsibilities. For purposes of this
Section 5, a substantial diminution of the Employee's responsibilities or
authority as they relate to the Employer's business as a whole shall be deemed a
"termination" by the Company.
6. Confidential Information.
6.1 Definitions. For purposes of this Agreement, the term
"Confidential Information" shall mean (i) confidential information, knowledge or
data of the Employer, (ii) trade secrets of the Employer and (iii) any other
information of the Employer disclosed to the Employee or to which the Employee
is given access prior to the termination of the Employee's employment with the
Employer. Without limiting the generality of the foregoing, the term
Confidential Information shall include (A) all inventions, improvements,
developments, ideas, processes, prototypes, plans, drawings, designs, models,
formulations, specifications, methods, techniques, shop-practices, discoveries,
innovations, creations, technologies, formulas, algorithms, data, computer
databases, reports, laboratory notebooks, papers, writings, photographs, source
and object codes, software programs, other works of authorship, and know-how
(including all records pertaining to any of the foregoing), whether or not
reduced to writing and whether or not patented or patentable or registered or
registrable under patent, copyright, trademark or similar statute, that are
owned by the Employer or that are required to be assigned to the Employer by any
person, including, without limitation, the Employee or any other employee or
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consultant of the Employer, or that are licensed to the Employer by any person
(all of the foregoing items listed or described in this clause (A) are
hereinafter referred to, collectively, as "Inventions"), (B) information
regarding the Employer's plans for research and development or for new products,
(C) information regarding regulatory matters pertaining to the Employer, (D)
information regarding any acquisition or strategic alliance effected by the
Employer or any proposed acquisition or strategic alliance being considered by
the Employer, (E) information regarding the status or outcome of any
negotiations engaged in by the Employer, (F) information regarding the existence
or terms of any contract entered into by the Employer, (G) information regarding
any aspect of the Employer's intellectual property position, (H) information
regarding prices or costs of the Employer, (1) information regarding any aspect
of the Employer's business strategy, including, without limitation, the
Employer's marketing, selling and distribution strategies, (J) information
regarding customers or suppliers of the Employer, (K) information regarding the
skills, compensation and other terms of employment or engagement of the
Employer's employees and consultants, (L) business plans, budgets, unpublished
financial statements and unpublished financial data of the Employer, (M)
information regarding marketing and sales of any actual or proposed product or
services of the Employer and (N) any other information that the Employer may
designate as or reasonably deem to be confidential. "Confidential Information"
shall exclude information known to the Employee prior to the date of employment.
6.2 Nondisclosure. The Employee acknowledges that, except to
the extent otherwise provided below in this Section 6.2 or in Section 6.4
hereof, all Confidential Information disclosed to or acquired by the Employee is
a valuable, special, and unique asset of the Employer and is to be held in trust
by the Employee for the Employer's sole benefit. Except as otherwise provided
below in this Section 6.2 or in Section 6.4 hereof, the Employee shall not, at
any time during or after the Term, use for himself or others, or disclose or
communicate to any person for any reason, any Confidential Information without
the prior written consent of the Employer. Notwithstanding anything in this
Section 6.2 to the contrary, it is understood that, except to the extent
otherwise expressly prohibited by the Employer, (A) the Employee may disclose or
use Confidential Information in performing his duties and responsibilities to
the Employer but only to the extent required or necessary for the performance of
such duties and responsibilities in the ordinary course and within the scope of
his employment, and (B) the Employee may disclose any Confidential Information
pursuant to a request or order of any court or governmental agency, provided
that the Employee promptly notifies the Employer of any such request or order
and provides reasonable cooperation (at the Employer's expense) in the efforts,
if any, of the Employer to contest or limit the scope of such request or order.
6.3 Third Party Confidential Information. The Employee
acknowledges and agrees that the Employer has received, and may receive in the
future, confidential or proprietary information from third parties ("Third Party
Confidential Information") subject to a duty on the Employer's part to maintain
the confidentiality of such Third Party Confidential Information and to use it
only for certain limited purposes. During the Term and thereafter, the Employee
shall hold Third Party Confidential Information in the strictest confidence and
will not use or disclose to anyone any Third Party Confidential Information,
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<PAGE>
unless expressly authorized in writing by the Employer or unless otherwise
provided below in this Section 6.3 or in Section 6.4 below. Notwithstanding
anything in this Section 6.3 to the contrary, it is understood that, except to
the extent otherwise expressly prohibited by the Employer, (A) the Employee may
disclose or use Confidential Third Party Information in performing his duties
and responsibilities to the Employer but only to the extent required or
necessary for the performance of such duties and responsibilities in the
ordinary course and within the scope of his employment and (B) the Employee may
disclose any Third Party Confidential Information pursuant to a request or order
of any court or governmental agency, provided that the Employee promptly
notifies the Employer of any such request or order and provides reasonable
cooperation (at the Employer's expense) in the efforts, if any, of the Employer
to contest or limit the scope of such request or order.
6.4 Permitted Disclosures. The Employee's obligations under
Section 6.2 and/or Section 6.3 hereof not to use, disclose or communicate
Confidential Information or Third Party Confidential Information to any person
without the prior written consent of the Employer shall not apply to any
Confidential Information or Third Party Confidential Information which (i) is or
becomes publicly known (as demonstrated by written evidence provided by the
Employee) under circumstances involving no breach by the Employee of this
Agreement and/or (ii) was or is approved for release by the Board or an
authorized officer of the Employer.
6.5 Other Duties. The obligations of the Employee under this
Section 6 are without prejudice, and are in addition to, any other obligations
or duties of confidentiality, whether express or implied or imposed by
applicable law, that are owed to the Employer or any other person to whom the
Employer owes an obligation of confidentiality.
7. No Improper Disclosure or Use of Materials. The Employee shall not
improperly use or disclose to the Employer or for the Employer's benefit any
confidential information or trade secrets of (i) any former or future employer,
(ii) any person to whom the Employee has previously provided, currently provides
or may in the future provide consulting services or (iii) any other person to
whom the Employee owes an obligation of confidentiality. The Employee shall not
bring onto the premises of the Employer any unpublished documents or any
property belonging to any person referred to in any of the foregoing clauses
(i), (ii) or (iii) unless consented to, in writing, by such person.
8. Right to Inspect. The Employee agrees that any property situated on
the Employer's premises, including disks and other storage media, filing
cabinets or other work areas, is subject to inspection by Employer personnel at
any time with or without notice.
9. Inventions; Assignment.
9.1 Definitions. For purposes of this Agreement, the term
"Assigned Inventions" shall mean any and all Inventions that (i) are made,
conceived, invented, discovered, originated, authored, created, learned or
reduced to practice by the Employee, either alone or together with others, in
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the course of performing his duties and responsibilities hereunder or in the
course of otherwise rendering any services to the Employer (in either case,
regardless of whether or not such Inventions were made, conceived, invented,
discovered, originated, authored, created, learned or reduced to practice by the
Employee at the Employer's facilities or during regular business hours or
utilizing resources of the Employer) or (ii) arise out of or are based upon any
Confidential Information or Third Party Confidential Information. For purposes
of this Agreement, the term "Proprietary Rights" shall mean (x) any and all
rights under or in connection with any patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications, service marks,
service mark applications, trade names, trade name applications, mask works,
trade secrets and/or other intellectual property rights with respect to Assigned
Inventions and (v) the goodwill associated with any and all of the rights
referred to in the foregoing clause (x).
9.2 Assignment Notice. The Employee hereby agrees to hold any
and all Assigned Inventions and Proprietary Rights in trust for the sole right
and benefit of the Employer and such other person or persons as the Employer
shall designate in writing, and the Employee hereby assigns to the Employer and
such other person or persons as the Employer shall designate in writing all of
his right, title and interest in and to any and all Assigned Inventions and
Proprietary Rights. The Employee agrees to give the Employer prompt written
notice of any Invention or Proprietary Right and agrees to execute such
instruments of transfer, assignment, conveyance or confirmation and such other
documents as the Employer may request to evidence, confirm or perfect the
assignment of all of the Employee's right, title and interest in and to any
Assigned Invention or Proprietary Right pursuant to the foregoing provisions of
this Section 9.2. The Employee hereby waives and quitclaims to the Employer any
and all claims of any nature whatsoever that the Employee may now or hereafter
have for infringement of any Proprietary Rights assigned hereunder to the
Employer.
