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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BIOMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2545573
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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3843
(Primary Standard Industrial Classification Code Number)
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1533 Monrovia Avenue, Newport Beach, California 92663
(Address of Principal Executive Offices)
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Zackary S. Irani
Biomerica, Inc.
1533 Monrovia Avenue
Newport Beach, California 92663
(949) 645-2111.
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
Michael Spadaccini, Esq.
731 Ninth Avenue, Suite E
San Diego, CA 92101
(619) 501-3825
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Approximate date of commencement of proposed sale of the securities to
the public: Upon completion of the asset purchase described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
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(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. [ ] ______________
Calculation of Registration Fee:
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Title of each Amount to Proposed Proposed Amount
class of be maximum maximum of
securities registered offering aggregate registration
to be (1) price offering fee
registered per unit(2) price(3)
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Common Stock, 984,274 $1.25 $610,250 $56.14
$0.08 Par Shares
Value
(1) The amount of shares we propose to register depends upon the average
closing price of Biomerica's common stock for the five-day period
immediately preceding the closing of the transaction contemplated in this
proxy statement/prospectus. Therefore, the number of shares to be
registered shall range between 488,200 and 984,274 shares.
(2) The proposed offering price per unit depends upon the average closing
price of Biomerica's common stock for the five-day period immediately
preceding the closing of the transaction contemplated in this proxy
statement/prospectus. Therefore the proposed offering price will range
from $0.62 to $1.25 per share.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act of 1933,
as amended.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission acting pursuant to said section 8(a), may determine.
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Dear Biomerica and Lancer shareholders:
On behalf of the boards of directors and management teams of both
Biomerica, Inc. and Lancer Orthodontics, Inc., we are pleased to deliver
our joint proxy statement/prospectus for Biomerica's proposed purchase of
the assets of Lancer. Upon completion of the purchase, holders of Lancer
common stock will be entitled to receive a dividend of between .677 and
..336 of a share of Biomerica common stock for each share of Lancer common
stock they hold as of the record date, April 30. Lancer
shareholders keep their Lancer shares. Biomerica common stock is listed
on the Nasdaq SmallCap market under the trading symbol "BMRAC". Please
note that the fifth character in our stock symbol is a designation that
our listing on the Nasdaq SmallCap market is "conditional". Please see
the section entitled "Risk Factors" in the proxy Statement/prospectus for
more information.
The boards of directors of Biomerica and Lancer recommend the asset
purchase based upon analysis, investigation and deliberation designed to
reach a result to enhance shareholder value.
We encourage you to read this joint proxy statement/prospectus, which
includes important information about the asset purchase. In addition, the
section entitled "Risk Factors" beginning on page 24 of this joint proxy
statement/prospectus contains a description of risks that you should
consider in evaluating the acquisition.
Completion of the acquisition requires Lancer shareholders to approve and
adopt the asset purchase agreement and approve the acquisition. Lancer
has scheduled its annual meeting of shareholders to obtain this approval
on June 4, 2002. Information regarding this annual meeting is included in
this joint proxy statement/prospectus. The Lancer board of directors
recommends that Lancer shareholders vote "FOR" the proposal to approve
and adopt the asset purchase agreement and approve the asset purchase;
please note that the Lancer directors are subject to conflicts of
interest as described more fully under the heading "Risk Factors".
Please vote "FOR" the proposal by signing and dating the enclosed proxy
card or voting instruction card today and returning it in the pre-
addressed envelope provided.
Thank you for your support.
Sincerely,
/s/ Zackary Irani
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Zackary Irani
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of Biomerica common
stock to be issued in connection with the asset purchase or determined
whether this joint proxy statement/prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated April 10, 2002 and is
first being mailed to shareholders of Lancer on or about _______.
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LANCER ORTHODONTICS, INC.
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 4, 2002
The 2001 Annual Meeting of Shareholders of Lancer Orthodontics, Inc. will
be held at 10:30 a.m. on Monday, June 4, 2002, at Biomerica, Inc.'s
corporate offices, 1533 Monrovia Avenue, Newport Beach, California 92663.
The purposes of the meeting are:
1. To elect a board of directors of Lancer for the ensuing year.
2. To vote on the sale of all of the assets and liabilities of Lancer to
Biomerica, Inc., followed by a distribution to our shareholders of shares
of Biomerica stock that constitute the proceeds of the sale in accordance
with our articles of incorporation, as amended.
3. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on the date
immediately preceding the day this proxy statement/prospectus is mailed
to shareholders, are entitled to notice of and to vote at the Annual
Meeting of Shareholders and any adjournment thereof.
The accompanying proxy statement/prospectus describes the purchase of
Lancer's assets in more detail. We encourage you to read the entire
document carefully. In particular, you should carefully consider the
discussion entitled "Risk Factors" which begins on page 24.
Your vote is important. Whether or not you expect to attend the Lancer
annual meeting in person, please vote by completing, signing and dating
the enclosed proxy card and returning it promptly in the reply envelope
provided. The proxy is revocable by you at any time prior to its use at
the Lancer annual meeting. If you are a holder of record, you may also
cast your vote in person at the Lancer annual meeting. If you receive
more than one proxy card because your shares are registered in different
names or addresses, each proxy card should be signed and returned to
ensure that all your shares will be voted at the Lancer annual meeting.
If your shares are held at a brokerage firm or a bank, you must provide
them with instructions on how to vote your shares.
By Order of the Board of Directors
/s/ Zackary S. Irani
Zackary S. Irani
Chairman of the Board and
Chief Executive Officer
San Marcos, California
==============================================================
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE ASSET PURCHASE 7
SUMMARY 13
The Parties to the Asset Purchase Agreement 13
Essential Terms of the Asset Purchase Agreement 13
Recommendation of the Biomerica Board of Directors 14
Recommendation of the Lancer Board of Directors 14
Reasons for the Asset Purchase Agreement 14
Lancer's Plan Following the Asset Purchase 15
Opinion of Lancer's Financial Advisor Regarding the Asset
Purchase 15
Share Ownership of Directors, Executive Officers, and
Affiliates of Lancer 16
What is Needed to Complete the Asset Purchase 16
Biomerica and Lancer May Terminate the Asset
Purchase Agreement Under Specified Circumstances 17
The Asset Purchase is Intended to Qualify as a Tax Free
Reorganization for United States Federal Income Tax Purposes 17
Accounting Treatment of the Asset Purchase 18
Dissenters' Appraisal Rights 18
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA OF BIOMERICA 18
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA 21
COMPARATIVE PER SHARE MARKET PRICE DATA 23
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION 23
RISK FACTORS 24
THE ANNUAL MEETING OF LANCER SHAREHOLDERS 37
Date, Time and Place 37
Matters to Be Considered at the Annual Meeting 37
Information Regarding the Election of Directors 38
Admission to the Annual meeting 45
Method of Voting; Record Date; Stock Entitled to Vote; Quorum 45
Adjournment and Postponement 46
Voting Procedures 47
Submitting Proxies or Voting Instructions 47
Revoking Proxies or Voting Instructions 47
Proxy Solicitation 47
Contact for Questions and Assistance in Voting 48
Other Matters 48
THE ASSET PURCHASE 48
How the Asset Purchase Is Structured 49
Reasons for the Asset Purchase Agreement 49
Conditions to the Asset Purchase Agreement 50
Biomerica and Lancer May Terminate the Asset Purchase
Agreement Under Specified Circumstances 51
Lancer's Plan Following the Asset Purchase 52
Recommendation of the Biomerica Board of Directors 52
Recommendation of the Lancer Board of Directors 52
How the Purchase Price is Calculated and Lancer's
Subsequent Dividend of Biomerica Shares to
Lancer's Shareholders 53
United States Federal Income Tax Consequences of the
Asset Purchase 55
Accounting Treatment of the Asset Purchase 56
DISSENTERS' APPRAISAL RIGHTS 57
COMPARISON OF RIGHTS OF HOLDERS OF BIOMERICA COMMON
STOCK AND LANCER COMMON STOCK 59
EXPERTS 64
TABLE OF CONTENTS (cont.)
WHERE YOU CAN FIND MORE INFORMATION 65
EXHIBITS 67
UNDERTAKINGS 68
SIGNATURES 70
This proxy statement/prospectus incorporates important business and
financial information about Biomerica and Lancer from documents that each
company has filed with the Securities and Exchange Commission but that
have not been included in or delivered with this proxy
statement/prospectus. For a listing of documents incorporated by
reference into this proxy statement/prospectus, please see the section
entitled "Where You Can Find More Information" beginning on page 65 of
this joint proxy statement/prospectus.
Biomerica will provide you with copies of this information relating to
Biomerica, without charge, upon written or oral request to:
Biomerica, Inc.
Attn: Janet Moore
1533 Monrovia Avenue
Newport Beach, California 92663
(949) 645-2111
Lancer will provide you with copies of this information relating to
Lancer, without charge, upon written or oral request to:
Lancer Orthodontics, Inc.
Attn: John Dodge
253 Pawnee Street
San Marcos, CA 92069
(760) 744-5585
In order for you to receive timely delivery of the documents in advance
of the Lancer annual meeting, Lancer should receive your request no later
than June 2, 2002.
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QUESTIONS AND ANSWERS ABOUT THE ASSET PURCHASE
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General Questions and Answers
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Q: Why am I receiving this proxy statement/prospectus?
A: Biomerica has agreed to purchase the assets and business of Lancer and
Lancer has agreed to sell its assets and business under the terms of an
asset purchase agreement that is described in this proxy
statement/prospectus.
A copy of the asset purchase agreement is attached to this proxy
statement/prospectus as Exhibit 99.3, and an amendment to the asset
purchase agreement is attached to this proxy as Exhibit 99.4.
In order to complete the purchase, Lancer shareholders must approve and
adopt the asset purchase agreement. Lancer is holding its annual meeting
of shareholders where shareholders will vote on these proposals. This
proxy statement/prospectus contains important information about the asset
purchase and Lancer's annual meeting, and you should read it carefully.
The enclosed voting materials for the Lancer annual meeting allow you to
vote your shares of Lancer common stock without attending the Lancer
annual meeting.
Your vote is important. We encourage you to vote as soon as possible.
Q: Why are Biomerica and Lancer proposing the asset purchase? (see page
49)
A: Biomerica and Lancer share a conviction that advances in technology,
increased competition and changing customer requirements are creating a
more competitive marketplace. After reviewing numerous strategic
alternatives to address the opportunities and challenges facing our
companies, the boards of directors of both Biomerica and Lancer reached
the same conclusion--this asset purchase represents the single best
strategic alternative for our respective companies and is the strategy
more likely to deliver increased value to our respective shareholders.
Specifically, we believe the asset purchase will:
* reduce both companies' administrative expenses;
* improve the operating margins of our business;
* give Lancer shareholders greater liquidity of ownership of Biomerica
shares, which trade on the Nasdaq SmallCap market. Lancer shareholders
should note that Nasdaq has recently notified Biomerica that it is
subject to delisting from the Nasdaq SmallCap market because in the
opinion of Nasdaq, it no longer meets the SmallCap market listing
requirements. This risk is described more fully in the section "Risk
Factors," below; and
* Following the asset purchase agreement, Biomerica has a greater chance
of maintaining its listing on the Nasdaq SmallCap market.
Q: Why is there an asset purchase agreement, and also an amendment to the
asset purchase agreement? (see page 48)
A: Biomerica and Lancer made one written amendment to the asset purchase
agreement a few weeks after signing the asset purchase agreement. The
only modification to the asset purchase agreement was the following: the
purchase price for the assets of Lancer was changed from $600,000 worth
of Biomerica stock to $610,250 of Biomerica stock. The boards of both
companies made this change after receiving the fairness opinion regarding
the transaction.
Q: When do Biomerica and Lancer expect to complete the asset purchase?
(see page 49)
A: Biomerica and Lancer currently plan to complete the asset purchase 15
days after the annual meeting of Lancer shareholders, which is to be held
on June 4, 2002.
Q: As a Lancer shareholder, what will I receive in the asset purchase?
(see page 53)
A: You will receive shares of Biomerica common stock. The number of
shares that Biomerica shall issue will vary according to Biomerica's
stock price in the period leading up to the closing of the asset purchase
agreement. Under the asset purchase agreement, Biomerica will issue to
Lancer $610,250 worth of its common stock based on the average closing
price of Biomerica's stock for the five days immediately preceding the
day of the closing of the asset purchase agreement.
Q: How does the Lancer board of directors recommend that I vote? (see
page 52)
A: The Lancer board of directors recommends that Lancer shareholders vote
"FOR" the proposal to approve and adopt the asset purchase agreement and
approve the asset purchase; please note that the Lancer directors are
subject to conflicts of interest as described more fully under the
heading "Risk Factors".
Q: What happens if the Lancer shareholders do not vote in favor of the
asset purchase agreement? (see page 52)
A: If a majority of the Lancer shareholders do not vote in favor of the
asset purchase agreement, then the asset purchase will not be completed,
and Lancer will not sell its assets to Biomerica.
Q: What should I do now? (see page 47)
A: Please review this proxy statement/prospectus carefully and sign, date
and return the proxy card and voting instruction card you receive as soon
as possible.
Q: What should I do if I receive more than one set of voting materials?
(see page 47)
A: Please complete, sign, date and return each proxy card and voting
instruction card that you receive. You may receive more than one set of
voting materials, including multiple copies of this proxy
statement/prospectus and multiple proxy cards or voting instruction
cards. For example, if you hold your shares in more than one brokerage
account, you will receive a separate voting instruction card for each
brokerage account in which you hold shares. If your shares are held in
more than one name you will receive more than one proxy or voting
instruction card.
Q: When and where is the Lancer annual meeting? (see page 37)
A: The annual meeting of Lancer shareholders will be held at 10:30 a.m.
on Monday, June 4, 2002, at Biomerica, Inc.'s Corporate Offices, 1533
Monrovia Avenue, Newport Beach, California 92663.
Q: How can I obtain admission to the Lancer annual meeting? (see page 45)
A: You are entitled to attend the annual meeting only if you were a
Lancer shareholder or joint holder as of the close of business on the
record date, April 30, 2002, or hold a valid proxy for
the annual meeting. You should be prepared to present photo
identification for admittance. In addition, if you are a record holder,
your name is subject to verification against the list of record holders
on the record date, April 30, 2002, prior to being admitted
to the meeting. If you are not a record holder but hold shares through a
broker or nominee (i.e., in street name), you should be prepared to
provide proof of beneficial ownership on the record date, such as your
most recent account statement prior to the record date, April 30, or similar
evidence of ownership. If you do not provide photo identification or
comply with the other procedures outlined above upon request, you will
not be admitted to the annual meeting.
Q: What is the percentage vote of Lancer shareholders required to approve
and adopt the asset purchase agreement and approve the asset purchase?
(see page 45)
A: Approval and adoption of the asset purchase agreement and approval of
the asset purchase requires the affirmative vote of the holders of a
majority of the shares of Lancer common stock outstanding as of the
record date, April 30, 2002, for the Lancer annual meeting.
Q: As a Lancer shareholder, what happens if I do not vote? (see page 45)
A: Failure to vote or give voting instructions to your broker or nominee
for the Lancer annual meeting will have the same effect as voting
"against" the proposal to approve and adopt the asset purchase agreement
and approve the asset purchase. Therefore, we urge you to vote.
