This was in the May S filed with the SEC. Has anyone voted yet?
I presume that they just let it lapse without a vote. I wonder if a vote was not really required since between the Grables and Schwatz, they control the vote?
AGREEMENT
---------
In June 1998, the Company and Mr. Grable, entered into the Patent Licensing
Agreement. Pursuant to the terms of the Patent Licensing Agreement, the Company
was granted the exclusive right to modify, customize, maintain, incorporate,
manufacture, sell, and otherwise utilize and practice the Patent, all
improvements thereto and all technology related to the process, throughout the
world. This license shall apply to any extension or re-issue of the Patent. The
term of the license is for the life of the Patent (17 years) and any renewal
thereof, subject to termination, under certain conditions. As consideration for
the License, on June 5, 1998, the Company issued to Mr. Grable 3,500,000 shares
of common stock and is required to issue and additional 3,500,000 shares in June
1999. The market price of the Shares at the time of issuance was $.54 per Share.
In addition, the Company has agreed to pay to Mr. Grable, a royalty based upon
the net selling price (the dollar amount earned from the sale by the Company,
both international and domestic, before taxes minus the cost of the goods sold
and commissions or discounts paid), of all products and goods in which the
Patent is used, before taxes and after deducting the direct cost of the product
and commissions or discounts paid (the "Royalty"). During the second year of the
Agreement there is a minimum cash royalty provision of $250,000 payable at the
end of the second year.
The Board of Directors did not submit the matter for a shareholder's vote prior
to the execution of the Patent License Agreement or the issuance of the shares,
since shareholder approval was not required by the Florida Business Corporation
Act. Pursuant to the Patent License Agreement, the Company is required to have
the Patent License Agreement ratified by its Shareholders at its next special or
annual meeting of Shareholders in order for the Licensing Royalties set forth
above, to take the place of the Development Royalties set forth in the Amendment
to Mr. Grable's Employment Agreement, and for such Amendment to become void and
have no effect. The ratification by the shareholders was requested by Mr.
Grable, based upon advice from his counsel. If shareholder ratification is not
obtained, the Company would contractually be required to pay Development
Royalties until July 4, 1999 (the expiration date of Mr. Grable's Employment
Agreement) in addition to the Patent License Royalties. If ratification is
received, in the event that litigation is instituted with regard to the validity
of the Patent License Agreement, the Company or Mr. Grable could and may assert
as a defense that shareholders approved the Patent License. All shareholders
will be entitled to vote on the ratification.
The Patent Licensing Agreement also contains anti-dilution protection upon the
occurrence of any stock dividend, stock split, combination or exchange of
shares, reclassification or re-capitalization of the Company's common stock,
reorganization of the Company, consolidation with or merger into or sale or
conveyance of all or substantially all of the Company's assets to another
corporation or any other similar event which serves to decrease the number of
Shares issued pursuant to the Patent Licensing Agreement. See "Risk
Factors-Possible Conflict of Interest" and "Certain Transactions". The Patent
has generated no revenues to date. The Company had anticipated generating
revenues in the 4th fiscal quarter beginning April 1999. However, due to the
developmental and clinical investigational trial delays, it is unlikely that
these projections will be met.
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