9.3 Works Made for Hire. The Employee hereby acknowledges and
agrees that those Assigned Inventions that are original works of authorship
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
9.4 Duties to Assist. At the request of the Employer, the
Employee will assist the Employer in every proper way (including, without
limitation, by executing patent applications) to obtain and enforce in any
country in the world Proprietary Rights relating to any or all Assigned
Inventions. The Employee's obligation under this Section 9.4 shall continue
beyond the Term. If and to the extent that, at any time after the Term, the
Employer requests assistance from the Employee with respect to obtaining and
enforcing in any country in the world any Proprietary Rights relating to
Assigned Inventions, the Employer shall compensate the Employee at a reasonable
rate for the time and expenses actually spent by the Employee on such
assistance.
9.5 Power of Attorney. By this Agreement, the Employee hereby
irrevocably constitutes and appoints the Employer as his attorney-in-fact for
the purpose of executing, in the Employee's name and on his behalf, (i) such
instruments or other documents as may be necessary to evidence, confirm or
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perfect any assignment pursuant to the provisions of this Section 9, (ii) such
instruments or other documents as may be necessary to assign, transfer or convey
any Assigned Invention to any third party to whom the Employer desires to
assign, transfer or convey any Assigned Invention or any interest therein or
(iii) such applications, certificates, instruments or documents as may be
necessary to obtain or enforce any Proprietary Rights in any country of the
world. This power of attorney is coupled with an interest on the part of the
Employer and is irrevocable.
9.6 Filings. Without the prior written consent of the
Employer, the Employee shall not, at any time, file any patent, trademark,
service mark, trade name or copyright application with respect to, or claiming,
any Assigned Inventions.
9.7 Other Duties. The obligations of the Employee under this
Section 9 are without prejudice, and are in addition to, any other obligations
or duties of the Employee, whether express or implied or imposed by applicable
law, to assign to the Employer all Assigned Inventions and all Proprietary
Rights.
10. Agreement Not to Compete.
10.1 Noncompetition. In view of the unique nature of the
business of the Employer and the need of the Employer to maintain its
competitive advantage in the industry, the Employee agrees that, during the
Restricted Period (as defined in Section 10.2 below), the Employee shall not,
directly or indirectly, within the United States of America or its Territories
or Possessions or within any other country in the world in which the Employer
has conducted or is then conducting business, engage in, own an interest in
(except as a holder of no more than five percent (5%) of the shares of any
publicly traded corporation), be employed by, consult for, act as an advisor to,
or otherwise in any way participate in or become associated with, any
Competitive Business (as defined in Section 10.2 below) or any corporation,
partnership, limited liability company, business, enterprise, venture or other
person or entity that is engaged or participates in any Competitive Business
(each, a "Competitive Business Entity"), unless in each case the Employee shall
have given to the Board notice of the Employee's intention to be employed by,
consult for, act as an advisor to, or otherwise in any way participate in or
become associated with, any Competitive Business or any Competitive Business
Entity and the Board shall have approved the Employee's relationship with or
engagement in such Competitive Business or Competitive Business Entity;
provided, however, that, notwithstanding anything in the foregoing provisions of
this Section 10.1 to the contrary, the Employee may be employed by, consult for,
act as an advisor to, or otherwise participate in any way with, any person or
entity that is engaged in any Competitive Business if, but only if, the services
being rendered by the Employee to such person or entity (whether in the nature
of employment services, consulting services or otherwise) do not pertain or in
any way relate to such Competitive Business. During the Restricted Period, the
Employee also shall not solicit, or arrange to have any other person or entity
solicit, any person or entity engaged by the Employer as an employee, customer
or supplier of, or consultant or advisor to, the Employer to terminate such
party's relationship with the Employer.
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10.2 Definitions. For purposes of this Section 10, the
following terms shall have the meanings provided ----------- therefor below:
(a) "Competitive Business" shall mean any business
that is engaged in a business in competition with the activities of the
Company as they may exist from time to time.
(b) "Restricted Period" shall mean the period
commencing on the date of this Agreement and ending on the first
anniversary of the effective date of the termination of the Employee's
employment with the Employer unless: (a) Employer terminates the
employment of the Employee under this Agreement without Cause or (b)
Employee terminates employment with Good Reason, in which case "
Restricted Period" shall mean the period commencing on the date of this
Agreement and ending on the date the Employee ceases being entitled to
receive Salary pursuant to the provisions of Section 5.3(a).
10.3 Time Periods; Divisibility. The time periods provided for
in this Section 10 shall be extended for a period of time equal to any period of
time in which the Employee shall be in violation of any provision of this
Section 10 and any period of time required for litigation to enforce the
provisions of this Section 10. If at any time the provisions of this Section 10
shall be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10 shall be
considered divisible and shall become and be automatically amended to apply only
to such area, duration and scope of activity as shall be determined to be
reasonable by the court or other body having jurisdiction over the matter; and
the Employee agrees that this Section 10, as so amended, shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
11. Return of Documents. Employee will promptly deliver to the
Employer, upon the termination of the Employee's employment with the Employer
or, if earlier, upon the request of the Employer, all documents and other
tangible media (including all originals, copies, reproductions, digests,
abstracts, summaries, analyses, notes, notebooks, drawings, manuals, memoranda,
records, reports, plans, specifications, devices, formulas, storage media,
including software, and computer printouts) in the Employee's actual or
constructive possession or control that contain, reflect, disclose or relate to
any Confidential Information, Third Party Confidential Information, Assigned
Inventions or Proprietary Rights. The Employee will destroy any related computer
entries on equipment or media not owned by the Employer.
12. No Use of Name, Etc. Without the prior written consent of the
Employer, the Employee shall not, at any time (including, without limitation, at
any time after the termination of the Employee's employment with the Employer),
use, for himself or on behalf of any other person, any name that is identical or
similar to or likely to be confused with the name of the Employer or the name of
any product or service produced or provided by the Employer, provided that the
Employee prior to termination may use the Employer's name in performing his or
her duties and responsibilities to the Employer but only to the extent required
or necessary for the performance of such duties and responsibilities in the
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ordinary course and within the scope of his employment. Without the prior
written consent of the Employer, the Employee shall not, at any time after the
termination of the Employee's employment with the Employer, directly or
indirectly represent himself, whether on his behalf or on behalf of any other
person, as then being in any way connected or associated with the Employer.
13. No Conflicting Obligation. Employee represents that he is free to
enter into this Agreement and that his performance of all of the terms of this
Agreement and of all of his duties and responsibilities as an employee of the
Employer do not and will not breach (i) any agreement to keep in confidence
information acquired by the Employee in confidence or in trust, (ii) any
agreement to assign to any third party inventions made by the Employee and/or
(iii) any agreement not to compete against the business of any third party.
Employee further represents that he has not made and will not make any
agreements in conflict with this Agreement.
14. Indemnification. The Employer agrees to indemnify, defend and hold
harmless the Employee and his respective successors, heirs and assigns
("Indemnitees") against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any of them in connection with any claims, suits,
actions, demands or judgments arising from the good faith performance by the
Employee of his duties and responsibilities hereunder.
15. Unique Nature of Agreement; Specific Enforcement. The Employer and
the Employee agree and acknowledge that the rights and obligations set forth in
this Agreement are of a unique and special nature and that the Employer is,
therefore, without an adequate legal remedy in the event of the Employee's
violation of any of the covenants set forth in this Agreement. The Employer and
the Employee agree, therefore, that, in addition to all other rights and
remedies, at law or in equity or otherwise, that may be available to the
Employer, each of the covenants made by the Employee under this Agreement shall
be specifically enforceable in equity.