Q: As a Lancer shareholder, what will I receive upon completion of the
asset purchase? (see page 53)
A: Upon completion of the asset purchase, you will be entitled to receive
between .677 and .336 shares of Biomerica common stock for each share of
Lancer common stock you own at the effective time of the asset purchase.
How many shares you will receive depends on the price of Biomerica stock
in the five trading days just before the closing of the asset purchase
agreement.
Q: As a Lancer shareholder, will I be able to trade the Biomerica common
stock that I receive in connection with the asset purchase? (see page 53)
A: The shares of Biomerica common stock issued in connection with the
asset purchase will be freely tradeable, unless you are an affiliate of
Lancer or Biomerica. Generally, persons who are deemed to be affiliates
of Lancer or Biomerica must comply with Rule 144 under the Securities Act
of 1933 if they wish to sell or otherwise transfer any of the shares of
Biomerica common stock received in connection with the asset purchase.
You will be notified if you are an affiliate of Lancer or Biomerica.
Q: As a Lancer shareholder, how can I vote? (see page 47)
A: If you are a shareholder of record, you may submit a proxy for the
Lancer annual meeting (1) by completing, signing, dating and returning
the proxy card.
If you hold your shares of Lancer common stock in a stock brokerage
account or if your shares are held by a bank or nominee (i.e., in street
name), you must provide the record holder of your shares with
instructions on how to vote your shares. If you are a shareholder of
record, you may also vote at the Lancer annual meeting. If you hold
shares in a stock brokerage account or if your shares are held by a bank
or nominee (i.e., in street name), you may not vote in person at the
Lancer annual meeting unless you obtain a signed proxy from the record
holder giving you the right to vote the shares. You will also need to
present photo identification and comply with the other procedures
described in "Admission to the Annual meeting" on page 45.
Q: As a Lancer shareholder, should I send in my stock certificates at
this time? (see page 47)
A: Do not send in your stock certificates. Biomerica is purchasing
Lancer's assets, but is not purchasing Lancer's stock. Following
completion of the asset purchase, Lancer shareholders will remain Lancer
shareholders. Lancer will become a blank check company. A blank check
company is a business entity that has no business operations other than
to seek a merger candidate.
Q: What will happen to Lancer following the completion of the asset
purchase agreement? (see page 52)
A: Assuming the asset purchase agreement is completed, Lancer will become
a blank check company without any operations. However, for at least the
foreseeable future, Lancer will remain a legal entity, its shares should
continue to trade on the Over-the-Counter Bulletin Board, and will
continue to make periodic filings to the SEC, such as quarterly and
annual reports, like any fully reporting company. There are essentially
two possible outcomes for Lancer. The more likely outcome, and one the
Lancer directors intend to pursue, is to find an operating company to
merge with Lancer. If Lancer merges with an operating company, Lancer
shareholders will benefit from becoming shareholders in such a new
combined company. The other possible outcome for Lancer is that the
Lancer directors vote to dissolve Lancer and end its life as a
corporation. The directors will only vote to dissolve Lancer in the event
that Lancer cannot secure a merger candidate.
Q: As a Lancer shareholder, who can help answer my questions? (see page
48)
A: If you have any questions about the asset purchase or how to vote or
revoke your proxy, you should contact:
Lancer Orthodontics, Inc.
Attn: John Dodge
253 Pawnee Street
San Marcos, CA 92069
(760) 744-5585
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SUMMARY
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This summary highlights selected information from this prospectus/proxy
statement, and you should read carefully this entire prospectus/proxy
statement and the documents referred to in this prospectus/proxy
statement for a more complete description of the terms of the asset
purchase and related transactions. The asset purchase agreement is
attached as Exhibit 99.3 to this prospectus/proxy statement, and an
amendment to the asset purchase agreement is attached to this proxy as
Exhibit 99.4. Additional documents relating to the transaction are also
attached to this prospectus/proxy statement. You are encouraged to read
the asset purchase agreement as it is the legal document that governs the
asset purchase, as well as these additional documents. In addition, you
are encouraged to read the information under "Risk Factors," beginning on
page 24 of this prospectus/proxy statement, for a discussion of important
factors you should consider in connection with the asset purchase. This
section includes page references in parentheses to direct you to a more
complete description of the topics presented in this summary.
The Parties to the Asset Purchase Agreement (see page 48)
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Biomerica Inc.'s address and telephone number is 1533 Monrovia Avenue,
Newport Beach, California 92663, (949) 645-2111. Biomerica develops,
manufactures, and markets medical diagnostic products designed for the
early detection and monitoring of chronic diseases and medical
conditions.
Lancer Orthodontics, Inc.'s address and telephone number is 253 Pawnee
Street, San Marcos, CA 92069, (760) 744-5585. Lancer manufactures and
distributes orthodontic products. Lancer's manufactured product line
includes preformed bands, direct bonding brackets, buccal tubes, arch
wires, lingual attachments, and related accessories. Lancer's products
are sold to distributors, private label customers, and orthodontists.
Essential Terms of the Asset Purchase Agreement (see page 49)
----------
Biomerica and Lancer have signed a contract, an "Asset Purchase Agreement
by and Between Lancer Orthodontics, Inc. and Biomerica, Inc." Under this
asset purchase agreement, Biomerica has agreed to purchase all of the
assets and most of the liabilities of Lancer, in exchange for Biomerica
stock valued at $610,250, which is substantially less than the net book
value of Lancer. Following the asset purchase, Lancer will own between
488,200 and 984,274 shares of Biomerica. Once Lancer receives the
Biomerica shares, Lancer will dividend the Biomerica shares out to Lancer
shareholders.
Upon completion of the asset purchase, Lancer shareholders will be
entitled to receive between .677 and .336 shares of Biomerica common
stock for each share of Lancer common stock. How many shares you will
receive depends on the price of Biomerica stock in the five trading days
just before the closing. Fractional shares shall be rounded up to the
next share.
Note that our transaction is not a merger, it is only a purchase of
assets. Thus, Lancer will not be merged with Biomerica, Lancer
shareholders will retain their Lancer shares, and Lancer shareholders
will receive a dividend of Biomerica shares. Upon completion of the asset
purchase, Lancer will have sold all of its operations to Biomerica, and
Lancer will become a blank check company with no operations other than to
seek a company with which to merge.
Recommendation of the Biomerica Board of Directors (see page 52)
----------
After careful consideration, the Biomerica board of directors unanimously
determined that the asset purchase is advisable, and is fair to and in
the best interests of Biomerica and its shareholders, and unanimously
approved the asset purchase agreement.
Recommendation of the Lancer Board of Directors (see page 52)
----------
After careful consideration, the Lancer board of directors unanimously
determined the asset purchase is advisable, and is fair to and in the
best interests of Lancer and its shareholders, and unanimously approved
the asset purchase agreement. The Lancer board of directors recommends
that the Lancer shareholders vote "FOR" the proposal to approve and adopt
the asset purchase agreement and approve the asset purchase; please note
that the Lancer directors are subject to conflicts of interest as
described more fully under the heading "Risk Factors".
Reasons for the Asset Purchase Agreement (see page 49)
----------
Both Biomerica and Lancer believe that the asset purchase agreement is
beneficial to both companies for the following reasons:
* A combined company will mean that both companies can share the burden
of administrative expenses, rather than bear those expenses individually.
* A combined company will mean that both companies can share the burden
of accounting and audit fees, rather than bear those expenses
individually.
* A combined company will mean that both companies can share the burden
of legal expenses and record keeping associated with their reporting
obligations under the Securities and Exchange Act of 1934, rather than
bear those expenses individually.
* Lancer shareholders will enjoy the greater liquidity of ownership of
Biomerica shares, which trade on the Nasdaq SmallCap market. Lancer
shareholders should note that Nasdaq has recently notified Biomerica that
it is subject to delisting from the Nasdaq SmallCap market because in the
opinion of Nasdaq, it no longer meets the SmallCap market listing
requirements. This risk is described more fully in the section "Risk
Factors," below.
* Following the asset purchase agreement, Biomerica has a greater chance
of maintaining its listing on the Nasdaq SmallCap market.
Lancer's Plan Following the Asset Purchase (see page 52)
----------
There are essentially two possible outcomes for Lancer following
completion of the asset purchase. The more likely outcome, and one the
Lancer directors intend to pursue, is to find an operating company to
merge with Lancer. If Lancer merges with an operating company, Lancer
shareholders will benefit from becoming shareholders in such a new
combined company. The other possible outcome for Lancer is that the
Lancer directors vote to dissolve Lancer and end its life as a
corporation. The directors will only vote to dissolve Lancer in the event
that Lancer cannot secure a merger candidate after several months.
Opinion of Lancer's Financial Advisor Regarding the Asset Purchase (see
page 52)
----------
On March 18, 2002, Willamette Management Associates delivered its written
opinion to Lancer's and Biomerica's board of directors that, as of that
date and subject to the assumptions, considerations and limitations set
forth in its opinion, the exchange ratio provided for in the asset
purchase agreement is fair, from a financial point of view, to Lancer.
Willamette Management Associates provided its opinion for the
information and assistance of the Lancer and Biomerica boards of
directors in connection with the boards' consideration of the asset
purchase. The Willamette Management Associates opinion is not a
recommendation as to how any Lancer shareholder should vote with respect
to the proposal to approve the issuance of shares of Biomerica common
stock in connection with the asset purchase.
Share Ownership of Directors, Executive Officers, and Affiliates of
Lancer (see page 43)
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At the close of business on the date immediately preceding the filing of
this proxy statement/prospectus, directors and executive officers of
Lancer and their affiliates beneficially owned and were entitled to vote
51.19 percent of the 2,098,624 shares of Lancer common stock outstanding
on that date.
What is Needed to Complete the Asset Purchase (see page 50)
----------
Several conditions must be satisfied or waived before we complete the
asset purchase agreement, including those summarized below:
* Lancer shareholders must vote to approve the asset purchase agreement
at Lancer's annual meeting on June 4, 2002;
* Both parties must materially comply with the covenants and warranties
they made in the asset purchase agreement, except if a variance would not
have a materially adverse effect on the other party;
* The absence of any law, regulation, injunction, or order making the
asset purchase illegal or otherwise prohibiting the asset purchase which
would have a material impact on Biomerica on a combined basis with
Lancer;
* Lancer must deliver to Biomerica a consent from its bank transferring
its line of credit to Biomerica;
* Biomerica is roughly a 31% shareholder in Lancer, and will not
participate in the dividend of Biomerica shares to Lancer shareholders
following the completion of the asset purchase agreement. Therefore,
Biomerica must deliver to Lancer an agreement waiving any and all right
to any distribution or dividend of the Biomerica shares that form the
purchase price under the asset purchase agreement. Thus, the Biomerica
shares will be distributed solely to the remaining 69% of Lancer
shareholders; and
* Lancer must deliver consent letters from Lancer's landlords agreeing to
assign Lancer's commercial leases to Biomerica.
Biomerica and Lancer May Terminate the Asset Purchase Agreement Under
Specified Circumstances (see page 51)
----------
Under circumstances specified in the asset purchase agreement, either
Biomerica or Lancer may terminate the asset purchase agreement. These
circumstances generally include if:
* both parties mutually agree to terminate the asset purchase agreement;
* either party breaches a representation, warranty or covenant in the
asset purchase agreement that is not cured within 20 days following
written notice of the breach; or
* a final, non-appealable order of a court or other action or inaction of
any governmental authority has the effect of permanently prohibiting
completion of the asset purchase.
The Asset Purchase is Intended to Qualify as a Tax Free Reorganization
for United States Federal Income Tax Purposes (see page 56)
----------
The asset purchase has been structured to qualify as a tax-free
reorganization for federal income tax purposes under the Internal Revenue
Code. Neither Lancer nor Biomerica has secured the opinion of a tax
advisor regarding the tax treatment of the asset purchase. Furthermore,
neither company will seek a letter ruling from the IRS regarding the tax
treatment of the asset purchase. Assuming the asset purchase so
qualifies, Lancer shareholders generally will not recognize gain or loss
for federal income tax purposes as a result of receiving Biomerica common
stock pursuant to the transaction, except with respect to cash received
due to the exercise of dissenter's rights. You should carefully read the
discussion in the section entitled "United States Federal Income Tax
Consequences of the Asset Purchase" beginning on page 55 of this proxy
statement/prospectus, as well as the section entitled "The Tax Treatment
of the Asset Purchase Could Have Adverse Consequences for Current Lancer
Shareholders" under the heading "Risk Factors". Further, you are
encouraged to consult your tax advisor because tax matters can be
complicated, and the tax consequences of the asset purchase to you will
depend upon your own situation.
Accounting Treatment of the Asset Purchase (see page 56)
----------
Biomerica will account for the asset purchase under the purchase method
of accounting for business combinations.
Dissenters' Appraisal Rights (see page 57)
----------
Under California law, Lancer shareholders may have the right to dissent
from the asset purchase agreement and to have the appraised fair market
value of their shares of Lancer common stock paid to them in cash. A
Lancer shareholder has the right to seek appraisal of the value of his or
her Lancer shares and be paid the appraised value if all of the following
conditions exist:
* the dissenting Lancer shareholder delivers to Lancer, not later than
the date of the annual meeting at which the vote on the asset purchase
will take place, a written demand for appraisal of his or her shares of
Lancer common stock;
* the dissenting Lancer shareholder must vote against the asset purchase;
and
* the dissenting Lancer shareholder must otherwise comply with the
provisions governing dissenters' rights under California law. If a Lancer
shareholder dissents from the asset purchase agreement and the conditions
outlined above are met, he or she will not receive a dividend of
Biomerica shares and his or her only right will be to receive the
appraised value of the shares in cash. Lancer shareholders should be
aware that submitting a signed proxy card without indicating a vote with
respect to the asset purchase will be deemed a vote "FOR" the asset
purchase and a waiver of their dissenter's rights. A vote "AGAINST" the
asset purchase does not dispense with the requirement to deliver a
written demand for payment.
----------
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BIOMERICA
----------
The table below presents a summary of selected historical consolidated
financial data with respect to Biomerica as of the dates and for the
periods indicated. The historical consolidated statements of operations
data presented below for the fiscal years ended May 31, 2001, 2000, and
1999 and the historical consolidated balance sheets data as of May 31,
2001 and 2000 have been derived from Biomerica's historical consolidated
financial statements, which are incorporated by reference into this proxy
statement/prospectus. The historical consolidated statements of
operations data presented below for the fiscal years ended May 31, 1998
and 1997 and the historical consolidated balance sheets data as of May
31, 1999, 1998 and 1997 have been derived from Biomerica's historical
consolidated financial statements, which are not incorporated by
reference into this proxy statement/prospectus. The unaudited
consolidated statements of operations data for the six months ended
November 30, 2001 and 2000 and the unaudited consolidated balance sheet
data as of November 30, 2001 and 2000 has been derived from the
historical consolidated financial statements as filed in Biomerica's 10-
QSB as of and for the period ended November 30, 2001 as filed with the
Securities and Exchange Commission, which is incorporated by reference
into this proxy statement/prospectus.
It is important for you to read the following summary selected historical
consolidated financial data together with the consolidated financial
statements and accompanying notes contained in Biomerica's Annual Report
on Form 10-KSB for its fiscal year ended May 31, 2001 as filed with the
Securities and Exchange Commission, as well as the sections of
Biomerica's Annual Report entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations," all of which are
incorporated by reference into this proxy statement/prospectus.
BIOMERICA, INC. AND SUBSIDIARIES
Summary Selected Historical Consolidated Financial Data
(In Thousands, except per share amounts)
================================================================================================
As of or For the
Six Months Ended
November 30,
(unaudited) As of or For the Year Ended May 31,
----------------- ---------------------------------------
2001 2000 2001 2000 1999 1998 1997
------- ------- ------- ------ ------ ------ ------
Historical Consolidated Statements
of Earnings Data:
Net revenue....................... $ 4,167 $ 4,264 $ 8,940 $ 8,014 $ 8,688 $ 9,376 $ 9,244
Gross Profit ..................... 1,302 1,686 2,810 2,410 3,271 3,892 3,866
Operating earnings (loss) from
Continuing operations ......... (451) (54) (579) (1,638) (73) 141 447
Net earnings per share from
continuing operations:
Basic......................... $ (0.09) $ (0.01) $ (0.12)$ (0.36)$ (0.02) $ 0.04 $ 0.12
Diluted....................... $ (0.09) $ (0.01) $ (0.12)$ (0.36)$ (0.02) $ 0.03 $ 0.12
Cash dividends declared per
Share........................... $ - $ - $ - $ - $ - $ - $ -
Historical Consolidated Balance
Sheets Data:
Assets--Continuing operations..... $ 5,201 $ 6,358 $ 5,347 $ 6,735 $ 7,850 $ 7,495 $ 7,379
Total assets...................... $ 5,201 $ 6,358 $ 5,347 $ 6,735 $ 7,850 $ 7,495 $ 7,379
Long-term debt.................... - - - - - - -
================================================================================================
Note: Biomerica owns 30.78% of the outstanding shares of Lancer
Orthodontics, but has direct and indirect voting control over Lancer of
51.19%. Therefore, the financial statements of Lancer Orthodontics have
historically been consolidated with those of Biomerica.
The table below presents a summary of selected historical financial data
with respect to Lancer as of the dates and for the periods indicated. The
historical statements of operations data presented below for the fiscal
years ended May 31, 2001, 2000, and 1999 and the historical balance sheet
data as of May 31, 2001 and 2000 have been derived from Lancer's
historical financial statements, which are incorporated by reference into
this proxy statement/prospectus. The historical statements of operations
data presented below for the fiscal years ended May 31, 1998 and 1997 and
the historical balance sheet data as of May 31, 1999, 1998 and 1997 have
been derived from Lancer's historical financial statements, which are not
incorporated by reference into this proxy statement/prospectus. The
unaudited statements of operations data for the six months ended November
30, 2001 and 2000 and the unaudited balance sheet data as of November 30,
2001 and 2000 has been derived from the historical unaudited financial
statements as filed in Lancer's 10-QSB as of and for the period ended
November 30, 2001 as filed with the Securities and Exchange Commission,
which is incorporated by reference into this proxy statement/prospectus.
Lancer Orthodontics, Inc.
Summary Selected Historical Financial Data
(In thousands, except per share amounts)
As of or For the
Six Months Ended
November 30,
(unaudited) As of or For the Year Ended May 31,
----------------- ---------------------------------------
2001 2000 2001 2000 1999 1998 1997
------- ------- ------- ------- ------- ------- -------
Historical Consolidated Statements
of Earnings Data:
Net revenue....................... $ 3,064 $ 2,717 $ 5,928 $ 5,651 $ 6,159 $ 6,194 $ 6,334
Gross Profit...................... 969 888 1,933 1,785 2,380 2,566 2,494
Net earnings ..................... ( 56) (172) (117) (297) 42 259 223
Net earnings per share
Basic......................... $ (0.03) $ (0.08) $ (0.06)$ (0.15)$ 0.02 $ 0.12 $ 0.11
Diluted....................... $ (0.03) $ (0.08) $ (0.06)$ (0.15)$ 0.02 $ 0.12 $ 0.10
Cash dividends declared per
Share........................... $ - $ - $ - $ - $ - $ - $ -
Historical Consolidated Balance
Sheets Data:
Assets............................ $ 3,717 $ 3,709 $ 3,737 $ 3,755 $ 4,327 $ 4,089 $ 3,950
Total assets...................... $ 3,717 $ 3,709 $ 3,737 $ 3,755 $ 4,327 $ 4,089 $ 3,950
Long-term debt.................... 0 0 0 0 0 0 0
================================================================================================
----------
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
----------
The following tables present comparative historical per share data
regarding the net earnings (loss), book value and dividends of each of
Biomerica and Lancer and unaudited combined pro forma per share data
after giving effect to the asset purchase as a purchase of Lancer by
Biomerica assuming the asset purchase had been completed as of the
beginning of each period presented for purposes of the net earnings
(loss) per share and as of November 30, 2001 for purposes of book value
per share. The following data assumes 984,274 shares of Biomerica common
stock will be issued in exchange for the assets and liabilities of Lancer
in connection with the asset purchase, although the actual number of
Biomerica shares that Lancer shareholders may receive will range from
488,200 shares to 984,274 shares. This data has been derived from and
should be read in conjunction with the summary selected historical
consolidated financial data above and the separate historical financial
statements of Biomerica and Lancer and accompanying notes incorporated by
reference into this proxy statement/prospectus. The unaudited pro forma
per share data is presented for informational purposes only and is not
intended to represent or be indicative of the consolidated results of
operations or financial condition of Biomerica that would have been
reported had the asset purchase been completed as of the date presented,
and should not be taken as representative of future consolidated results
of operations or financial condition of Biomerica.
=======================================================================================================
As of And For the Six Months Ended November 30, 2001
-----------------------------------------------
Pro Forma Combined
Historical ----------------
Biomerica and
Biomerica Lancer Lancer
------- ---------- ----------
(Unaudited)
Net earnings (loss) per share from
continuing operations:
Basic............................................. $(0.09) $(0.03) $(0.08)
Diluted........................................... $(0.09) $(0.03) $(0.08)
Book value per share at period end................... $ 0.22 $ 1.38 $ .47
Cash dividends declared per share.................... $ 0.00 $ 0.00 $ 0.00
=======================================================================================================
=======================================================================================================
As of And For the Year Ended May 31, 2001
---------------------------------------------
Pro Forma Combined
Historical ---------------
Biomerica and
Biomerica Lancer Lancer
-------- ---------- ----------
(Unaudited)
Net earnings (loss) per share from continuing
operations:
Basic.............................................. $(0.12) $(0.06) $(0.10)
Diluted............................................ $(0.12) $(0.06) $(0.10)
Book value per share at period end.................... $ 0.31 $ 1.41 $ .55
Cash dividends declared per share..................... $ 0.00 $ 0.00 $ 0.00
=======================================================================================================
----------
COMPARATIVE PER SHARE MARKET PRICE DATA
----------
Biomerica common stock trades on the Nasdaq SmallCap market under the
symbol "BMRAC." Lancer common stock trades on the Over-the-Counter
Bulletin Board under the symbol "LANZ" or "LANZ.OB".
The following table shows the high and low sales prices per share of
Biomerica common stock and Lancer common stock, each as reported on their
respective exchanges (1) on February 27, 2002, the last full trading day
preceding public announcement that Biomerica and Lancer had entered into
the asset purchase agreement, and (2) April 9, 2002, the last full
trading day for which high and low sales prices were available as of the
date of this proxy statement/prospectus.
Biomerica Lancer
Common Stock Common Stock
------------- -------------
High Low High Low
------ ------ ------ ------
February 27, 2002 ........... $ 0.64 $ 0.63 $ 0.22 $ 0.22
April 9, 2002 ........... $ 0.55 $ 0.47 $ 0.36 $ 0.36
----------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
----------
This joint proxy statement/prospectus and the documents incorporated by
reference into this joint proxy statement/prospectus contain forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties, as
well as assumptions, that, if they prove incorrect or never materialize
or prove incorrect, could cause the results of Biomerica and its
consolidated subsidiaries, on the one hand, or Lancer and its
consolidated subsidiaries, on the other, to differ materially from those
expressed or implied by such forward-looking statements. All statements
other than statements of historical fact are statements that could be
deemed forward-looking statements, including any projections of
earnings, revenues, synergies, accretion, margins or other financial
items; any statements of the plans, strategies and objectives of
management for future operations, approvals and closings relating to the
asset purchase or other planned acquisitions; any statements concerning
proposed new products, services, developments or industry rankings; any
statements regarding future economic conditions or performance; any
statements of belief; and any statements of assumptions underlying any
of the foregoing.
The risks, uncertainties and assumptions referred to above include the
ability of the combined company to retain and motivate key employees;
the timely development, and production and acceptance of products and
services; the challenge of managing asset levels, including inventory;
the flow of products into third-party distribution channels; the
difficulty of keeping expense growth at modest levels while increasing
revenues; the challenges of integration and restructuring associated
with the asset purchase or other planned acquisitions and the challenges
of achieving anticipated synergies; the possibility that the asset
purchase or other planned acquisitions may not close or that Biomerica,
Lancer or other parties to planned acquisitions may be required to
modify some aspects of the acquisition transactions in order to obtain
regulatory approvals; the assumption of maintaining revenues on a
combined company basis following the close of the asset purchase or
other planned acquisitions; and other risks that are described in the
section entitled "Risk Factors," which follows on the next page, and in
the documents that are incorporated by reference into this joint proxy
statement/prospectus.
If any of these risks or uncertainties materializes or any of these
assumptions proves incorrect, results of Biomerica and Lancer could
differ materially from the expectations in these statements. Biomerica
and Lancer are not under any obligation and do not intend to update
their respective forward-looking statements.
----------
RISK FACTORS
----------
Biomerica and the operating business of Lancer will operate as a combined
company in a market environment that cannot be predicted and that
involves significant risks, many of which will be beyond the combined
company's control. In addition to the other information contained in, or
incorporated by reference into, this proxy statement/prospectus, you
should carefully consider the risks described below before deciding how
to vote your shares. Additional risks and uncertainties not presently
known to Biomerica and Lancer or that are not currently believed to be
important to you, if they materialize, also may adversely affect the
asset purchase and Biomerica and Lancer as a combined company.
The Directors and Officers of Biomerica and Lancer are Subject to
Conflicts of Interest in Connection With Their Approval of the Asset
Purchase Agreement
Many of the directors and officers of Lancer are also directors,
officers, and shareholders of Biomerica. Thus, certain directors,
officers, and shareholders of Lancer stand to benefit from the asset
purchase. For example, certain directors and officers of Lancer are
shareholders in Lancer, and will receive Biomerica shares as part of this
transaction if the asset purchase agreement is completed. Also, certain
directors and officers of Lancer are or will be under employment
agreements with Biomerica. Also, certain directors and officers of Lancer
will enjoy continuing indemnification protection as directors and
officers of Biomerica. Also, certain directors and officers of Lancer are
shareholders in Biomerica, and will stand to benefit if their shares in
Biomerica become more valuable if the asset purchase is completed.
Although We Expect That the Asset Purchase Will Result in Benefits to the
Combined Company, the Combined Company May Not Realize Those Benefits
Because of Integration and Other Challenges
The failure of the combined company to meet the challenges involved in
integrating the operations of Biomerica and Lancer successfully or
otherwise to realize any of the anticipated benefits of the asset
purchase, including anticipated cost savings described in this proxy
statement/prospectus, could seriously harm the results of operations of
the combined company. Realizing the benefits of the asset purchase will
depend in part on the integration of operations and personnel. The
integration of the companies is a complex, time-consuming and expensive
process that, without proper planning and implementation, could
significantly disrupt the businesses of Biomerica and Lancer. The
challenges involved in this integration include the following:
* demonstrating to the customers of Biomerica and to the customers of
Lancer that the asset purchase will not result in adverse changes in
client service standards or business focus and helping customers conduct
business easily with the combined company;
* consolidating and rationalizing corporate information technology and
administrative infrastructures;
* preserving distribution, marketing or other important relationships of
both Biomerica and Lancer and resolving potential conflicts that may
arise;
* persuading employees that the business cultures of Biomerica and Lancer
are compatible, maintaining employee morale and retaining key employees;
and
* coordinating, where possible, overseas operations, relationships and
facilities, which may be subject to additional constraints imposed by
local laws and regulations.
The combined company may not successfully integrate the operations of
Biomerica and Lancer in a timely manner, or at all, and the combined
company may not realize the anticipated benefits or synergies of the
asset purchase to the extent, or in the timeframe, anticipated. The
anticipated benefits and synergies relate to cost savings associated with
anticipated administrative and other operational efficiencies. However,
these anticipated benefits and synergies are based on projections and
assumptions, not actual experience. In addition to the integration risks
discussed above, the combined company's ability to realize these benefits
and synergies could be adversely impacted by practical or legal
constraints.
Upon completion of the asset purchase, each Lancer shareholder shall have
the right to receive between 0.677 shares and 0.336 shares of Biomerica
stock, depending on the closing price of Biomerica stock in the five
trading days immediately preceding the closing of the asset purchase
agreement. The market values of Biomerica common stock has varied since
Biomerica and Lancer entered into the asset purchase agreement and will
continue to vary in the future due to changes in the business, operations
or prospects of Biomerica and Lancer, market assessments of the asset
purchase, regulatory considerations, market and economic considerations,
and other factors. The number of shares and the dollar value of Biomerica
common stock that Lancer shareholders will receive upon completion of the
asset purchase will depend on the market value of Biomerica common stock
at the time of completion of the asset purchase, which may be different
from, and lower than, the closing price of Biomerica common stock on the
last full trading day preceding public announcement that Biomerica and
Lancer entered into the asset purchase agreement, the last full trading
day prior to the date of this proxy statement/prospectus or the date of
the annual meetings. Moreover, completion of the asset purchase may occur
some time after shareholder approval has been obtained. The parties do
not have a right to terminate the asset purchase agreement based upon
changes in the market price of either Biomerica common stock or Lancer
common stock.
If Biomerica's Stock Price Drops in the Period Immediately Before the
Completion of the Asset Purchase Agreement, Lancer Shareholders Will
Receive Fewer Biomerica Shares Than They Otherwise Would
In exchange for Lancer's assets, Biomerica is issuing to Lancer shares of
its common stock. The purchase price is substantially below the net book
value of Lancer. The number of shares that Biomerica shall issue will
vary according to Biomerica's stock price in the period leading up to the
closing of the asset purchase agreement. Under the asset purchase
agreement, Biomerica will issue to Lancer $610,250 worth of its common
stock, based on the average closing price of Biomerica's stock for the
five days immediately preceding the day of the closing of the asset
purchase agreement. However, the average closing price used to calculate
the number of shares cannot be less than $0.62 or more than $1.25. Thus,
if Biomerica's average closing price is $0.62 or less, Biomerica will
issue 984,274 shares to Lancer. So, Lancer shareholders could conceivably
receive shares worth far less than $0.62 if Biomerica's stock price
suffers in the period immediately before the closing. This risk becomes
more likely if Biomerica is delisted from the Nasdaq SmallCap market
during the period just before the closing of the asset purchase
agreement. Please see the risk factor immediately following.