16. Survival. The provisions of Sections 6, 7, 9, 10, 12 and 14 shall
survive the termination of this Agreement.
17. Miscellaneous.
17.1 Entire Agreement. This Agreement represents the entire
agreement of the parties with respect to the arrangements contemplated hereby.
No prior agreement, whether written or oral, shall be construed to change,
amend, alter, repeal or invalidate this Agreement. This Agreement may be amended
only by a written instrument executed in one or more counterparts by the
parties.
17.2 Waiver. No consent to or waiver of any breach or default
in the performance of any obligations hereunder shall be deemed or construed to
be a consent to or waiver of any other breach or default in the performance of
any of the same or any other obligations hereunder. Failure on the part of
either party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of the duration of such
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failure, shall not constitute a waiver of rights hereunder and no waiver
hereunder shall be effective unless it is in writing, executed by the party
waiving the breach or default hereunder.
17.3 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may be assigned by the Employer to any
Affiliate of the Employer and to a successor of its business to which this
Agreement relates (whether by purchase or otherwise). "Affiliate of the
Employer" means any person which, directly or indirectly, controls or is
controlled by or is under common control with the Employer and, for the purposes
of this definition, "control" (including the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of another
whether through the ownership of voting securities or holding of office in
another, by contract or otherwise. The Employee may not assign or transfer any
or all of his rights or obligations under this Agreement.
17.4 Arbitration.
(a) Disputes to be Arbitrated Any controversy, claim,
or dispute arising out of or relating to this Agreement, including its
formation, validity, or breach thereof, whether arising during or after
the period of this Agreement, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association, and
the decision of the arbitrator shall be final and binding upon the
parties. Nothing in this paragraph, however, shall prevent the parties
from seeking injunctive relief from a state or federal court of
competent jurisdiction.
(b) Arbitration Procedure The arbitration shall be
conducted by one neutral arbitrator, who shall be selected in
accordance with the rules of the American Arbitration Association. The
arbitration shall take place in Boston, Massachusetts. The arbitrator
shall issue a written decision and set forth the reasons for said
decision. Judgment upon the award rendered by the arbitrator may be
entered in any federal or state court having competent jurisdiction
thereof. The costs of arbitration, including the fees of the
arbitrator, shall be borne equally. Each side shall bear its own
attorney's fees and costs, and punitive damages shall not be allowed.
17.5 Severability. All headings and subdivisions of this
Agreement are for reference only and shall not affect its interpretation. In the
event that any provision of this Agreement should be held unenforceable by a
court of competent jurisdiction, such court is hereby authorized to amend such
provision so as to be enforceable to the fullest extent permitted by law, and
all remaining provisions shall continue in full force without being impaired or
invalidated in any way.
17.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding choice of law rules thereof.
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IN WITNESS WHEREOF, the parties have signed this agreement as of the
date written above as a sealed instrument.
SAFESCIENCE, INC.
By: /s/ Illegible
-------------
Name:
Title:
/s/ Bradley J. Carver
---------------------
Name: Bradley J. Carver
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SAFESCIENCE, INC.
Employment Agreement
--------------------
THIS EMPLOYMENT AGREEMENT, dated as of this 29th day of June, 1999
(this "Agreement"), is between SafeScience, Inc., a Nevada corporation
(hereinafter called the "Employer"), and Richard A. Salter (hereinafter called
the "Employee").
WHEREAS, the Employer desires to employ the Employee as its Senior Vice
President, and the Employee desires to accept such employment, all upon the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto hereby mutually agree as
follows:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon and subject to the terms and conditions
set forth herein.
2. Effective Date and Term. The term (the "Term") of employment of the
Employee hereunder shall commence as of the date first above written (the "
Effective Date") and shall continue until the third anniversary of the Effective
Date unless terminated earlier in accordance with the provisions hereof or
unless extended in writing by the Employer and Employee.
3. Title, Powers and Duties; Extent of Services. The Employee shall
promote the business and affairs of the Employer as its Senior Vice President.
The Employee shall report and be responsible to the Board of Directors of the
Employer (the "Board"), and, except for vacations and absences due to temporary
illness or disability, shall devote his full efforts, time, attention and
energies to the business and affairs of the Employer. As its Senior Vice
President, the Employee shall have the duties and responsibilities normally
inherent in his position and such other duties and responsibilities, consistent
with his position, as may be reasonably assigned to him by the Board from time
to time. The Employee agrees to abide by the rules, regulations, instructions,
personnel practices and policies of the Employer and any changes therein which
may be adopted from time to time by the Employer.
4. Compensation.
4.1 Salary. During the Term, the Employer shall pay the
Employee a base salary at the annual rate of $180,000, payable in accordance
with the Employer's standard payroll practices. The base salary to which the
Employee is entitled pursuant to this Section 4.1 is hereinafter referred to as
the "Salary".
4.2 Expense Reimbursement. The Employer shall reimburse the
Employee for any actual expenses incurred by the Employee within the scope of
his employment under this Agreement so long as such expenses are reasonable and
necessary, appropriately documented, and in compliance with budgetary and policy
<PAGE>
guidelines of the Employer. The Employee will be responsible for reporting and
documenting his own tax deductions for un-reimbursed business expenses.
4.3 Benefits. The Employee shall be entitled to receive such
employee or fringe benefits as may be offered or made available by the Employer
from time to time to its employees (the "Benefits").
4.4 Bonuses. The Employee will be eligible to receive bonuses
in accordance with individual and company performance criteria established under
the Employer's stock option plan, as determined by the Compensation Committee of
the Board.
5. Termination.
5.1 Termination upon Death. This Agreement and the Employee's
employment hereunder shall terminate immediately upon the Employee's death.
5.2 Termination. The Employer may at any time immediately
terminate the employment of the Employee under this Agreement with or without
Cause (as defined below). The Employee may at any time immediately terminate his
employment under this Agreement with or without Good Reason (as defined below).
The rights and obligations of the parties upon any termination of the Employee's
employment shall be as set forth in Section 5.3 hereof.
(a) For purposes of this Agreement, the term "Cause"
shall mean (i) any act of dishonesty, gross negligence or willful
misconduct with respect to the Employer, including without limitation,
fraud or theft, on the part of the Employee, (ii) conviction of the
Employee for a felony, or (iii) the Employee's sustained failure, as
determined by the Employer's Board of Directors, to perform significant
duties hereunder (which duties are not inconsistent with the terms of
this Agreement) after notice and a thirty (30) day opportunity to cure.
(b) For purposes of this Agreement, the term "Good
Reason" shall mean a material breach by the Employer of any term of
this Agreement.
5.3 Rights Upon Termination. In the event that:
(a) the employment of the Employee is terminated by
the Employee for Good Reason or by the Employer without Cause, then for
the remainder of the Term, the Employer shall pay to the Employee, at
the time otherwise due under Section 4, all Salary at the rate in
effect at the time of termination plus, if not yet paid to the
Employee, the Employee's bonus, if any, earned in the year prior to
such termination at such time as such bonus would be paid had the
Employee's employment hereunder not been terminated. The obligations of
the Employer pursuant to this Section 5.3(a) shall be in lieu of any
other rights of the Employee to compensation or Benefits hereunder, and
no other compensation of any kind or any other amounts shall be due to
the Employee by the Employer under this Agreement, except that Employee
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shall be entitled to continue to receive health benefits for the
remainder of the Tenn.
(b) the Employee's employment terminates by reason of
Employer's death or Permanent Disability, then the Employer shall pay
and provide to the Employee or Employee's estate or other successor in
interest at the time otherwise due under Section 4 all Salary and
Benefits due to the Employee under Section 4 through the end of the day
on which the termination occurs, but reduced in the case of disability
by any payments received under any disability plan, program or policy
paid for by the Employer. For purposes of this Agreement, "Permanent
Disability" shall mean the Employee's inability to perform his or her
duties hereunder for a continuous period of six (6) months by reason of
his or her physical or mental illness or incapacity. In the event of
any dispute concerning the existence of a Permanent Disability, such
question shall be determined by a licensed physician selected by the
Employer and reasonably acceptable to the Employee, whose determination
shall be final and binding upon the parties. The Employee shall submit
to such examinations and furnish such information as such physician may
reasonably request.