Biomerica is Subject to Delisting From the Nasdaq SmallCap Market Which
Will Likely Harm the Market Price of Its Shares
In September of 2001, Nasdaq notified Biomerica that it is subject to
delisting from the Nasdaq SmallCap market because in the opinion of
Nasdaq, it no longer meets the SmallCap market listing requirements,
specifically the requirement that Biomerica maintain net tangible assets
of $2,000,000 and/or shareholder's equity of $2,500,000. Biomerica
appealed the decision, and on March 25, 2002, Biomerica received a ruling
from the Nasdaq Listing Qualifications Panel that Biomerica would
continue to be listed on the Nasdaq SmallCap market on a conditional
basis. However, Biomerica must do all of the following:
* Biomerica must file this proxy
statement/prospectus.
* Biomerica must complete the asset purchase agreement.
* Biomerica must demonstrate a closing bid
price of at least $1.00 per share; immediately thereafter, Biomerica must
evidence a closing bid price of at least $1.00 per share for a minimum of
ten consecutive trading days. See the risk factor immediately below for a
discussion of a potential reverse stock split of Biomerica's shares.
Thus, Biomerica is subject to conditional listing on the Nasdaq SmallCap
market, and may be unable to maintain its listing. Biomerica currently
trades under the symbol "BMRAC". The fifth character in Biomerica's stock
symbol signifies that Biomerica's listing on the SmallCap market is
"conditional".
There can be no assurance that Biomerica's shares will continue to trade
on the Nasdaq SmallCap market. If Biomerica is ultimately delisted from
the Nasdaq SmallCap market, its shares will likely begin trading on the
Over-the-Counter Bulletin Board. Shares that trade on the Over-the-
Counter Bulletin Board do not enjoy the same liquidity as shares that
trade on the Nasdaq SmallCap market, and the combined company's stock
price will likely suffer if Biomerica is delisted from the Nasdaq
SmallCap market. In March of 2002, Biomerica was notified by Nasdaq that
it is subject to delisting from the Nasdaq SmallCap market on a separate
basis--that its share price does not meet the minimum trading price of
one dollar. See the discussion of possible implementation of Biomerica
reverse stock split below.
Biomerica's Shareholders Have Approved a Reverse Stock Split, Which if
Implemented, May Harm Biomerica's Share Price
At Biomerica's most recent annual meeting of shareholders on November 13,
2001, its shareholders gave Biomerica's board of directors the authority
to conduct a one-for-three reverse stock split of Biomerica shares. To
date, Biomerica's board has not implemented the reverse stock split. A
reverse stock split, if implemented, would mean that each three shares of
Biomerica stock would become one share of Biomerica stock. Biomerica's
board may implement the reverse stock split in order to force the trading
price of Biomerica stock higher in order to maintain the minimum trading
price required for listing on the Nasdaq SmallCap market. A typical
result of a reverse stock split is that the net holdings of an individual
shareholder will drop. If Biomerica implements the reverse split, while
the price of Biomerica stock will likely rise, the total value of a
shareholder's Biomerica shares will likely suffer a net decrease.
Following the Completion of the Asset Purchase, Lancer Will Become a
"Blank Check" Company, and Will Be Subject to Increased Risks
Following completion of the asset purchase, Lancer will become a blank
check company. A blank check company is a business entity that has no
business operations other than to seek a merger candidate. Not all blank
check companies find merger candidates. If Lancer cannot find a merger
candidate, Lancer will have no choice but to cease operations.
Following the asset purchase, Lancer must continue to maintain its status
as a publicly traded company while it searches for a company with which
to merge. In doing so, Lancer will incur accounting and legal expenses.
However, Lancer will not incur these expenses indefinitely because Lancer
must either find a company with which to merge, or must ultimately cease
operations. If Lancer finds a company with which to merge, either Lancer,
the new company, or both, will incur substantial legal and accounting
expenses to complete the merger.
The Stock Prices and Businesses of Biomerica and Lancer May Be Adversely
Affected if the Asset Purchase Is Not Completed
If the asset purchase is not completed, the price of Biomerica common
stock and Lancer common stock may decline to the extent that the current
market prices of Biomerica common stock and Lancer common stock reflect a
market assumption that the asset purchase will be completed. In addition,
Biomerica's business and Lancer's operations may be harmed to the extent
that customers, suppliers and others believe that the companies cannot
effectively compete in the marketplace without the asset purchase, or
there is customer and employee uncertainty surrounding the future
direction of the product and service offerings and strategy of Biomerica
or Lancer on a standalone basis. In the event the asset purchase is not
completed, Biomerica intends to evaluate its strategic options for
addressing the lack of profitability in certain of its businesses.
Completion of the asset purchase is subject to several closing
conditions, including obtaining Lancer shareholder approvals, and
Biomerica and Lancer may be unable to obtain such approvals on a timely
basis or at all.
Biomerica and Lancer Will Incur Substantial Fees in Connection With the
Asset Purchase Even if the Asset Purchase Is Not Completed
Biomerica and Lancer will also be required to pay significant costs
incurred in connection with the asset purchase, including legal and
accounting fees, whether or not the asset purchase is completed.
The Combined Company May Have Difficulty Raising Working Capital
Historically, both Biomerica and Lancer have shown losses. The current
cash position of both companies is low. It may become necessary to raise
more capital to ensure continuing operations. There can be no assurance
that additional investment capital will be available, or that it will be
available on favorable terms.
The Tax Treatment of the Asset Purchase Could Have Adverse Consequences
for Current Lancer Shareholders
The asset purchase has been structured to qualify as a tax-free
reorganization for federal income tax purposes under the Internal Revenue
Code. Neither Lancer nor Biomerica has secured the opinion of a tax
advisor regarding the tax treatment of the asset purchase. Furthermore,
neither company will seek a letter ruling from the IRS regarding the tax
treatment of the asset purchase. Assuming the asset purchase so
qualifies, Lancer shareholders generally will not recognize gain or loss
for federal income tax purposes as a result of receiving Biomerica common
stock pursuant to the transaction, except with respect to cash received
due to the exercise of dissenter's rights. You should carefully read the
discussion in the section entitled "United States Federal Income Tax
Consequences of the Asset Purchase" beginning on page 55 of this proxy
statement/prospectus. Further, you are encouraged to consult your tax
advisor because tax matters can be complicated, and the tax consequences
of the asset purchase to you will depend upon your own situation. If the
asset purchase is not deemed a tax-free reorganization by the Internal
Revenue Service, then the receipt of Biomerica shares by Lancer
shareholders may be taxable as income.
Lancer Has Cumulated Net Operating Losses That Will Be Substantially
Limited to Offset Operating Income Following the Asset Purchase Agreement
Lancer has cumulated net operating losses over the past several years of
operations. Lancer's cumulated net operating losses could normally be
used to offset future operating income, thereby reducing Lancer's taxable
income. Following the asset purchase agreement, however, Lancer's
cumulated net operating losses will be substantially limited pursuant to
the Internal Revenue Code to offset operating income, and therefore
Lancer will not be able to benefit from the tax savings it otherwise
would enjoy due to its cumulated net operating losses.
Customer Uncertainties Related to the Asset Purchase Could Adversely
Affect the Businesses, Revenues and Gross Margins of Biomerica, Lancer,
and the Combined Company
In response to the announcement of the asset purchase or due to ongoing
uncertainty about the asset purchase, customers of Biomerica or Lancer or
the combined company may delay or defer purchasing decisions or elect to
switch to other suppliers.
The Combined Company May Fail to Retain and Motivate Key Employees
In order to be successful, the combined company must retain and motivate
executives and other key employees, including those in managerial,
technical, and marketing positions. Experienced management and technical,
marketing and support personnel in our industries are in high demand and
competition for their talents is intense. Employee retention may be a
particularly challenging issue in connection with the asset purchase.
Employees of Biomerica or Lancer may experience uncertainty about their
future role with the combined company until or after strategies with
regard to the combined company are announced or executed. This
circumstance may adversely affect the combined company's ability to
attract and retain key management, marketing and technical personnel. The
combined company also must continue to motivate employees and keep them
focused on the strategies and goals of the combined company, which may be
particularly difficult due to the potential distractions of the asset
purchase, morale challenges posed by the separate workforce reductions
being implemented by Biomerica and Lancer and the additional workforce
reductions of the combined company anticipated in connection with the
asset purchase.
The International Economic Downturn Could Adversely Affect the Revenues,
Gross margins and Expenses of the Combined Company
Softening demand for the products and services of Biomerica and Lancer
caused by the ongoing economic downturn may result in decreased revenues,
earnings levels or growth rates and problems with the saleability of
inventory and realizability of customer receivables for the combined
company. The global economy has weakened and market conditions continue
to be challenging. As a result, individuals and companies are delaying or
reducing expenditures in many areas.
Terrorist Acts and Acts of War May Seriously Harm the Combined Company's
Business and Revenues, Costs, and Expenses
Terrorist acts or acts of war (wherever located around the world) may
cause damage or disruption to the combined company, its employees,
facilities, partners, suppliers, distributors and resellers, and
customers, which could significantly impact the combined company's
revenues, costs and expenses and financial condition. The terrorist
attacks that took place in the United States on September 11, 2001 were
unprecedented events that have created many economic and political
uncertainties, some of which may materially harm the combined company's
business and results of operations. The long-term effects on the combined
company of the September 11, 2001 attacks are unknown. The potential for
future terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility have created many
economic and political uncertainties, which could adversely affect the
business and results of operations of Biomerica, Lancer or the combined
company in ways that cannot presently be predicted. In addition, as
companies with headquarters and significant operations located in the
United States, Biomerica, Lancer or the combined company may be impacted
by actions against the United States. The combined company will be
predominantly uninsured for losses and interruptions caused by terrorist
acts and acts of war.
Business Disruptions Could Seriously Harm the Future Revenues and
Financial Condition and Increase the Costs and Expenses of the Combined
Company
The combined company's operations could be subject to natural disasters
and other business disruptions, which could seriously harm its revenues
and financial condition and increase its costs and expenses. The
corporate headquarters of the combined company, a portion of its research
and development activities, other critical business operations and some
of its suppliers will be located in California, near major earthquake
faults. The ultimate impact on the combined company, its significant
suppliers and its general infrastructure of being located near major
earthquake faults is unknown, but the combined company's revenues,
financial condition and costs and expenses could be significantly
impacted in the event of a major earthquake. In addition, some areas,
including California, have experienced, and may continue to experience,
ongoing power shortages, which have resulted in "rolling blackouts."
These blackouts could cause disruptions to the operations of the combined
company or the operations of its suppliers, distributors and resellers,
or customers. The combined company will be predominantly uninsured for
losses and interruptions caused by earthquakes, power outages and other
natural disasters.
Lancer's Manufacturing Operations Are Located in Mexico, and Are Subject
to Political and Economic Risk
Lancer's manufacturing operations are conducted at a plant in Mexicali,
Mexico. As such, Lancer's manufacturing operations are subject to
significant economic and political risks. As a developing country, Mexico
does not enjoy the same political and economic stability as the United
States. Thus, the combined company will be subject to such risks, and
even a small degree of political and/or economic instability could
seriously disrupt Lancer's manufacturing operations.
Unforeseen Environmental Costs Could Impact the Combined Company
Some of the combined company's operations will use substances regulated
under various federal, state and international laws governing the
environment. The combined company could be subject to liability for
remediation if it does not handle these substances in compliance with
applicable laws. It will be the combined company's policy to apply strict
standards for environmental protection to sites inside and outside the
United States. The combined company will record a liability for
environmental remediation and related costs when it considers the costs
to be probable and the amount of the costs can be reasonably estimated.
Neither Biomerica nor Lancer has incurred environmental costs that are
presently material to it, and neither Biomerica nor Lancer is presently
subject to known environmental liabilities that it expects to be
material.
Biomerica's and Lancer's Revenues and Profitability Have Historically
Varied, and Will Likely Continue to Vary Widely
The revenues and profit margins of Biomerica and Lancer vary among their
respective products, customer groups and geographic markets. Overall
profitability in any given period is dependent partially on the product,
customer and geographic mix reflected in that period's net revenue, and
therefore revenue and gross margin trends cannot be reliably predicted.
Actual trends may cause the combined company to adjust its operations,
which could cause period-to-period fluctuations in the combined company's
results of operations.
Biomerica and Lancer Sell Dissimilar Products, Which May Yield Only
Marginal Synergies and Efficiencies Following the Completion of the Asset
Purchase Agreement
Biomerica's and Lancer's products are dissimilar. While Biomerica and
Lancer believe that a combined company will enjoy reductions in
administrative expenses, the lack of synergies among product lines could
result in only marginal or no improvements in efficiencies in
manufacturing and sales.
Biomerica's Stock Price Has Historically Fluctuated and May Continue to
Fluctuate
Biomerica's stock price, like that of other medical and medical
technology companies, can be volatile. Some of the factors that can
affect its stock price are:
* the announcement of new products, services or technological innovations
by Biomerica or its competitors;
* quarterly increases or decreases in Biomerica's revenue or earnings;
* changes in quarterly revenue or earnings estimates by the investment
community; and
* speculation in the press or investment community about Biomerica's
strategic position, financial condition, results of operations, business
or significant transactions.
Biomerica Is Subject to Intense Competition
Human immunodiagnostics is an intensely competitive field in which there
are a number of well-established companies. Many of Biomerica's
competitors have substantially greater financial resources and larger,
more established sales, marketing, and service organizations. The primary
bases of competition in the immunodiagnostic testing market are
throughput, ease-of-use, price, breadth of test menu, quality of results
and service. There can be no assurance that Biomerica will be able to
compete successfully on any of these bases.
Biomerica believes that its principal competitors are both large
companies with a diagnostic division such as Abbott Laboratories, Becton,
Dickinson and Company, Boehringer Mannheim, GmbH, Chiron/Ciba-Corning
Diagnostics Corporation and Johnson & Johnson, and small companies in the
point of care market. These companies have an established position in the
clinical and point of care markets with systems based on traditional
immunoassay technologies. No assurance can be given that Biomerica's
products will compete successfully with existing or future products of
such competitors or that new competitors will not enter the market with
competing technologies.
Lancer Is Subject to Intense Competition
Many of Lancer's competitors have substantially greater financial
resources and larger, more established sales, marketing, and service
organizations. Lancer believes that there are six major competitors in
the orthodontic products field; Unitek, a division of 3M; Sybron Dental
Specialties; RMO Inc.; American Orthodontics; GAC and Dentaurum. The
primary bases of competition in the orthodontic market are price, quality
and service. There can be no assurance that Lancer will be able to
compete successfully on any of these bases.
The Combined Company Must Protect Its Intellectual Property Against
Infringers, and Cannot Always Effectively Do So
Biomerica seeks patent protection on selected products, but in general
does not have patent protection for the majority of its products, and
instead strives to maintain the confidentiality of its proprietary know-
how. Biomerica believes that the patent positions of any medical device
manufacturer are uncertain and involve complex legal and factual
questions for which important legal principles are largely unresolved.
Lancer owns four patents, but like Biomerica, it does not seek patent
protection for all its products. There can be no assurance, however, that
these patents will provide significant proprietary protection or will be
circumvented or invalidated. Furthermore, there can be no assurance that
products without patent protection will provide significant proprietary
protection.
The Combined Company Must Meet the Demands of Changing Customer
Requirements and Technological Developments
The diagnostic and orthodontic industries are characterized by ongoing
technological developments and changing customer requirements. As a
result, the combined company's success and continued growth will depend
on its ability in a timely manner to develop and successfully introduce
into the marketplace, enhancements of existing products or new products
that incorporate technological advances, meet customer requirements and
respond to products developed by the combined company's competition.
There can be no assurance that the combined company will be successful in
developing products on a timely basis or that such products will
adequately address the changing needs of the marketplace.
The Combined Company Will Be Subject to Intense Government Regulation
Biomerica's immunodiagnostic products are regulated in the United States
as medical devices primarily by the FDA and as such, require regulatory
clearance or approval prior to commercialization. Pursuant to the Federal
Food, Drug and Cosmetic Act, and the regulations promulgated thereunder,
the FDA regulates, among other things, the clinical testing, manufacture,
labeling, promotion, distribution, sale and use of medical devices in the
United States. Failure of Biomerica to comply with applicable regulatory
requirements can result in, among other things, warning letters, fines,
injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, the government's refusal to grant
premarket clearance or premarket approval of devices, withdrawal of
marketing approvals, and criminal prosecution.
Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. The
time required to obtain registrations or approvals required by foreign
countries may be longer or shorter than that required for FDA clearance
or approval, and requirements for licensing may differ significantly from
FDA requirements. There can be no assurance that Biomerica will be able
to obtain regulatory clearances for its current or any future products in
the United States or in foreign markets.
Lancer's products are also subject to regulation by the FDA under the
Medical Device Amendments of 1976 (the "Amendments"). Lancer has
registered with the FDA as required by the Amendments. There can be no
assurance that Lancer will be able to obtain regulatory clearances for
its current or any future products in the United States or in foreign
markets.
Reimbursement Policies Present a Significant Challenge to the Business of
the Combined Company
Political, economic and regulatory influences are subjecting the health
care industry in the United States and other countries to fundamental
change. Although Congress has failed to pass comprehensive health care
reform legislation to date, Lancer and Biomerica anticipate that
Congress, state legislatures and the private sector will continue to
review and assess alternative benefits, controls on health care spending
through limitations on the growth of private health insurance premiums
and Medicare and Medicaid spending, the creation of large insurance
purchasing groups, price controls on pharmaceuticals and other
fundamental changes to the health care delivery system. Any such proposed
or actual changes could cause any potential partners of the combined
company to limit or eliminate spending on collaborative development
projects. Legislative debate is expected to continue in the future,
market forces are expected to demand reduced costs and the combined
company cannot predict what impact the adoption of any federal or state
health care reform measures or future private sector reforms may have on
its business.
In both domestic and foreign markets, sales of the combined company's
products will depend in part on the availability of reimbursement from
third-party payors such as government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price and cost effectiveness of medical
products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. There can be
no assurance that the combined company's products will be considered cost
effective or that adequate third-party reimbursement will be available to
enable the combined company to maintain price levels sufficient to
realize an appropriate return on its investment in product development.
Legislation and regulations affecting the pricing of health care services
may change, which could affect the combined company's products and could
further limit reimbursement for medical products and services.
Biomerica and Lancer Are Subject to the Risk of Product Liability Claims,
and Insurance May Not Be Available
Testing, manufacturing and marketing of Biomerica's and Lancer's products
entail risk of product liability. Biomerica and Lancer currently have
product liability insurance. There can be no assurance, however, that the
combined company will be able to maintain such insurance at a reasonable
cost or in sufficient amounts to protect it against losses due to product
liability. An inability to maintain insurance at an acceptable cost or to
otherwise protect against potential product liability could prevent or
inhibit the commercialization of its products. In addition, a product
liability claim or recall could have a material adverse effect on the
business or financial condition of the combined company.
An Accident Involving Hazardous Materials Could Harm Our Business
----------
Biomerica's and Lancer's research and development involves the controlled
use of hazardous materials and chemicals. Although Biomerica and Lancer
believe that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal
regulations, and the regulations of Mexico, the risk of accidental
contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the combined company could
be held liable for any damages that result and any such liability could
exceed the resources of the combined company. The combined company may
incur substantial costs to comply with environmental regulations.
----------
THE ANNUAL MEETING OF LANCER SHAREHOLDERS
----------
Date, Time and Place
----------
The Lancer annual meeting will be held at 10:30 a.m., local time, on June
4, 2002 at the offices of Biomerica at 1533 Monrovia Avenue, Newport
Beach, CA 92663. The telephone number is (949) 645-2111.
Matters to Be Considered at the Annual Meeting
----------
At the Lancer annual meeting, Lancer shareholders will be asked to vote
on the following proposals:
1. To elect a board of directors for Lancer for the year 2002.
2. To consider and vote upon the proposal to approve and adopt the asset
purchase agreement between Lancer and Biomerica and approve the asset
purchase, which is the subject of this joint proxy statement/prospectus.
3. Lancer shareholders also will consider any other business that may
properly come before the Lancer annual meeting or any adjournment or
postponement of the Lancer annual meeting. Lancer currently does not
contemplate that any other matters will be considered at the Lancer
annual meeting.
Information Regarding the Election of Directors
----------
The Directors to be elected at the meeting will hold office until the
next annual meeting or until their successors shall be elected and
qualified. The persons named in the enclosed proxy card will vote the
shares represented by the proxies given to them for the election of the
four (4) nominees listed in the table below, unless authority to do so is
withheld. The shares represented by proxies will not be voted for a
greater number of persons than the number of nominees listed below;
however, the proxy holders have the right (subject to the same conditions
as apply to cumulation of votes by a shareholder) to cumulate the votes
represented by proxies and to distribute the votes among the listed
nominees in such manner as they see fit to elect the maximum number of
such nominees. If any nominees should not be available for election as
Directors, which the board of directors and management do not presently
anticipate, the persons named in the enclosed proxy will vote for the
election of such other person as the board of directors and management
may recommend.
The board of directors has nominated the following four persons to serve
as Directors until the next annual meeting of shareholders or until their
successors have been duly elected and qualified. There is one vacancy on
the board of directors.
==============================================================
Name Age Position
==============================================================
Zackary Irani 35 Chairman of the Board, CEO, and Director
Janet Moore 51 Secretary and Director
Dr. Robert Orlando 63 Director
Dr. Francis Cano 57 Director
==============================================================
The following is a summary of the Directors' experiences with Lancer and
their other business experience:
Mr. Zackary Irani has been a Director of Lancer since October 29, 1992.
Mr. Irani was elected Chairman of the Board effective April 30, 1997, and
was elected Chief Executive Officer effective October 24, 1997. Mr. Irani
has been the Chief Executive Officer, Chairman, and Treasurer of
Biomerica since August 1997. Prior to that time, Mr. Irani served as Vice
President of Business Development of Biomerica since July 1994 and
Business Development Manager of Biomerica since 1988. Mr. Irani also
serves as a Director of Biomerica and a Director of Allergy Immuno
Technologies, Inc., a publicly held corporation controlled by Biomerica.
Ms. Moore has been a Director of Lancer since October 25, 1996, and was a
Director of Lancer from October 29, 1992 through November 4, 1994. Ms.
Moore has been an employee of Biomerica since 1976 and currently serves
as the Secretary of Biomerica and as a Director of Biomerica.
Dr. Orlando has been a Director of Lancer since July 20, 1988. Dr.
Orlando is a professor of pathology and has served as Chief Pathologist
of Whittier Hospital in Whittier, California, since 1981 and of Beverly
Hospital in Montebello, California, since 1991. Dr. Orlando has also been
a professor at the Southern California College of Optometry in Fullerton,
California, since 1972. Dr. Orlando also serves as a Director of
Biomerica and as a Director of Allergy Immuno Technologies, Inc., a
publicly held corporation controlled by Biomerica.
Dr. Cano has served as a Director of Lancer since May 2001. Dr. Cano
currently works as a consultant in the biomedical field. From 1996 to
1997, Dr. Cano served as Senior Vice President - Biotechnology of PDM, an
information technology company. From 1992 to 1996, he served as President
and Chief Operating Officer of Aviron, a public biotechnology company
focused on developing viral vaccines for disease prevention. Dr. Cano was
also involved in developing a vaccine business at a division of American
Cynamid Corporation.
Meetings of the board of directors and its Committees
The board of directors met six times during the fiscal year ended May 31,
2001 (the "2001 Fiscal Year"). In 1979, the board of directors of Lancer
created an Executive Committee, which is vested with all the authority of
the board of directors of Lancer, except as restricted by the Lancer's
Bylaws and the California General Corporation Law. The Executive
Committee is presently composed by Mr. Zackary Irani, and Ms. Janet
Moore. The Executive Committee did not meet during the 2001 Fiscal Year.
The Audit Committee is presently composed of Ms. Moore and Dr. Orlando.
The Audit Committee met once with the auditors during the 2001 Fiscal
Year.
The Executive Compensation Committee is composed of Ms. Moore and Dr.
Orlando. The Executive Compensation Committee did not meet in Fiscal
2001. The Compensation Committee of the board of directors reviews and
makes recommendations to the Board regarding all forms of compensation
and benefits provided Lancer's officers. In addition, the Compensation
Committee establishes and reviews general policies relating to the
compensation and benefits of all Lancer's employees.
Each outside Director is to be paid $500 for each Board or Committee
meeting attended and $200 for each telephonic meeting. In May 2000,
54,725 previously unissued shares of the Lancer's common stock were
issued to outside directors as payment for accrued fees. Currently no
accrued fees are owed to the Directors. Lancer has no other committees.
Lancer's Executive Compensation
The following table presents, for each of the last three fiscal years,
the annual compensation earned by the Chief Executive Officer. Neither
the Chief Executive Officer nor any other officer of Lancer earned in
excess of $100,000 during any of the last three fiscal years.
Summary Compensation Table
=====================================================================================
Annual Compensation Long Term Compensation
=====================================================================================
Awards Payouts
===================== =========
Securities
Name and Other Restricted Underlying
Principal Annual Stock Options/ LTIP All Other
Position (1) Year Salary (2) Bonus Comp. Awards SARs Payouts Compensation
Zackary Irani,
Chairman of 1999 $4,500 (3) -- -- -- -- -- --
the Board and 2000 $7,700 (3) -- -- -- -- -- --
Chief Exec. 2001 $3,000 (3) -- -- -- -- -- --
Officer
=====================================================================================
(1) Mr. Zackary Irani was elected Chairman of the Board effective April
30, 1997, and was elected Chief Executive Officer effective October 24,
1997.
(2) There were no other forms of compensation earned or paid during the
last three fiscal years.
(3) This sum represents director's fees which have been accrued and
partially paid with shares of common stock.
Stock Option Grants in Last Fiscal Year
The following table sets forth information concerning stock options
granted in the fiscal year ended May 31, 2001, to Lancer's Chief
Executive Officer.
Individual Grants
===================================================================
Number Percent of Total
of Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price($/Sh) Date
===================================================================
Zackary
Irani -- -- -- --
===================================================================
Options Exercises and Fiscal Year End Values
The following table presents information for the named officer in the
Summary Compensation Table with respect to options exercised during
Fiscal 2001 and unexercised options held as of the end of the fiscal
year.
===========================================================================================
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
===========================================================================================
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised in the Money Options
On Realized Options at Fiscal Year End at Fiscal Year End (1)
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
===========================================================================================
Zackary Irani -0- -0- -0- -0- -0- -0-
===========================================================================================
Stock Options
Under the 2000 Stock Incentive Plan (the "Plan"), Lancer is authorized to
grant stock options to key employees, officers, and directors of the
Company (or its parent corporation), non-employee members of the board of
directors of the Company (or its parent), and consultants who provide
valuable services to the Company. Any options outstanding at date of plan
termination will remain in effect. Under the plan, 450,000 shares have
been authorized for grant or issuance. Stock options granted under the
Plan shall be granted at an option price not less than 85% of the fair
market value for options granted to employees, or less than 100% of the
fair market value for options granted to non-employees. The fair market
value of the stock is as of the date the option is granted. Most options
granted under the Plan to date expire five (5) years from the date of
their respective grant and all were granted at fair market value at the
date of grant. As of February 12, 2002, options to purchase 323,000
shares of Common Stock were outstanding at exercise prices ranging from
$.25 to $1.00 per share with an average exercise price of $0.67. As of
February 12, 2002, options to purchase 239,916 shares of Common Stock
were exercisable.
Section 16 Compliance
The rules of the Securities and Exchange Commission require disclosure of
late Section 16 filings by Lancer's directors, officers, and persons who
beneficially own more than 10% of the Lancer's stock. To the best of
Lancer's knowledge and belief, there were no late filings under Section
16 by or for any of Lancer's directors and officers during Fiscal 2001.
Audit Committee Report
The Audit Committee reviewed and discussed with Lancer's management and
BDO Seidman, LLP the audited financial statements of the Company
contained in the Company's Annual Report on Form 10-KSB for the 2001
fiscal year and the matters required to be discussed pursuant to SAS No.
61. The Audit Committee also received and reviewed the written
disclosures and the letter from BDO Seidman, LLP required by ISB Standard
No. 1 regarding independence. Based on the review and discussions, the
Audit Committee recommended to the Board of Directors that the
aforementioned financial statements be included in the 2001 Annual Report
on Form 10-KSB.
Audit Fees
The aggregate fees billed for professional services rendered for the
audit of Lancer's annual financial statements for the year ended May 31,
2001 was $27,500. Lancer was billed a total of $15,000 for the reviews of
the financial statements included in Lancer's Form 10-QSB for the three
quarters during fiscal year ended May 31, 2001.
Financial Information Systems Design and Implementation Fees
There were no fees billed by the principal accountants for professional
services with respect to financial information systems design and
implementation for the fiscal year ended May 31, 2001.
All Other Fees
There were no other services rendered during the fiscal year ended May
31, 2001, with respect to general consulting or income tax preparation.
The audit committee has considered that the provision of the above
services has not impaired the principal accountant's ability to maintain
independence.
It is expected that a representative of BDO Seidman, LLP will be present
at the Annual Meeting to respond to appropriate questions or to make a
statement if he or she so desires.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
ownership of Lancer's Common Stock as of the date of this Proxy
Statement, by (i) each person known to Lancer to own beneficially more
than 5% of the outstanding shares of the Common Stock, (ii) each
director, including the nominees for director, and each executive officer
of Lancer, and (iii) all executive officers and directors as a group.
Unless otherwise indicated, each person listed has sole voting and
investment power over the shares beneficially owned by him or her.
======================================================================
Name and Address of Amount and Nature of Percent
Beneficial Owner(1)(2) Beneficial Ownership(3) of Class (2)
======================================================================
Biomerica 645,967(4) 30.8%
Zackary Irani 122,682(5) 5.6%
Janet Moore 310,163(6) 14.7%
Dr. Robert Orlando 32,042(7) 1.5%
Dr. Francis Cano 10,000(8) .5%
All executive officers
and directors as a
group (4 persons) 437,221(9) 20.3%
======================================================================
(1) The address for Mr. Irani, Ms. Moore, Dr. Orlando, and Dr. Cano is
1533 Monrovia Avenue, Newport Beach CA 92663.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934. Any shares of Common Stock that each
named person and group has the right to acquire within 60 days pursuant
to options, warrants, conversion privileges or other rights, are deemed
outstanding for purposes of computing shares beneficially owned by and
the percentage ownership of each such person and group. However, such
shares are not deemed outstanding for purposes of computing the shares
beneficially owned by or percentage ownership of any other person or
group. Percentage ownership for each named beneficial owner, and the
beneficial ownership of the directors and executive officers as a group,
is based on 2,098,620 issued and outstanding shares of Common Stock.