(c) the employment of the Employee is terminated by
the Employee without Good Reason or by the Employer for Cause, the
Employee shall not be entitled to compensation or Benefits granted
hereunder beyond the date of the termination of the Employee's
employment, and no other compensation of any kind or any other amounts
shall be due to the Employee by the Employer under this agreement.
5.4 Diminution of Responsibilities. For purposes of this
Section 5, a substantial diminution of the Employee's responsibilities or
authority as they relate to the Employer's business as a whole shall be deemed a
"termination" by the Company.
6. Confidential Information.
6.1 Definitions. For purposes of this Agreement, the term
"Confidential Information" shall mean (i) confidential information, knowledge or
data of the Employer, (ii) trade secrets of the Employer and (iii) any other
information of the Employer disclosed to the Employee or to which the Employee
is given access prior to the termination of the Employee's employment with the
Employer. Without limiting the generality of the foregoing, the term
Confidential Information shall include (A) all inventions, improvements,
developments, ideas, processes, prototypes, plans, drawings, designs, models,
formulations, specifications, methods, techniques, shop-practices, discoveries,
innovations, creations, technologies, formulas, algorithms, data, computer
databases, reports, laboratory notebooks, papers, writings, photographs, source
and object codes, software programs, other works of authorship, and know-how
(including all records pertaining to any of the foregoing), whether or not
reduced to writing and whether or not patented or patentable or registered or
registrable under patent, copyright, trademark or similar statute, that are
owned by the Employer or that are required to be assigned to the Employer by any
person, including, without limitation, the Employee or any other employee or
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consultant of the Employer, or that are licensed to the Employer by any person
(all of the foregoing items listed or described in this clause (A) are
hereinafter referred to, collectively, as "Inventions"), (B) information
regarding the Employer's plans for research and development or for new products,
(C) information regarding regulatory matters pertaining to the Employer, (D)
information regarding any acquisition or strategic alliance effected by the
Employer or any proposed acquisition or strategic alliance being considered by
the Employer, (E) information regarding the status or outcome of any
negotiations engaged in by the Employer, (F) information regarding the existence
or terms of any contract entered into by the Employer, (G) information regarding
any aspect of the Employer's intellectual property position, (H) information
regarding prices or costs of the Employer, (I) information regarding any aspect
of the Employer's business strategy, including, without limitation, the
Employer's marketing, selling and distribution strategies, (J) information
regarding customers or suppliers of the Employer, (K) information regarding the
skills, compensation and other terms of employment or engagement of the
Employer's employees and consultants, (L) business plans, budgets, unpublished
financial statements and unpublished financial data of the Employer, (M)
information regarding marketing and sales of any actual or proposed product or
services of the Employer and (N) any other information that the Employer may
designate as or reasonably deem to be confidential. "Confidential Information"
shall exclude information known to the Employee prior to the date of employment.
6.2 Nondisclosure. The Employee acknowledges that, except to
the extent otherwise provided below in this Section 6.2 or in Section 6.4
hereof, all Confidential Information disclosed to or acquired by the Employee is
a valuable, special, and unique asset of the Employer and is to be held in trust
by the Employee for the Employer's sole benefit. Except as otherwise provided
below in this Section 6.2 or in Section 6.4 hereof, the Employee shall not, at
any time during or after the Term, use for himself or others, or disclose or
communicate to any person for any reason, any Confidential Information without
the prior written consent of the Employer. Notwithstanding anything in this
Section 6.2 to the contrary, it is understood that, except to the extent
otherwise expressly prohibited by the Employer, (A) the Employee may disclose or
use Confidential Information in performing his duties and responsibilities to
the Employer but only to the extent required or necessary for the performance of
such duties and responsibilities in the ordinary course and within the scope of
his employment, and (B) the Employee may disclose any Confidential Information
pursuant to a request or order of any court or governmental agency, provided
that the Employee promptly notifies the Employer of any such request or order
and provides reasonable cooperation (at the Employer's expense) in the efforts,
if any, of the Employer to contest or limit the scope of such request or order.
6.3 Third Party Confidential Information. The Employee
acknowledges and agrees that the Employer has received, and may receive in the
future, confidential or proprietary information from third parties ("Third Party
Confidential Information") subject to a duty on the Employer's part to maintain
the confidentiality of such Third Party Confidential Information and to use it
only for certain limited purposes. During the Term and thereafter, the Employee
shall hold Third Party Confidential Information in the strictest confidence and
will not use or disclose to anyone any Third Party Confidential Information,
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<PAGE>
unless expressly authorized in writing by the Employer or unless otherwise
provided below in this Section 6.3 or in Section 6.4 below. Notwithstanding
anything in this Section 6.3 to the contrary, it is understood that, except to
the extent otherwise expressly prohibited by the Employer, (A) the Employee may
disclose or use Confidential Third Party Information in performing his duties
and responsibilities to the Employer but only to the extent required or
necessary for the performance of such duties and responsibilities in the
ordinary course and within the scope of his employment and (B) the Employee may
disclose any Third Party Confidential Information pursuant to a request or order
of any court or governmental agency, provided that the Employee promptly
notifies the Employer of any such request or order and provides reasonable
cooperation (at the Employer's expense) in the efforts, if any, of the Employer
to contest or limit the scope of such request or order.
6.4 Permitted Disclosures. The Employee's obligations under
Section 6.2 and/or Section 6.3 hereof not to use, disclose or communicate
Confidential Information or Third Party Confidential Information to any person
without the prior written consent of the Employer shall not apply to any
Confidential Information or Third Party Confidential Information which (i) is or
becomes publicly known (as demonstrated by written evidence provided by the
Employee) under circumstances involving no breach by the Employee of this
Agreement and/or (ii) was or is approved for release by the Board or an
authorized officer of the Employer.
6.5 Other Duties. The obligations of the Employee under this
Section 6 are without prejudice, and are, in addition to, any other obligations
or duties of confidentiality, whether express or implied or imposed by
applicable law, that are owed to the Employer or any other person to whom the
Employer owes an obligation of confidentiality.
7. No Improper Disclosure or Use of Materials. The Employee shall not
improperly use or disclose to the Employer or for the Employer's benefit any
confidential information or trade secrets of (i) any former or future employer,
(ii) any person to whom the Employee has previously provided, currently provides
or may in the future provide consulting services or (iii) any other person to
whom the Employee owes an obligation of confidentiality. The Employee shall not
bring onto the premises of the Employer any unpublished documents or any
property belonging to any person referred to in any of the foregoing clauses
(i), (ii) or (iii) unless consented to, in writing, by such person.
8. Right to Inspect. The Employee agrees that any property situated on
the Employer's premises, including disks and other storage media, filing
cabinets or other work areas, is subject to inspection by Employer personnel at
any time with or without notice.
9. Inventions; Assignment.
9.1 Definitions. For purposes of this Agreement, the term
"Assigned Inventions" shall mean any and all Inventions that (i) are made,
conceived, invented, discovered, originated, authored, created, learned or
reduced to practice by the Employee, either alone or together with others, in
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<PAGE>
the course of performing his duties and responsibilities hereunder or in the
course of otherwise rendering any services to the Employer (in either case,
regardless of whether or not such Inventions were made, conceived, invented,
discovered, originated, authored, created, learned or reduced to practice by the
Employee at the Employer's facilities or during regular business hours or
utilizing resources of the Employer) or (ii) arise out of or are based upon any
Confidential Information or Third Party Confidential Information. For purposes
of this Agreement, the term "Proprietary Rights" shall mean (x) any and all
rights under or in connection with any patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications, service marks,
service mark applications, trade names, trade name applications, mask works,
trade secrets and/or other intellectual property rights with respect to Assigned
Inventions and (y) the goodwill associated with any and all of the rights
referred to in the foregoing clause (x).