(3) Except as otherwise indicated and subject to applicable community
property and similar statutes, the persons listed as beneficial owners of
the shares have sole voting and depositive power with respect to such
shares.
(4) Biomerica, Inc.'s address is 1533 Monrovia Avenue, Newport Beach CA
92663.
(5) Includes 91,542 shares of Common Stock underlying options exercisable
by Mr. Irani at or within 60 days after the date of the proxy.
(6) Includes 2,771 shares in the name of Ms. Moore's minor sons and
13,500 shares of Common Stock underlying options exercisable by Ms. Moore
at or within 60 days after the date of the proxy.
(7) Includes 13,500 shares of Common Stock underlying options exercisable
by Dr. Orlando at or within 60 days after the date of the proxy.
(8) Includes 10,000 shares of Common Stock underlying options exercisable
by Dr. Cano at or within 60 days after the date of the proxy.
(9) Includes 128,452 shares underlying options exercisable at or within
60 days after the date of the proxy.
Admission to the Annual meeting
----------
Only Lancer shareholders, including joint holders, as of April 30, 2002
and other persons holding valid proxies for the annual meeting
are entitled to attend the annual meeting. All shareholders
and their proxies should be prepared to present
photo identification. In addition, if you are a record holder, your name
is subject to verification against the list of record holders on the
record date, April 30, 2002, prior to being admitted
to the meeting. Lancer shareholders who are not record holders but hold
shares through a broker or nominee (i.e., in street name) should be
prepared to provide proof of beneficial ownership on the record date,
such as a recent account statement prior to April 30, 2002, or
similar evidence of ownership. If you do not provide
photo identification or comply with the other procedures outlined above
upon request, you will not be admitted to the annual meeting.
Method of Voting; Record Date; Stock Entitled to Vote; Quorum
----------
Lancer shareholders are being asked to vote both shares held directly in
their name as shareholders of record and any shares they hold in street
name as beneficial owners. Shares held in street name are shares held in
a stock brokerage account or shares held by a bank or other nominee.
The method of voting differs for shares held as a record holder and
shares held in street name. Record holders will receive proxy cards.
Holders of shares in street name will receive voting instruction cards in
order to instruct their brokers or nominees how to vote.
Proxy cards and voting instruction cards are being solicited on behalf of
the Lancer board of directors from Lancer shareholders in favor of the
proposal to approve and adopt the asset purchase agreement and approve
the asset purchase.
Shareholders may receive more than one set of voting materials, including
multiple copies of this proxy statement/prospectus and multiple proxy
cards or voting instruction cards. For example, shareholders who hold
shares in more than one brokerage account will receive a separate voting
instruction card for each brokerage account in which shares are held.
Shareholders of record whose shares are registered in more than one name
will receive more than one proxy card. Therefore, Lancer shareholders
should complete, sign, date and return each proxy card and voting
instruction card they receive.
Only shareholders of record of Lancer at the close of business on
April 30, 2002, the record date for the Lancer annual meeting,
are entitled to receive notice of, and have the right to vote at, the
Lancer annual meeting. On the record date, approximately 2,098,624 shares
of Lancer common stock were issued and outstanding. Shareholders of
record of Lancer on the record date are entitled to one vote per share of
Lancer common stock on the proposal to approve and adopt the asset
purchase agreement and approve the asset purchase.
A quorum of shareholders is necessary to have a valid meeting of Lancer
shareholders. A majority of the shares of Lancer common stock issued and
outstanding and entitled to vote on the record date must be present in
person or by proxy at the Lancer annual meeting in order for a quorum to
be established.
Abstentions and broker "non-votes" count as present for establishing a
quorum. A broker "non-vote" occurs on an item when a broker is not
permitted to vote on that item without instructions from the beneficial
owner of the shares and no instructions are given. Shares held by Lancer
in its treasury do not count toward establishing a quorum.
Adjournment and Postponement
----------
Lancer shareholders may be asked to vote upon a proposal to adjourn or
postpone the Lancer annual meeting.
Share Ownership of Lancer Directors and Executive Officers
At the close of business on the date of this proxy statement/prospectus,
directors and executive officers of Lancer and their affiliates
beneficially owned and were entitled to vote 51.19 percent of the
2,098,624 shares of Lancer common stock outstanding on that date.
Voting Procedures
----------
Submitting Proxies or Voting Instructions
----------
Lancer shareholders of record may vote their shares by attending the
Lancer annual meeting and voting their shares in person at the annual
meeting, or by completing their proxy cards and signing, dating and
mailing them in the enclosed self-addressed envelopes. If a proxy card is
signed by a shareholder of record of Lancer and returned without voting
instructions, the shares represented by the proxy will be voted "FOR" the
proposal to approve and adopt the asset purchase agreement and approve
the asset purchase, and in the discretion of Zackary Irani, as the proxy
holder, on any other business that may properly come before the Lancer
annual meeting or any adjournment or postponement of the Lancer annual
meeting.
Lancer shareholders whose shares are held in the name of a broker or
nominee must either direct the record holder of their shares as to how to
vote their shares of Lancer common stock or obtain a proxy from the
record holder to vote at the Lancer annual meeting. Beneficial holders of
Lancer common stock should check the voting instruction cards used by
their brokers or nominees to see if they may vote by using the telephone
or the Internet.
Revoking Proxies or Voting Instructions
----------
Lancer shareholders of record may revoke their proxies at any time prior
to the time their proxies are voted at the Lancer annual meeting. Proxies
may be revoked by written notice to the corporate secretary of Lancer, by
a later-dated proxy signed and returned by mail, or by attending the
Lancer annual meeting and voting in person. Lancer shareholders of record
may also revoke proxies by a later-dated proxy using the telephone or
Internet voting procedures described on their Proxy cards.
Lancer shareholders whose shares are held in the name of a broker or
nominee may change their votes by submitting new voting instructions to
their brokers or nominees. Those Lancer shareholders may not vote their
shares in person at the Lancer annual meeting unless they obtain a signed
proxy from the record holder giving them the right to vote their shares.
Proxy Solicitation
----------
Lancer is soliciting proxies for the Lancer annual meeting from Lancer
shareholders. Each company will share equally the cost of printing and
filing this proxy statement/prospectus and the registration statement on
Form S-4, of which it forms a part, that has been filed by Biomerica with
the Securities and Exchange Commission.
Other than the costs shared with Biomerica, the cost of soliciting
proxies from Lancer shareholders will be paid by Lancer. In addition to
solicitation by mail, directors, officers and employees of Lancer may
also solicit proxies from shareholders by telephone, telecopy, telegram
or in person. Lancer will also make arrangements with brokerage houses
and other custodians, nominees and fiduciaries to send the proxy
materials to beneficial owners. Upon request, Lancer will reimburse those
brokerage houses and custodians for their reasonable expenses in so
doing.
Please do not send in any Lancer stock certificates with your proxy cards
or voting instruction cards.
Contact for Questions and Assistance in Voting
----------
Any Lancer shareholder who has a question about the asset purchase or how
to vote or revoke a proxy, or who needs additional copies of this proxy
statement/prospectus or voting materials should contact :
Lancer Orthodontics, Inc.
Attn: John Dodge
253 Pawnee Street
San Marcos, CA 92069
(760) 744-5585
Other Matters
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Lancer is not aware of any other business to be acted upon at the Lancer
annual meeting. If, however, other matters are properly brought before
the Lancer annual meeting or any adjournment or postponement of the
Lancer annual meeting, the persons named as proxy holders, Janet Moore
and Zackary Irani, will have discretion to act on those matters, or to
adjourn or postpone the Lancer annual meeting.
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THE ASSET PURCHASE
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The following is a description of the material aspects of the asset
purchase transaction, including the asset purchase agreement. While we
believe that the following description covers the material terms of the
asset purchase, the description may not contain all of the information
that is important to you. We encourage you to read carefully this entire
proxy statement/prospectus, including the asset purchase agreement
attached to this proxy statement/prospectus as Exhibit 99.3, and the
amendment to the asset purchase agreement attached to this proxy
statement/prospectus as Exhibit 99.4 for a more complete understanding of
the asset purchase.
How the Asset Purchase Is Structured
----------
Biomerica and Lancer have signed a contract, an "Asset Purchase Agreement
by and Between Lancer Orthodontics, Inc. and Biomerica, Inc." Under this
asset purchase agreement, including one amendment, Biomerica has agreed
to purchase all of the assets and most of the liabilities of Lancer, in
exchange for Biomerica stock. The asset purchase agreement is attached as
Exhibit 99.3 to this proxy statement/prospectus. Following the asset
purchase, Lancer will own between 488,200 and 984,274 shares of
Biomerica. The section entitled, "How the Purchase Price is Calculated
and Lancer's Subsequent Dividend of Biomerica Shares to Lancer's
Shareholders," explains how the number of shares that Lancer is to
receive is calculated. Once Lancer receives the Biomerica shares, Lancer
will dividend the Biomerica shares out to Lancer shareholders.
Note that our transaction is not a merger, it is only a purchase of
assets. Thus, Lancer will not be merged with Biomerica, Lancer
shareholders will retain their Lancer shares, and Lancer shareholders
will receive shares of Biomerica. Upon completion of the asset purchase,
Lancer will have sold all of its operations to Biomerica, and Lancer will
become a blank check company with no operations other than to seek a
company with which to merge.
The boards of both Lancer and Biomerica have executed the asset purchase
agreement document, but the asset purchase agreement will not be
completed until a formal closing takes place. Several conditions to
closing remain, and the asset purchase agreement is subject to
termination.
Reasons for the Asset Purchase Agreement
----------
Overview
The boards of directors and management teams of both Biomerica and Lancer
believe that the proposed asset purchase represents the best strategic
alternative for delivering increased value to our respective
shareholders.
Biomerica and Lancer currently enjoy a close relationship. Lancer is a
Biomerica subsidiary; Biomerica holds over 30% of the outstanding shares
of Lancer. Both companies manufacture medical products. The two companies
share common board members. All of Lancer's four directors sit on
Biomerica's board, comprised of seven directors. Despite this close
relationship, both companies incur many duplicative administrative,
accounting, marketing, legal, and professional expenses. A combined
company will market products more effectively, and will incur lesser
expenses than two separate companies.
Strategic Benefits of the Asset Purchase Agreement
Both Biomerica and Lancer believe that the asset purchase agreement is
beneficial to both companies for the following reasons:
* A combined company will mean that both companies can share the burden
of administrative expenses, rather than bear those expenses individually.
* A combined company will mean that both companies can share the burden
of accounting and audit fees, rather than bear those expenses
individually.
* A combined company will mean that both companies can share the burden
of legal expenses and record keeping associated with their reporting
obligations under the Securities and Exchange Act of 1934, rather than
bear those expenses individually.
* Lancer shareholders will enjoy the greater liquidity of ownership of
Biomerica shares, which trade on the Nasdaq SmallCap market (however,
Lancer shareholders should note that Nasdaq has recently notified
Biomerica that it is subject to delisting from the Nasdaq SmallCap market
because in the opinion of Nasdaq, it no longer meets the SmallCap market
listing requirements).
* Following the asset purchase agreement, Biomerica has a greater chance
of maintaining its listing on the Nasdaq SmallCap market.
Conditions to the Asset Purchase Agreement
----------
Several conditions must be satisfied before we complete the asset
purchase agreement. If these conditions are not met, and the parties do
not agree to waive the failure of these conditions, then the asset
purchase agreement will not be completed. The material conditions that
must be satisfied are summarized below:
* Lancer shareholders must vote to approve the asset purchase agreement
at Lancer's annual meeting on June 4, 2002;
* Both parties must materially comply with the covenants and warranties
they made in the asset purchase agreement, except if a variance would not
have a materially adverse effect on the other party;
* The absence of any law, regulation, injunction, or order making the
asset purchase illegal or otherwise prohibiting the asset purchase which
would have a material impact on Biomerica on a combined basis with
Lancer;
* Lancer must deliver to Biomerica a consent from its bank transferring
its line of credit to Biomerica;
* Biomerica is approximately a 30% shareholder in Lancer, and will not
participate in the dividend of Biomerica shares to Lancer shareholders
following the completion of the asset purchase agreement. Therefore,
Biomerica must deliver to Lancer an agreement waiving any and all right
to any distribution or dividend of the Biomerica shares that form the
purchase price under the asset purchase agreement. Thus, the Biomerica
shares will be distributed solely to the remaining 70% of Lancer
shareholders; and
* Lancer must deliver consent letters from Lancer's landlords agreeing to
assign Lancer's commercial leases to Biomerica.
Biomerica and Lancer May Terminate the Asset Purchase Agreement Under
Specified Circumstances
----------
Under circumstances specified in the asset purchase agreement, either
Biomerica or Lancer may terminate the asset purchase agreement. These
circumstances generally include if:
* both parties mutually agree to terminate the asset purchase agreement;
* either party breaches a representation, warranty or covenant in the
asset purchase agreement that is not cured within 20 days following
written notice of the breach; or
* a final, non-appealable order of a court or other action or inaction
of any governmental authority has the effect of permanently prohibiting
completion of the asset purchase.
Opinion of Lancer's Financial Advisor Regarding the Asset Purchase
----------
On March 18, 2002, Willamette Management Associates delivered its written
opinion to Lancer's and Biomerica's board of directors that, as of that
date and subject to the assumptions, considerations and limitations set
forth in its opinion, the exchange ratio provided for in the
asset purchase agreement is fair, from a financial point of view, to
Lancer. Willamette Management Associates provided its opinion
for the information and assistance of the Lancer and Biomerica boards of
directors in connection with the boards' consideration of the asset
purchase. The Willamette Management Associates opinion is not a
recommendation as to how any Lancer shareholder should vote with respect
to the proposal to approve the issuance of shares of Biomerica common
stock in connection with the asset purchase.
Lancer's Plan Following the Asset Purchase
----------
Assuming the asset purchase agreement is completed, Biomerica will
operate both Biomerica and Lancer's former operations as a combined
company, while Lancer will become a blank check company, a company
without any operations other than to seek a merger candidate. However,
for at least the foreseeable future, Lancer will remain a legal entity,
its shares will continue to trade on the Over-the-Counter Bulletin
Board, and it will continue to make periodic filings to the SEC, such
as quarterly and annual reports, and will remain a fully reporting
company. Fully reporting blank check companies are valuable because
they are attractive merger candidates for private companies
that wish to become public through a merger with the blank check company.
Thus, there are essentially two possible outcomes for Lancer. The more
likely outcome, and one the Lancer directors intend to pursue, is to
find an operating company to merge with Lancer. If Lancer merges with
an operating company, Lancer shareholders will benefit from becoming
shareholders in such a new combined company. The other possible outcome
for Lancer is that the Lancer directors vote to dissolve Lancer and
end its life as a corporation. The directors will only vote to dissolve
Lancer in the event that Lancer cannot secure a merger candidate.
Recommendation of the Biomerica Board of Directors
----------
After careful consideration, the Biomerica board of directors unanimously
determined that the asset purchase is advisable, and is fair to and in
the best interests of Biomerica and its shareholders, and unanimously
approved the asset purchase agreement.