9.2 Assignment; Notice. The Employee hereby agrees to hold any
and all Assigned Inventions and Proprietary Rights in trust for the sole right
and benefit of the Employer and such other person or persons as the Employer
shall designate in writing, and the Employee hereby assigns to the Employer and
such other person or persons as the Employer shall designate in writing all of
his right, title and interest in and to any and all Assigned Inventions and
Proprietary Rights. The Employee agrees to give the Employer prompt written
notice of any Invention or Proprietary Right and agrees to execute such
instruments of transfer, assignment, conveyance or confirmation and such other
documents as the Employer may request to evidence, confirm or perfect the
assignment of all of the Employee's right, title and interest in and to any
Assigned Invention or Proprietary Right pursuant to the foregoing provisions of
this Section 9.2. The Employee hereby waives and quitclaims to the Employer any
and all claims of any nature whatsoever that the Employee may now or hereafter
have for infringement of any Proprietary Rights assigned hereunder to the
Employer.
9.3 Works Made for Hire. The Employee hereby acknowledges and
agrees that those Assigned Inventions that are original works of authorship
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
9.4 Duties to Assist. At the request of the Employer, the
Employee will assist the Employer in every proper way (including, without
limitation, by executing patent applications) to obtain and enforce in any
country in the world Proprietary Rights relating to any or all Assigned
Inventions. The Employee's obligation under this Section 9.4 shall continue
beyond the Term. If and to the extent that, at any time after the Term, the
Employer requests assistance from the Employee with respect to obtaining and
enforcing in any country in the world any Proprietary Rights relating to
Assigned Inventions, the Employer shall compensate the Employee at a reasonable
rate for the time and expenses actually spent by the Employee on such
assistance.
9.5 Power of Attorney. By this Agreement, the Employee hereby
irrevocably constitutes and appoints the Employer as his attorney-in-fact for
the purpose of executing, in the Employee's name and on his behalf, (i) such
instruments or other documents as may be necessary to evidence, confirm or
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perfect any assignment pursuant to the provisions of this Section 9, (ii) such
instruments or other documents as may be necessary to assign, transfer or convey
any Assigned Invention to any third party to whom the Employer desires to
assign, transfer or convey any Assigned Invention or any interest therein or
(iii) such applications, certificates, instruments or documents as may be
necessary to obtain or enforce any Proprietary Rights in any country of the
world. This power of attorney is coupled with an interest on the part of the
Employer and is irrevocable.
9.6 Filings. Without the prior written consent of the
Employer, the Employee shall not, at any time, file any patent, trademark,
service mark, trade name or copyright application with respect to, or claiming,
any Assigned Inventions.
9.7 Other Duties. The obligations of the Employee under this
Section 9 are without prejudice, and are in addition to, any other obligations
or duties of the Employee, whether express or implied or imposed by applicable
law, to assign to the Employer all Assigned Inventions and all Proprietary
Rights.
10. Agreement Not to Compete
10.1 Noncompetition. In view of the unique nature of the
business of the Employer and the need of the Employer to maintain its
competitive advantage in the industry, the Employee agrees that, during the
Restricted Period (as defined in Section 10.2 below), the Employee shall not,
directly or indirectly, within the United States of America or its Territories
or Possessions or within any other country in the world in which the Employer
has conducted or is then conducting business, engage in, own an interest in
(except as a holder of no more than five percent (5%) of the shares of any
publicly traded corporation), be employed by, consult for, act as an advisor to,
or otherwise in any way participate in or become associated with, any
Competitive Business (as defined in Section 10.2 below) or any corporation,
partnership, limited liability company, business, enterprise, venture or other
person or entity that is engaged or participates in any Competitive Business
(each, a "Competitive Business Entity"), unless in each case the Employee shall
have given to the Board notice of the Employee's intention to be employed by,
consult for, act as an advisor to, or otherwise in any way participate in or
become associated with, any Competitive Business or any Competitive Business
Entity and the Board shall have approved the Employee's relationship with or
engagement in such Competitive Business or Competitive Business Entity;
provided, however, that, notwithstanding anything in the foregoing provisions of
this Section 10.1 to the contrary, the Employee may be employed by, consult for,
act as an advisor to, or otherwise participate in any way with, any person or
entity that is engaged in any Competitive Business if, but only if, the services
being rendered by the Employee to such person or entity (whether in the nature
of employment services, consulting services or otherwise) do not pertain or in
any way relate to such Competitive Business. During the Restricted Period, the
Employee also shall not solicit, or arrange to have any other person or entity
solicit, any person or entity engaged by the Employer as an employee, customer
or supplier of, or consultant or advisor to, the Employer to terminate such
party's relationship with the Employer.
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10.2 Definitions. For purposes of this Section 10, the
following terms shall have the meanings provided therefor below:
(a) "Competitive Business" shall mean any business
that is engaged in a business in competition with the activities of the
Company as they may exist from time to time.
(b) "Restricted Period" shall mean the period
commencing on the date of this Agreement and ending on the first
anniversary of the effective date of the termination of the Employee's
employment with the Employer unless: (a) Employer terminates the
employment of the Employee under this Agreement without Cause or (b)
Employee terminates employment with Good Reason, in which case "
Restricted Period" shall mean the period commencing on the date of this
Agreement and ending on the date the Employee ceases being entitled to
receive Salary pursuant to the provisions of Section 5.3(a).
10.3 Time Periods; Divisibility. The time periods provided for
in this Section 10 shall be extended for a period of time equal to any period of
time in which the Employee shall be in violation of any provision of this
Section 10 and any period of time required for litigation to enforce the
provisions of this Section 10. If at any time the provisions of this Section 10
shall be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10 shall be
considered divisible and shall become and be automatically amended to apply only
to such area, duration and scope of activity as shall be determined to be
reasonable by the court or other body having jurisdiction over the matter; and
the Employee agrees that this Section 10, as so amended, shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
11. Return of Documents. Employee will promptly deliver to the
Employer, upon the termination of the Employee's employment with the Employer
or, if earlier, upon the request of the Employer, all documents and other
tangible media (including all originals, copies, reproductions, digests,
abstracts, summaries, analyses, notes, notebooks, drawings, manuals, memoranda,
records, reports, plans, specifications, devices, formulas, storage media,
including software, and computer printouts) in the Employee's actual or
constructive possession or control that contain, reflect, disclose or relate to
any Confidential Information, Third Party Confidential Information, Assigned
Inventions or Proprietary Rights. The Employee will destroy any related computer
entries on equipment or media not owned by the Employer.
12. No Use of Name, Etc. Without the prior written consent of the
Employer, the Employee shall not, at any time (including, without limitation, at
any time after the termination of the Employee's employment with the Employer),
use, for himself or on behalf of any other person, any name that is identical or
similar to or likely to be confused with the name of the Employer or the name of
any product or service produced or provided by the Employer, provided that the
Employee prior to termination may use the Employer's name in performing his or
her duties and responsibilities to the Employer but only to the extent required
or necessary for the performance of such duties and responsibilities in the
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ordinary course and within the scope of his employment. Without the prior
written consent of the Employer, the Employee shall not, at any time after the
termination of the Employee's employment with the Employer, directly or
indirectly represent himself, whether on his behalf or on behalf of any other
person, as then being in any way connected or associated with the Employer.
13. No Conflicting Obligation. Employee represents that he is free to
enter into this Agreement and that his performance of all of the terms of this
Agreement and of all of his duties and responsibilities as an employee of the
Employer do not and will not breach (i) any agreement to keep in confidence
information acquired by the Employee in confidence or in trust, (ii) any
agreement to assign to any third party inventions made by the Employee and/or
(iii) any agreement not to compete against the business of any third party.