Recommendation of the Lancer Board of Directors
----------
After careful consideration, the Lancer board of directors unanimously
determined the asset purchase is advisable, and is fair to and in the
best interests of Lancer and its shareholders, and unanimously approved
the asset purchase agreement. The Lancer board of directors recommends
that the Lancer shareholders vote "FOR" the proposal to approve and adopt
the asset purchase agreement and approve the asset purchase; please note
that the Lancer directors are subject to conflicts of interest as
described more fully under the heading "Risk Factors".
How the Purchase Price is Calculated and Lancer's Subsequent Dividend of
Biomerica Shares to Lancer's Shareholders
----------
Overview of the Purchase Price Calculation
In exchange for Lancer's assets, Biomerica is issuing to Lancer shares of
its common stock with a value of $610,250, with certain exceptions
discussed below. The number of shares that Biomerica shall issue will
vary according to Biomerica's stock price in the period leading up to the
closing. The following steps outline how the purchase price is calculated
and how Lancer intends to dividend the Biomerica shares to the Lancer
shareholders.
Step One: Biomerica and Lancer Must First Calculate the Average Closing
Price of Biomerica's Stock.
The calculation of the number of shares that Biomerica will issue first
depends upon the average closing price of Biomerica stock for the five
days immediately preceding the closing of the asset purchase agreement.
We cannot know what that average price is because the asset
purchase agreement cannot close until after the Lancer shareholder vote.
The boards of both Lancer and Biomerica felt it would be fairer to both
companies and their shareholders if the purchase price for Lancer's
assets was based upon the share price of Biomerica at the time that the
transaction was finalized, and not months before when the transaction was
planned.
Step Two: Biomerica and Lancer Then Calculate the Number of Biomerica
Shares to Be Issued Based Upon the Average Closing Price.
Once the average closing price of Biomerica's stock is calculated,
Biomerica will then issue $610,250 worth of its shares at the average
closing price. In other words, Biomerica will issue a number of shares
such that the issued shares multiplied by Biomerica's average closing
price equals $610,250 worth of stock. For example, if the average closing
price of Biomerica stock is $0.80, then Biomerica will issue 762,812
shares because 762,812 shares multiplied by $0.80 equals $610,250.
Step Three: The Number of Shares to Be Issued by Biomerica Is Subject to
Both a Maximum and a Minimum.
The total number of Biomerica shares to be issued in the asset purchase
is subject to a maximum and a minimum number of shares--the total number
of shares cannot be more than 984,274 Biomerica shares or less than
488,200 Biomerica shares. The Biomerica and Lancer boards agreed that if
Biomerica's average closing price was equal to or less than $0.62, that
Biomerica would only be required to issue a maximum of 984,274 shares.
Similarly, the Biomerica and Lancer boards agreed that if Biomerica's
average closing price was equal to or less than $1.25, that Biomerica
would issue a minimum of 488,200 shares. Thus, in the event Biomerica's
average closing share price is greater than $1.25 or less than $0.62, the
number of shares to be issued shall be subject to the minimum and maximum
limitations.
Step Four: Biomerica, a Lancer Shareholder, Will Agree to Waive the
Dividend of Biomerica Shares.
Biomerica owns 645,967 shares of Lancer common stock, which equals
approximately 30.78 percent of Lancer's outstanding stock. As a condition
to the closing of the asset purchase agreement, Biomerica agrees to waive
its right to receive the dividend of Biomerica shares by Lancer following
the completion of the asset purchase agreement. Because Biomerica is
waiving its right to receive the dividend of Biomerica shares, the
dividend of Biomerica shares will be distributed solely to the
approximately 69.22 percent of remaining Lancer shareholders.
Step Five: Lancer's Board Will Pay to Lancer Shareholders a Dividend of
the Biomerica Shares.
Because Biomerica will not share in the dividend of Biomerica shares,
Biomerica will be ineligible to receive shares in the dividend. Thus, the
Lancer board will pay out the Biomerica shares as a dividend to the
remaining eligible Lancer shareholders. The eligible shareholders hold
1,452,657 shares, which represents 69.22 percent of Lancer's outstanding
shares. Thus, if the maximum number of shares is issued, 984,274
Biomerica shares will be paid as a dividend to the 1,452,657 eligible
Lancer shares; each Lancer share will receive .677 Biomerica shares.
The following table shows sample calculations of the number of Biomerica
shares to be paid to Lancer shareholders at various sample average
closing prices of Biomerica stock.
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Sample Total
Average Closing Number of Number of Biomerica
Price of Biomerica Shares to be
Biomerica Cash Value Shares to Paid to Each Eligible
Shares of Shares Be Issued Lancer Share
-----------------------------------------------------------------------
$0.62 $610,250 984,274 .677
$0.80 $610,250 762,812 .525
$1.25 $610,250 488,200 .336
One special circumstance deserves mention: Lancer cannot dividend out
fractions of shares, so fractional shares shall be rounded up to the next
share. It is important to note that although Biomerica will be waiving
its right to receive its own stock as a dividend, Biomerica will remain a
Lancer shareholder.
United States Federal Income Tax Consequences of the Asset Purchase
----------
The following summary discusses the material federal income tax
consequences of the asset purchase to Lancer shareholders. The following
discussion is based on existing provisions of the Internal Revenue Code,
existing treasury regulations and current administrative rulings and
court decisions, all of which are subject to change, possibly with
retroactive effect, and to differing interpretations.
We do not discuss all federal income tax considerations that may be
relevant to a particular shareowner in light of his or her personal
circumstances or to shareholders subject to special treatment under the
federal income tax laws, including:
* dealers in securities or foreign currencies;
* shareholders who are subject to the alternative minimum tax provisions
of the Internal Revenue Code;
* tax-exempt organizations;
* non-United States persons or entities;
* financial institutions or insurance companies;
* shareholders who acquired Lancer common stock in connection with stock
option or stock purchase plans or in other compensatory transactions.
In addition, we do not discuss the tax consequences of the asset purchase
under foreign, state or local tax law. This discussion assumes that
Lancer shareholders hold their shares of Lancer common stock as capital
assets within the meaning of Section 1221 of the Internal Revenue Code
(generally, as property held as an investment).
Neither Biomerica nor Lancer has sought a tax opinion regarding the
specific tax consequences to Lancer shareholders of the asset purchase.
Accordingly, we urge you to consult your tax advisors as to the specific
tax consequences to you of the asset purchase, including any applicable
federal, state, local and foreign tax consequences.
We believe that the asset purchase will qualify as a tax-free
reorganization for federal income tax purposes within the meaning of
Section 368(a) of the Internal Revenue Code and that the following
material federal income tax consequences will result from such
qualification:
* Lancer shareholders will not recognize any gain or loss upon the
receipt of Biomerica common stock pursuant to the transaction, except for
cash received as a result of dissenter's appraisal rights; and
* Biomerica and Lancer will not recognize gain or loss as a result of the
asset purchase.
Neither Biomerica nor Lancer will request a ruling from the Internal
Revenue Service regarding the tax consequences of the asset purchase to
Lancer shareholders. The tax opinions do not bind the Internal Revenue
Service and do not prevent the Internal Revenue Service from successfully
asserting a contrary opinion. In addition, if any of the representations
or assumptions upon which the opinions are based are inconsistent with
the actual facts, the tax consequences of the asset purchase could be
adversely affected.
Accounting Treatment of the Asset Purchase
----------
In accordance with accounting principles generally accepted in the United
States of America, Biomerica will account for the asset purchase using
the purchase method of accounting. Biomerica will allocate the cost of
Lancer to the assets acquired and the liabilities assumed based on their
estimated fair values at the date of acquisition. Any excess of the
estimated purchase price over those fair values would be accounted for as
goodwill. When the fair value of the identifiable net assets acquired
exceeds the cost of the acquired business (which management of Biomerica
believes will be the case because the purchase price paid for Lancer's
assets is expected to be less that the estimated fair value of the net
assets acquired), the excess over cost (negative goodwill) should reduce
acquired assets, excluding current assets and certain other assets. Any
excess that remains after reducing those certain acquired assets will be
recognized as an extraordinary gain in Biomerica's consolidated financial
statements. Biomerica believes that the increase in equity as a result
of the acquisition of Lancer and the accounting thereof will be
approximately $1,700,000. If Biomerica's management should determine
that the fair values of the assets and liabilities to be acquired are
different then estimated, the negative goodwill calculation and increase
in equity could be different.
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DISSENTERS' APPRAISAL RIGHTS
----------
Under California law, the holders of common stock of Lancer will have
dissenters' rights and may be entitled to receive cash equal to the fair
market value of their Lancer common stock. Shareholders who elect to
exercise dissenters' rights must comply with all of the procedures to
preserve those rights. We have attached a copy of Chapter 13 of the
California Corporations Code, which sets forth the dissenters' rights, as
Exhibit 99.2 to this joint proxy statement/prospectus.
Chapter 13 sets forth the required procedure a shareholder exercising
dissenters' rights must follow. Making sure that you actually perfect
your dissenters' rights can be complicated. The procedural rules are
specific and must be followed completely. Failure to comply with the
procedure may cause a termination of your dissenters' rights. We are
providing you with only a summary of your rights and the procedure. The
following information is qualified in its entirety by the provisions of
Chapter 13. Please review Chapter 13 for the complete procedure. Lancer
will not give you any notice other than as described in this joint proxy
statement/prospectus and as required by the California Corporations Code.
Shares of Lancer common stock must satisfy each of the following
requirements to qualify as dissenting shares under the California
Corporations Code: (i) the shares must have been outstanding on the
record date for the determination of the holders of Lancer common stock
entitled to vote on the asset purchase (and therefore options to purchase
Lancer common stock exercised after the record date may not constitute
dissenting shares); (ii) the shares must not have been voted in favor of
the asset purchase; (iii) the holder of such shares must make a written
demand that Lancer repurchase the shares at fair market value and such
demand must be received by Lancer within thirty days after notice of
approval of the asset purchase by the outstanding shares is mailed to the
holder; and (iv) the holder of such shares must submit certificates for
endorsement (as described below). A vote by proxy or in person against
the asset purchase does not in and of itself constitute a demand for
appraisal under the California Corporations Code.
Pursuant to Sections 1300 through 1312 of the California Corporations
Code, holders of dissenting shares may require Lancer to repurchase their
dissenting shares at a price equal to the fair market value of such
shares determined as of the day before the first announcement of the
terms of the asset purchase, excluding any appreciation or depreciation
in consequence of the proposed asset purchase, but adjusted for any stock
split, reverse stock split or stock dividend which becomes effective
thereafter.
Within ten days following approval of the asset purchase by the
shareholders of Lancer, Lancer is required to mail each person who did
not vote in favor of the asset purchase a notice of the approval of the
asset purchase, a statement of the price determined by Lancer to
represent the fair market value of dissenting shares determined as of the
day before the first announcement of the terms of the asset purchase
(which shall constitute an offer by Lancer to purchase such dissenting
shares at such stated price), a copy of sections 1300 through 1304 of the
California Corporations Code, and a description of the procedures for
such holders to exercise their rights as dissenting shareholders.
Within thirty days following the date on which the notice of the approval
of the asset purchase was mailed, a holder of Lancer common stock who
wishes to be paid the full cash value of his, her or its dissenting
shares must submit to Lancer (i) a written demand for the purchase of
dissenting shares, as described below, and (ii) certificates representing
any dissenting shares which the dissenting shareholder demands that
Lancer purchase, so that such dissenting shares may either be stamped or
endorsed with the statement that the shares are dissenting shares or
exchanged for certificates of appropriate denomination so stamped or
endorsed.
The demand of a dissenting shareholder is required by law to contain a
statement concerning the number of dissenting shares held of record by
such dissenting shareholder which the dissenting shareholder demands that
Lancer purchase, and a statement of what such dissenting shareholder
claims to be the fair market value of the dissenting shares as of the day
before the announcement of the proposed asset purchase. The statement of
fair market value in such demand by the dissenting shareholder
constitutes an offer by the dissenting shareholder to sell the dissenting
shares at such price.
If Lancer and a dissenting shareholder agree upon the price to be paid
for the dissenting shares, upon the dissenting shareholder's surrender of
the certificates representing the dissenting shares, such price is
required by law to be paid to the dissenting shareholder within the later
of thirty days after such agreement or thirty days after any statutory or
contractual conditions to the consummation of the asset purchase are
satisfied or waived, subject to surrender of the certificates for the
payment.
If Lancer and a dissenting shareholder disagree as to the price for such
dissenting shares or disagree as to whether such dissenting shares are
entitled to be classified as dissenting shares, such holder has the right
to bring an action in California Superior Court to resolve such dispute
within six months after the date on which notice of approval of the asset
purchase is mailed. In such action, the court will determine whether the
shares of Lancer common stock held by such shareholder are dissenting
shares, the fair market value of such shares of Lancer common stock, or
both. The California Corporations Code provides, among other things, that
a Lancer dissenting shareholder may not withdraw the demand for payment
of the fair market value of dissenting shares unless Lancer consents to
such request for withdrawal.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.
----------
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed 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.
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COMPARISON OF RIGHTS OF HOLDERS OF BIOMERICA COMMON STOCK AND LANCER
COMMON STOCK.
----------
Comparison of the Certificates of Incorporation and Bylaws of Biomerica
and Lancer
The following is a summary of the material differences between the
provisions of the certificate of incorporation and bylaws of each of
Biomerica and Lancer. This summary is not intended to be a complete
discussion of the respective certificates of incorporation and bylaws of
Biomerica and Lancer and it is qualified in its entirety by reference to
the applicable Delaware General Corporation Law or California Corporation
Code, as applicable, as well as by reference to the respective
certificates of incorporation and bylaws of Biomerica and Lancer. You
should carefully read this entire proxy statement/prospectus and the
other documents we refer to in this proxy statement/prospectus for a more
complete understanding of the differences between being a shareowner of
Biomerica and being a shareowner of Lancer. Biomerica and Lancer will
send copies of their articles of incorporation and bylaws to you upon
your request. See the section entitled "Where You Can Find More
Information" beginning on page 65 of this proxy statement/prospectus.
Authorized Capital Stock
Biomerica's certificate of incorporation authorizes the issuance of
30,000,000 shares of capital stock, consisting of:
* 25,000,000 shares of common stock, par value $0.08 per share; and
* 5,000,000 shares of preferred stock, par value $0.08 per share.
Lancer's certificate of incorporation authorizes the issuance of
50,750,000 shares of capital stock, consisting of:
* 50,000,000 shares of common stock, no par value; and
* 250,000 shares of Series C preferred stock, $.06 noncumulative annual
dividend; $.75 par value; $.75 liquidation preference.
* 500,000 shares of Series D preferred stock, $.04 noncumulative annual
dividend; $.50 par value; $.50 liquidation preference.
Size of the Board of Directors
Biomerica's certificate of incorporation provides that the number of
directors comprising the Biomerica board of directors shall be no fewer
than 3 and no more than 9 persons. Biomerica's certificate of
incorporation further provides that the exact number of directors
comprising the Biomerica board of directors shall be fixed, and may be
changed from time to time, within the foregoing limits, by an amendment
to Biomerica's bylaws that has been duly adopted by the Biomerica board
of directors or Biomerica shareholders. Biomerica's bylaws provide that
within the range of 3 to 9 directors set forth in Biomerica's certificate
of incorporation, the exact number of directors comprising the Biomerica
board of directors may be as fixed from time to time by the Biomerica
board of directors. The Biomerica board of directors currently has 7
members. Upon completion of the asset purchase, the Biomerica board of
directors will have 7 members.