Employee further represents that he has not made and will not make any
agreements in conflict with this Agreement.
14. Indemnification. The Employer agrees to indemnify, defend and hold
harmless the Employee and his respective successors, heirs and assigns
("Indemnitees") against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any of them in connection with any claims, suits,
actions, demands or judgments arising from the good faith performance by the
Employee of his duties and responsibilities hereunder.
15. Unique Nature of Agreement; Specific Enforcement. The Employer and
the Employee agree and acknowledge that the rights and obligations set forth in
this Agreement are of a unique and special nature and that the Employer is,
therefore, without an adequate legal remedy in the event of the Employee's
violation of any of the covenants set forth in this Agreement. The Employer and
the Employee agree, therefore, that, in addition to all other rights and
remedies, at law or in equity or otherwise, that may be available to the
Employer, each of the covenants made by the Employee under this Agreement shall
be specifically enforceable in equity.
16. Survival. The provisions of Sections 6, 7, 9, 10, 12 and 14 shall
survive the termination of this Agreement.
17. Miscellaneous.
17.1 Entire Agreement. This Agreement represents the entire
agreement of the parties with respect to the arrangements contemplated hereby.
No prior agreement, whether written or oral, shall be construed to change,
amend, alter, repeal or invalidate this Agreement. This Agreement may be amended
only by a written instrument executed in one or more counterparts by the
parties.
17.2 Waiver. No consent to or waiver of any breach or default
in the performance of any obligations hereunder shall be deemed or construed to
be a consent to or waiver of any other breach or default in the performance of
any of the same or any other obligations hereunder. Failure on the part of
either party to complain of any act or failure to act of the other party or to
declare the other party in default, irrespective of the duration of such
-9-
<PAGE>
failure, shall not constitute a waiver of rights hereunder and no waiver
hereunder shall be effective unless it is in writing, executed by the party
waiving the breach or default hereunder.
17.3 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may be assigned by the Employer to any
Affiliate of the Employer and to a successor of its business to which this
Agreement relates (whether by purchase or otherwise). "Affiliate of the
Employer" means any person which, directly or indirectly, controls or is
controlled by or is under common control with the Employer and, for the purposes
of this definition, "control" (including the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of another
whether through the ownership of voting securities or holding of office in
another, by contract or otherwise. The Employee may not assign or transfer any
or all of his rights or obligations under this Agreement.
17.4 Arbitration.
(a) Disputes to be Arbitrated Any controversy, claim,
or dispute arising out of or relating to this Agreement, including its
formation, validity, or breach thereof, whether arising during or after
the period of this Agreement, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association, and
the decision of the arbitrator shall be final and binding upon the
parties. Nothing in this paragraph, however, shall prevent the parties
from seeking injunctive relief from a state or federal court of
competent jurisdiction.
(b) Arbitration Procedure The arbitration shall be
conducted by one neutral arbitrator, who shall be selected in
accordance with the rules of the American Arbitration Association. The
arbitration shall take place in Boston, Massachusetts. The arbitrator
shall issue a written decision and set forth the reasons for said
decision. Judgment upon the award rendered by the arbitrator may be
entered in any federal or state court having competent jurisdiction
thereof. The costs of arbitration, including the fees of the
arbitrator, shall be borne equally. Each side shall bear its own
attorney's fees and costs, and punitive damages shall not be allowed.
17.5 Severability. All headings and subdivisions of this
Agreement are for reference only and shall not affect its interpretation. In the
event that any provision of this Agreement should be held unenforceable by a
court of competent jurisdiction, such court is hereby authorized to amend such
provision so as to be enforceable to the fullest extent permitted by law, and
all remaining provisions shall continue in full force without being impaired or
invalidated in any way.
17.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding choice of law rules thereof.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have signed this agreement as of the
date written above as a sealed instrument.
SAFESCIENCE, INC.
By: /s/ Bradley J. Carver
---------------------
Name:
Title:
/s/ Richard A. Salter
---------------------
Name: Richard A. Salter
-11-
DAYMON ASSOCIATES, INC.
700 FAIRFIELD AVE,, STAMFORD, CT 06902-7337
TEL: 203-352-7500 - FAX: 203-352-7575
May 20, 1999
Mr. Richard A. Salter
Senior V.P,, Corporate Development
SafeScience, Inc.
31 St. James Avenue #520
Boston, MA 02116
PARTNERSHIP AGREEMENT
- ---------------------
The below is the partnering agreement under which we will move for-ward with on
the development on the SafeScience franchise:
I. It is Daymon's intention to deliver national sales and marketing
resources for the purpose of selling SafeScience brand, private
label and co-branded for all customers in North America. Daymon
will also represent SafeScience in international markets that we
have offices. (See attached).
II. A commission will be paid for services rendered specific to
execution at all customers. The commission rate will be established
at 3% on all items (total net sales - customer specific).
III. A "corporate commission" will be paid based on all SafeScience
sales (total net sales), for services rendered in managing the
overall SafeScience program. This commission rate is established at
3% on all items, These monies will not be payable until the total
value exceeds the monthly dollar amount of $15,000. Any new
business rendered/developed with SafeScience will be included in
this management commission, New Business will be defined as:
- Retail Chains, Hardware Outlets, Drug Store Chains, Third Party
Partnerships (i,e. EcoTerra), C Stores, Automotive Outlets,
Mass Merchandisers, Club Stores, Wholesalers, FoodService
Providers and Telemarkers.
<PAGE>
IV. Recognizing the opportunity for greater continuity, better
communication and efficiency, every reasonable attempt will be made
to utilize the in-house services at Daymon including Creative
Services, C&M Design and Marketing Research- Each department will
quote for services and will be competitive to current SafeScience
options or they will not participate.
V. A retainer fee of $15,000 per month will be paid to Daymon
Associates to assign a dedicated person to manage the SafeScience
Business. This fee will be paid the first of each month for the
previous month, If both parties in the middle of the month approve
this agreement, that month will be prorated according to the number
of days worked. If this agreement is canceled by either party, with
a 90-day notification, SafeScience will be obligated to continue
commissions but will not be obligated to continue to pay the
$15,000 monthly retainer.
VI. In the event our partnership dissolves, Daymon Associates will
continue to represent, at established rates, the entire SafeScience
line at those accounts already participating in the program as well
as any Daymon customer accounts that elect to take the SafeScience
program within 6 months of termination of our partnership.
(Established rate of 6% - 3% corporate & 3% customer specific
location).
VII. Upon completion of the signed agreement Daymon Associates will
appoint a Brands Manager dedicated to the SafeScience business,
SafeScience will be involved in the approval process of this
individual.
VIII. SafeScience agrees that the appointed Brands Manager will work as
an agent of SafeScience hired by Daymon Associates and will not be
offered employment within the SafeScience organization.
-2-
<PAGE>
IX. Daymon will be compensated on agricultural sales where we have
educated the retailer to mandate usage of the SafeScience
technology with the principal/grower.
/s/Pat Collins /s/Richard Salter
- -------------- -----------------
PAT COLLINS RICHARD A. SALTER
Vice President Senior Vice President
Daymon Associates SafeScience, Inc.
Cc: Stephen Pall
-3-
<PAGE>
- --------------------------------------------------------------------------------
DAYMON ASSOCIATES
CUSTOMER NETWORK
- INTERNATIONAL -
- --------------------------------------------------------------------------------
COMMERCIAL MEXICANA
Mexico City, Mexico
COSTCO WHOLESALE
Mexico City, Mexico
DAIRY FARM GROUP
Wanchai, Hong Kong
DAVID'S LIMITED
Blacktown, Australia
DISCO
Buenos Aires, Argentina
FRANKLINS
Perth, Australia
FOODLAND ASSOCIATED LIMITED
Perth, Australia
METRO CASH & CARRY, INC.
Johannesburg, South Africa
PICK N' PAY STORES, LTD.
Johannesburg, South Africa
PROGRESSIVE ENTERPRISES
Auckland, New Zealand
SANTA ISABEL
Val Paraiso, Chile
WOOLWORTHS
Manukau, Aukland - New Zealand
- --------------------------------------------------------------------------------
December 3, 1999
Jon Arnold
Shaw's Supermarkets
140 Laurel St.
E. Bridgewater, MA 02333
Dear Jon:
As we discussed, the following will serve to formalize our agreement with regard
to exclusivity for Shaw's. Please review and initial at the bottom of the page
if you are in agreement.
1. The definition of exclusivity will consist of two components: (1) Any
product brought to market by SafeScience, Inc. and (2). The brand name
"SafeScience".
2. Shaw's will have supermarket channel exclusivity throughout New England
for as long as they stock these lines. New England will be defined as the
states of Maine, New Hampshire, Vermont, Massachusetts, Connecticut and
Rhode Island. This exclusivity will pertain to all supermarket retailers
doing business in New England, including retailers whose base is outside
New England but have stores which spill-in to the region. (Except that
SafeScience will have the right to sell to supermarkets whose base is
outside New England if they agree not to place the products into their New
England stores).
3. Shaw's may grant an exception to supermarket channel exclusivity,
especially for retailers with minimal numbers of stores in the region.
SafeScience must make a written request for all exceptions and provide
store locations to Shaw's. However, Shaw's is not obligated to grant any
such requests for exclusivity.
4. Shaw's will have a six-month exclusivity for all retail channels, for the
six months September 1, 1999 to February 28, 2000. This would exclude all
existing distribution such as CVS, BJ's Wholesale Club and small
hardware/home center outlets.
5. Exclusivity is not transferable to other markets, should Sainsbury
purchase additional retailers.
6. Shaw's will have the right of first refusal on any new SafeScience
products. If Shaw's does not exercise this right within 90 days,
SafeScience has the right to market this technology to any New England
<PAGE>
supermarkets but cannot use the SafeScience brand name as the brand.
SafeScience: /s/ Richard Salter Date:3/3/00
---------------------------------------- ------
Shaw's: /s/ Illegible Date:12/3/99
-------------------------------------------------- -------
SAFESCIENCE, INC.
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purposes of this SafeScience, Inc. 1998 Stock Option Plan (the
"Plan") are to encourage employees, directors and consultants of SafeScience,
Inc., a Nevada corporation (together with any successor thereto, the "Company"),
or any present or future Subsidiary Corporation (as defined below) of the
Company to acquire a proprietary interest in the growth and performance of the
Company, to generate an increased incentive to contribute to the Company's
future success an prosperity, thus enhancing the value of the Company for the
benefit of its stockholders, and to enhance the ability of the Company to
attract and retain qualified individuals upon whom, in large measure, the
sustained progress, growth and profitability of the Company depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(c) "Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not less than two (2) directors;
or, if no such committee shall have been designated, the Board.
(d) "Consultant" shall mean an independent contractor who renders
technical, business, professional or other consulting services to the Company.
(e) "Fair Market Value" shall mean, with respect to Shares or other
securities, the fair market value of the Shares or other securities determined
by such methods or procedures as shall be established from time to time by the
Committee in good faith or in accordance with applicable law. Unless otherwise
determined by the Committee, the Fair Market Value of Shares shall mean (i) the
closing price per Common Share on the principal exchange on which the Shares are
then trading, if any, on such date, or, if the Shares were not traded on such
date, then on the next preceding trading day during which a sale occurred; or
(ii) if the Shares are not traded on an exchange but are quoted on the NASDAQ
Stock Market or a successor quotation system, (1) the last sales price (if the
Shares are then listed as a National Market Issue on the NASDAQ Stock Market) or
(2) the mean between the closing representative bid and asked prices (in all
other cases) for the Shares on such date as reported by the NASDAQ Stock Market
or such successor quotation system; or (iii) if the Shares are not publicly
traded on an exchange and not quoted on the NASDAQ Stock Market or a successor
quotation system, the mean between the closing bid and asked prices for the
Shares on such date as determined in good faith by the Committee.
<PAGE>
(f) "Incentive Stock Option" shall mean an option granted under the
Plan that is designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(g) "Independent Director" shall mean each member of the Board who is
not an Employee of the Company or any Subsidiary Corporation of the Company.
(h) "Employee" shall mean any officer, director or other employee who
is a regular full-time or part-time employee of the Company or its present and
future Subsidiary Corporations.
(i) "Non-Qualified Stock Option" shall mean an Option granted under the
Plan that is not designated as an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Option Agreement" shall mean a written agreement, contract or
other instrument or document evidencing an Option granted under the Plan.
(l) "Participant" shall mean a Employee, Independent Director or
Consultant who has been granted an option under the Plan.
(m) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.
(n) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation thereto.
(o) "Shares" shall mean shares of Common Stock of the Company, $.01 par
value, and such other securities or property as may become the subject of
Options pursuant to an adjustment made under Section 4(b) of the Plan.
(p) "Subsidiary Corporation" shall have the meaning ascribed thereto in
Code Section 424(f).
(q) "Ten Percent Stockholder" shall mean a Person, who together with
his or her spouse, children and trusts and custodial accounts for their benefit,
immediately at the time of the grant of an Option and assuming its immediate
exercise, would beneficially own, within the meaning of Section 424(d) of the
Code, Shares possessing more than ten percent (10%) of the total combined voting
power of all of the outstanding capital stock of the Company or any Subsidiary
Corporation of the Company.
-2-
<PAGE>
SECTION 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Option shall be within the sole discretion of the Committee, may be made at any
time, and shall be final, conclusive, and binding upon all Persons, including
the Company, any Participant, any holder or beneficiary of any Option, any
stockholder of the Company and any Employee of the Company.
(b) Powers. Subject to the terms of the Plan and applicable law and
except as provided in Section 7 hereof, the Committee shall have full power and
authority: (i) to designate Participants; (ii) to determine the type or types of
Options to be granted to each Participant under the Plan; (iii) to determine the
number of Shares to be covered by Options; (iv) to determine the terms and
conditions of any Option; (v) to determine whether, to what extent, and under
what circumstances Options may be settled or exercised in cash, Shares, other
Options, or other property, or canceled, forfeited, or suspended, and the method
or methods by which Options may be settled, exercised, canceled, forfeited, or
suspended; (vi) to interpret and administer the Plan and any instruments or
agreements relating to, or Options granted under, the Plan; (vii) to establish,
amend, suspend, or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of the Plan; and (viii)
to make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
SECTION 4. SHARES AVAILABLE FOR OPTIONS
(a) Shores Available. Subject to adjustment as provided in Section
4(b):
(i) Limitation on Number of Shares. Options issuable under the
Plan are limited such that the maximum aggregate number of Shares which may be
issued pursuant to, or by reason of, Options is 600,000. Further, no Participant
shall be granted Options to purchase more than 200,000 Shares in any one fiscal
year; provided, however, that the Committee may adopt procedures for the
counting of Shares relating to any grant of Options to ensure appropriate
counting, avoid double counting, and provide for adjustments in any case in
which the number of Shares actually distributed differs from the number of
Shares previously counted in connection with such grant; provided further,
however, that the options granted under the Company's 1996 Nonqualified Stock
Option Plan shall not be treated as outstanding. To the extent that an Option
granted a Participant ceases to remain outstanding by reason of termination of
rights granted thereunder, forfeiture or otherwise, the Shares subject to such
Option shall again become available for award under the Plan.
(ii) Sources of Shores Deliverable Under Options. Any Shares
delivered pursuant to an Option may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
(iii) Adjustments. In the event that the Committee shall
determine that any change in corporate capitalization, such as a dividend or
other distribution of Shares, or a corporate transaction, such as a merger,
-3-
<PAGE>
consolidation, reorganization or partial or complete liquidation of the Company
or other similar corporate transaction or event, affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem necessary to prevent dilution or enlargement of the benefits or
potential benefits intended to be made under the Plan, adjust any or all of (x)
the number and type of Shares which thereafter may be made the subject of
Options, (y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to any Option or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Option; provided, however, in each case, that (i) with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422 of the Code or
any successor provision thereto, (ii) such adjustment shall be made in such
manner as not to adversely affect the status of any Option as "performance-based
compensation" under Section 162(m) of the Code; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
In determining the Participants to whom Options shall be granted and
the number of Shares to be covered by each Option, the Committee shall take into
account the nature of the Person's duties, such Person's present and potential
contributions to the success of the Company and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the Plan. A
Participant who has been granted an Option or Options under the Plan may be
granted an additional Option or Options, subject to such limitations as may be
imposed by the Code on the grant of Incentive Stock Options. Notwithstanding
anything herein to the contrary, Incentive Stock Options may be granted only to
Employees of the Company or any Parent Corporation or Subsidiary Corporation.
SECTION 6. OPTIONS
The Committee is hereby authorized to grant Options to Participants
upon the following terms and the conditions (except to the extent otherwise
provided in Section 7) and with such additional terms and conditions, in either
case not inconsistent with the provisions of the Plan, as the Committee shall
determine:
(a) Exercise Price. The exercise price per Share purchasable under
Options shall be determined by the Committee at the time the Option is granted
but generally shall not be less than the Fair Market Value of the Shares covered
thereby at the time the Option is granted.
(b) Option Term. The term of each Option shall be fixed by the
Committee but generally shall not exceed ten (10) years from the date of grant.
(c) Time and Method of Exercise. The Committee shall determine the time
or times at which the right to exercise an Option may vest, and the method or
methods by which, and the form or forms in which, payment of the option price
with respect to exercises of such Option may be made or deemed to have been made
-4-
<PAGE>
(including, without limitation, (i) cash, Shares, outstanding Options or other
consideration, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant option price and (ii) a broker-assisted
cashless exercise program established by the Committee), provided in each case
that such methods avoid "short-swing" profits to the Participant under Section
16(b) of the Securities Exchange Act of 1934, as amended. The payment of the
exercise price of an Option may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee.
(d) Incentive Stock Options. All terms of any Incentive Stock Option
granted under the Plan shall comely in all respects with the provisions of
Section 422 of the Code, or any successor provision thereto, and any regulations
promulgated thereunder including that, (i)(A) in the case of a grant to a
Participant that is not a Ten Percent Stockholder the purchase price per Share
purchasable under Incentive Stock Options shall not be less than the Fair Market
Value of a Share on the date of grant and (B) in the case of a grant to a Ten
Percent Stockholder the purchase price per Share purchasable under Incentive
Stock Options shall not be less than 110% of the Fair Market Value of a Share on
the date of grant and (ii) the term of each Incentive Stock Option shall be
fixed by the Committee but shall in no event be more than ten (10) years from
the date of grant, or in the case of an Incentive Stock Option granted to a Ten
Percent Stockholder, five (5) years from the date of grant.
(e) Limits on Transfer of Options. Subject to Code Section 422, no
Option and no right under any such Option, shall be assignable, alienable,
saleable or transferable by a Participant otherwise than by will or by the laws
of descent and distribution, and such Option, and each right under any such
Option, shall be exercisable during the Participant's lifetime, only by the
Participant or, if permissible under applicable law (including Code Section 422,
in the case of an Incentive Stock Option), by the Participant's guardian or
legal representative. No Option and no right under any such Option, may be
pledged, alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and unenforceable
against the Company. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that Non-Qualified Stock Options be transferable, without
consideration, to immediate family members (i.e., children, grandchildren or
spouse), to trusts for the benefit of such immediate family members and to
partnerships in which such family members are the only partners. The Committee
may attach to such transferability feature such terms and conditions as it deems
advisable. In addition, a Participant may, in the manner established by the
Committee, designate a beneficiary (which may be a person or a trust) to
exercise the rights of the Participant, and to receive any distribution, with
respect to any Option upon the death or disability of the Participant. A
beneficiary, guardian, legal representative or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Option Agreement applicable to such Participant,
except as otherwise determined by the Committee, and to any additional
restrictions deemed necessary or appropriate by the Committee.
(f) Tax Withholding. The Company or any Subsidiary is authorized to
withhold from any Option granted any payment relating to an Option under the
Plan, including from the exercise of an Option, amounts of withholding and other
taxes due in connection with any transaction involving an Option, and to take
-5-
<PAGE>
such other action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of with holding taxes and
other tax obligations relating to any Option. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(g) Loan Provisions. With the consent of the Committee, and subject at
all times to laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or arrange for a
loan or loans to a Participant with respect to the exercise of any Option,
including the payment by a Participant of any or all federal, state, or local
income or other taxes due in connection with the exercise of any Option. Subject
to such limitations, the Committee shall have full authority to decide whether
to make a loan or loans hereunder and to deter mine the amount, terms, and
provisions of any such loan or loans, including the interest rate to be charged
in respect of any such loan or loans, whether the loan or loans are to be with
or without recourse against the borrower, the terms on which the loan is to be
repaid and the conditions, if any, under which the loan or loans may be
forgiven.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Option Agreement or in the Plan:
(a) Amendments to the Plan. The Plan may be wholly or partially amended
or otherwise modified, suspended or terminated at any time or from time to time
by the Board, but no amendment without the approval of the stock holders of the
Company shall be made if such amendment would be required under Sections 162(m)
or 422 of the Code, Rule 16b-3 or any other law or rule of any governmental
authority, stock exchange or other self-regulatory organization to which the
Company may then be subject. Neither the amendment, suspension nor termination
of the Plan shall, without the consent of the holder of such Option, alter or
impair any rights or obligations under any Option theretofore granted.
(b) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant shall have any claim to be
granted any Option under the Plan, and there is no obligation for uniformity of
treatment of Participants or holders or beneficiaries of Options under the Plan.
The terms and conditions of Options need not be the same with respect to each
recipient.
(b) No Right to Employment. The grant of an Option shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or to serve as an Independent Director of or Consultant to the Company.
Further, the Company may at any time dismiss a Participant from employment, or
as an Independent Director or Consultant, as the case may be, free from any
-6-
<PAGE>
liability, or any claim under the Plan, unless otherwise expressly provide in
the Plan or in any Option Agreement.
(c) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating t the Plan shall be determined in
accordance with the laws of the State of Nevada and applicable Federal law.
(d) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, unenforceable in any jurisdiction,
or would disqualify the Plan or any Option under any law deemed applicable by
the Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan, such
provision shall be deemed void, stricken and the remainder of the Plan and any
such Option shall remain in full force and effect.
(e) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lie of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or other wise eliminated.
(f) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision hereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of December 1, 1998, subject to stockholder
approval of the Plan on or prior to such date.
SECTION 10. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which all
Options issuable hereunder have been issued, (ii) the termination of the Plan by
the Board or (iii) December 1, 2008. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Option or to waive any conditions or rights under any such Option, and the
authority of the Board to amend the Plan, shall extend beyond such date.
-7-
Exhibit 21
Subsidiaries
SafeScience Products, Inc.
International Gene Group, Inc.
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to use of our reports and
to all references to our Firm, included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 28, 2000
Exhibit 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
Board of Directors
SafeScience, Inc.
Boston, Massachusetts
We consent to the use of our audit report dated March 27, 1997, on the
consolidated financial statements of IGG International, Inc. (now known as
SafeScience, Inc.) as of December 31, 1995 and 1996, for the filing with and
attachment to the Form S-1 filed in April 2000, and inclusion in the Company's
previously filed Registration Statement File Nos. 333-046764.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
April 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at December 31, 1999 Audited and
the Consolidated Statement of Income for the twelve months ended December 31,
1998 Audited and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,377,067
<SECURITIES> 0
<RECEIVABLES> 95,222
<ALLOWANCES> 43,000
<INVENTORY> 356,211
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0
0
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<EPS-BASIC> (.77)
<EPS-DILUTED> (.77)
</TABLE>