Lancer's bylaws provide that the number of directors comprising the
Lancer board of directors may be no fewer than 4 and no more than 7, with
an actual number of directors set at 5. The number of directors is to
remain at 5 until the bylaws are amended either by vote of the Lancer
board of directors or by vote of the Lancer shareholders. The Lancer
board of directors currently has 4 members. One seat is vacant.
Cumulative Voting
Biomerica's shareholders are not entitled to cumulate votes in connection
with the election of directors.
Lancer shareholders are entitled to cumulate votes in connection with the
election of directors according to California law. Cumulative voting give
greater voting power to minority shareholders; it allows shareholders to
give one director candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares to be voted.
This allows shareholders to focus increased voting power on one
candidate.
Removal of Directors
Biomerica's bylaws provide that any director, or the entire Biomerica
board of directors, may be removed with or without cause by the holders
of a majority of the shares then outstanding and entitled to vote at an
election of directors. However, if and so long as shareholders are
entitled to cumulative voting in connection with the election of
directors, if less than the entire Biomerica board of directors is to be
removed, no individual director may be removed from the Biomerica board
of directors without cause if the votes cast against such director's
removal would be sufficient to elect such director if then cumulatively
voted in an election of the entire Biomerica board of directors.
Lancer's certificate of incorporation and bylaws do not provide
procedures for the removal of Lancer directors. Under California Law, any
director, or the entire board of directors, may be removed with or
without cause by the affirmative vote of the holders of at least a
majority of the outstanding shares of a corporation entitled to vote in
the election of directors.
However, cumulative voting rules apply to the removal of Lancer
directors. Thus, if and so long as shareholders are entitled to
cumulative voting in connection with the election of directors, if less
than the entire Lancer board of directors is to be removed, no individual
director may be removed from the Lancer board of directors without cause
if the votes cast against such director's removal would be sufficient to
elect such director if then cumulatively voted in an election of the
entire Lancer board of directors.
Filling Vacancies on the Board of Directors
Biomerica's bylaws provide that vacancies on the Biomerica board of
directors may be filled by a majority of the remaining directors, even if
less than a quorum.
Lancer's bylaws provide that any vacancy on the Lancer board of
directors, except for a vacancy caused by the removal of a director, may
be filled by a majority of the remaining directors, whether or not less
than a quorum or by a sole remaining director. Vacancies occurring in the
board of directors by reason of the removal of directors may be filled
only by the affirmative vote of a majority of the voting power of shares
represented and voting at a duly held shareowner meeting at which a
quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum).
Ability to Call Special Meetings of the Board of Directors
Biomerica's bylaws provide that special meetings of the Biomerica board
of directors for any purpose(s) may be held at any time upon the call of
the Chairman of the Board or the President or a majority of the directors
by oral, telegraphic or written notice duly served on or sent or mailed
to each director not less than one day before such meeting.
Lancer's bylaws provide that special meetings of the Lancer board of
directors for any purpose(s) may be called at any time by the Chairman of
the board, the president, or by any vice president, or by the secretary
or any two directors.
Ability to Call Special Meetings of Shareholders
Biomerica's bylaws provide that a special meeting of Biomerica
shareholders may be called at any time by the Chairman of the Board or
the President, or the Secretary at the request in writing of the
stockholders owning of record at least 10% of the issued and outstanding
capital stock of the corporation entitled to vote thereat.
Lancer's bylaws provide that a special meeting of the Lancer shareholders
may be called at any time by the board, the chairman of the board, the
president, or by the holders of shares entitled to cast 10% or more of
the votes at the meeting.
Shareholder Action by Written Consent in Lieu of a Shareholder Meeting
Biomerica's certificate of incorporation is silent with respect to
shareholder action by written consent. Delaware law thus allows
shareholders to vote by written consent signed by the holders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote were present and voted.
Lancer shareholders may take action without a meeting, without prior
notice and without a vote, if a written consent is signed by the holders
of outstanding stock having not less than the minimum number of votes
necessary to take action at a meeting at which all shares entitled to
vote were present and voted. However, the following actions require
either unanimous shareholder written consent or notice to shareholders:
*A contract between the corporation and either any director or a firm in
which any director has an interest.
*An agreement to extend indemnification protection to a party.
*A reorganization of the corporation.
*A plan of distribution of property in connection with the winding up of
the corporation's affairs.
Amendment to Bylaws
Biomerica shareholders can amend the bylaws upon the vote of the holders
of a majority of the stockholders present in person or by proxy at any
annual or special meeting of the stockholders, if there is a quorum, and
if notice was given of the proposed amendment.
The Biomerica board also enjoys the power to amend the bylaws by the vote
of a majority of the whole board, given at any regular or special meeting
of the board.
Lancer shareholders can amend the bylaws by the vote or written consent
of the majority of shareholders.
The Lancer board also enjoys the power to amend the bylaws by majority
vote, with a limitation: the board cannot modify a bylaw concerning any
of the following:
*Specifying or changing the fixed number of directors.
*Changing the maximum or minimum number of directors.
*Changing from a fixed board to a variable board, and vice versa.
Indemnification of Officers and Directors
Biomerica's Amended and Restated Certificate of Incorporation extends to
its directors and officers the widest possible indemnification protection
allowed by Delaware law. Specifically, Biomerica eliminates the liability
of directors for monetary damages for an act or omission in the
director's capacity as a director, except for the following
circumstances:
*A breach of a director's duty of loyalty to the company or its
stockholders.
*An act or omission not in good faith that constitutes a breach of duty
of that director to the company or an act or omission that involves
intentional misconduct or a knowing violation of the law.
*A transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope
of the director's office.
*An act or omission for which the liability of a director is expressly
provided for by an applicable statute.
Lancer's bylaws extend to directors and officers the widest possible
indemnification protection allowed by California law. California law
dictates that Lancer cannot reimburse officers, directors, employees,
etc. under the following circumstances:
*A court of law determines that the director, officer, employee, etc. is
liable to the corporation in connection with the performance of that
person's duties.
*Reimbursement for amounts paid in settling or disposing of a pending
action without court approval.
*Reimbursement for expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
----------
EXPERTS
----------
The consolidated financial statements incorporated by reference in this
prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in their
reports incorporated herein by reference, and are incorporated herein in
reliance upon such reports given on the authority of said firm as experts
in auditing and accounting.
----------
WHERE YOU CAN FIND MORE INFORMATION
----------
This proxy statement/prospectus incorporates documents by reference which
are not presented in or delivered with this proxy statement/prospectus.
You should rely only on the information contained in this proxy
statement/prospectus and in the documents that we have incorporated by
reference into this proxy statement/prospectus. We have not authorized
anyone to provide you with information that is different from or in
addition to the information contained in this document and incorporated
by reference into this proxy statement/prospectus.
The following documents, which were filed by Biomerica with the
Securities and Exchange Commission, are incorporated by reference into
this proxy statement/prospectus:
* Biomerica's annual report on Form 10-KSB for the fiscal year ended May
31, 2001, and delivered to Lancer shareholders with this joint
prospectus/proxy; and
* Biomerica's quarterly reports on Form 10-QSB for the quarters ended
August 31, 2001, and November 30, 2001; and delivered to Lancer
shareholders with this joint prospectus/proxy; and
The following documents, which were filed by Lancer with the Securities
and Exchange Commission, are incorporated by reference into this proxy
statement/prospectus:
* Lancer's annual report on Form 10-KSB for the fiscal year ended May 31,
2001, and delivered to Lancer shareholders with this joint
prospectus/proxy;
* Lancer's quarterly reports on Form 10-QSB for the quarters ended August
31, 2001, and November 30, 2001; and delivered to Lancer shareholders
with this joint prospectus/proxy; and
In addition, all documents filed by Biomerica and Lancer pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this proxy statement/prospectus and before the date of
the Biomerica and Lancer annual meetings are deemed to be incorporated by
reference into, and to be a part of, this proxy statement/prospectus from
the date of filing of those documents.
Any statement contained in this proxy statement/prospectus or in a
document incorporated or deemed to be incorporated by reference into this
proxy statement/prospectus will be deemed to be modified or superseded
for purposes of this proxy statement/prospectus to the extent that a
statement contained in this proxy statement/prospectus or any other
subsequently filed document that is deemed to be incorporated by
reference into this proxy statement/prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this proxy
statement/prospectus.
Biomerica has supplied all information contained or incorporated by
reference in this proxy statement/prospectus about Biomerica, and Lancer
has supplied all information contained or incorporated by reference in
this proxy statement/prospectus about Lancer.
Biomerica will provide you with copies of this information relating to
Biomerica, without charge, upon written or oral request to:
Biomerica, Inc.
Attn: Janet Moore
1533 Monrovia Avenue
Newport Beach, California 92663
(949) 645-2111
Lancer will provide you with copies of this information relating to
Lancer, without charge, upon written or oral request to:
Lancer Orthodontics, Inc.
Attn: John Dodge
253 Pawnee Street
San Marcos, CA 92069
(760) 744-5585
In order for you to receive timely delivery of the documents in advance
of the Lancer special meeting, Lancer should receive your request no
later than June 2, 2002.
Biomerica and Lancer file annual, quarterly and current reports, proxy
and information statements and other information with the Securities and
Exchange Commission. Copies of the reports, proxy and information
statements and other information filed by Biomerica and Lancer with the
Securities and Exchange Commission may be inspected and copied at the
Public Reference Room maintained by the Securities and Exchange
Commission at:
450 Fifth Street, N.W. Washington, D.C. 20549
The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
SEC and the internet address of that site is (http://www.sec.gov).
Biomerica has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the Securities and Exchange Commission with
respect to Biomerica's common stock to be issued to Lancer shareholders
in connection with the asset purchase. This proxy statement/prospectus
constitutes the prospectus of Biomerica filed as part of the registration
statement. This proxy statement/prospectus does not contain all of the
information set forth in the registration statement because certain parts
of the registration statement are omitted in accordance with the rules
and regulations of the Securities and Exchange Commission. The
registration statement and its exhibits are available for inspection and
copying as set forth above.
This proxy statement/prospectus does not constitute an offer to sell, or
a solicitation of an offer to purchase, the securities offered by this
proxy statement/prospectus, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom or from whom it is unlawful to
make such offer, solicitation of an offer, or proxy solicitation in such
jurisdiction. Neither the delivery of this proxy statement/prospectus nor
any distribution of securities pursuant to this proxy
statement/prospectus shall, under any circumstances, create any
implication that there has been no change in the information set forth or
incorporated into this proxy statement/prospectus by reference or in our
affairs since the date of this proxy statement/prospectus.
----------
EXHIBITS
----------
ITEM
NO. DESCRIPTION
---------------------
3.1 First Amended and Restated Articles of Incorporation
of Biomerica, Inc.
3.2 Bylaws of Nuclear Medical Systems, Inc.
3.3 Amendment to Bylaws of Biomerica, Inc.
5.1 Opinion of Michael D. Spadaccini, Esq.
regarding legality of the Common Stock
being registered
23.1 Consent of BDO Seidman, LLP, Independent Certified Public
Accountants
23.2 Consent of BDO Seidman, LLP, Independent Certified Public
Accountants
99.1 Form of Proxy for Lancer
99.2 California Corporations Code Section 1300-1312
99.3 Asset Purchase Agreement By and Between Lancer
Orthodontics, Inc., and Biomerica, Inc.
99.4 Amendment Number One to Asset Purchase Agreement
by and Between Lancer and Biomerica
99.5 Opinion Re: Fairness of the Asset Purchase Agreement
----------
UNDERTAKINGS.
----------
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To include 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 represent
no more than 20% 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;
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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 remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (h)(1) immediately following, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment 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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company
being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
----------
SIGNATURES
----------
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Marcos, State
of California on April 10, 2002
BIOMERICA, INC.
By: /S/ Zackary S. Irani
----------------------------
Zackary S. Irani, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Zackary S. Irani Date: April 10, 2002
------------------------------------
Zackary S. Irani
President, Director, Chief Executive
Officer
/s/ Janet Moore Date: April 10, 2002
------------------------------------
Janet Moore, Secretary
Director, Chief Financial Officer
/s/ Robert Orlando, M.D., Ph.D. Date: April 10, 2002
------------------------------------
Robert Orlando, M.D., Ph.D.
Director
/s/ Carlos St. Aubyn Beharie Date: April 10, 2002
------------------------------------
Carlos St. Aubyn Beharie
Director
/s/ David Burrows Date: April 10, 2002
------------------------------------
David Burrows
Director
/s/ Francis R. Cano Date: April 10, 2002
------------------------------------
Francis R. Cano
Director
/s/ Allen Barbieri Date: April 10, 2002
------------------------------------
Allen Barbieri
Director
----------------------------------------------------------
Exhibit 3.1 First Amended and Restated Articles of Incorporation of
Biomerica, Inc.
FIRST AMENDED AND RESTATED
CERTIFICATE of INCORPORATION
OF
BIOMERICA, INC.
Biomerica, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the
"Corporation") does hereby certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on September 22, 1971
under the name of Nuclear Medical Systems, Inc.
2. At a duly called meeting of the Board of Directors of the Corporation
at which a quorum was present at all times, a resolution was duly
adopted, pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware ("General Corporation Law"), setting forth the
First Amended and Restated Certificate of Incorporation of the
Corporation, declaring said First Amended and Restated Certificate of
Incorporation advisable and directing that said First Amended and
Restated Certificate of Incorporation be considered at the next annual
meeting of the stockholders. The stockholders of the Corporation duly
approved said proposed First Amended and Restated Certificate of
Incorporation at such annual meeting of the stockholders in accordance
with Sections 222, 242 and 245 of the General Corporation Law.
3. The text of the Certificate of Incorporation of the Corporation, as
amended, is hereby further amended and restated in its entirety as
follows:
ARTICLE I
NAME
The name of this Corporation is Biomerica, Inc.
ARTICLE II
REGISTERED OFFICE IN STATE AND REGISTERED AGENT
The address of the registered office of this Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle.
The name of this Corporation's registered agent at such registered office
is The Prentice-Hall Corporation System, Inc.
ARTICLE III
PURPOSE
The purpose for which this Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law.
ARTICLE IV
CAPITAL STOCK
This Corporation is authorized to issue two classes of shares designated
respectively "Common Stock" and "Preferred Stock" and referred to herein
as Common Stock or Common Shares and Preferred Stock or Preferred Shares,
respectively. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 30,000,000 shares, par
value $.08, consisting of:
(a) 25,000,000 shares of Common Stock; and
(b) 5,000,000 shares of Preferred Stock. The Preferred Shares may be
issued from time to time in one or more series. The board of directors is
authorized to fix the number of shares of any series of Preferred Stock
and to determine the designation of any such series. The board of
directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Shares and, within the limits and
restrictions stated in any resolution or resolutions of the board of
directors originally fixing the number of shares constituting any series,
to increase or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any series subsequent to
the issue of shares of that series.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS of THIS
CORPORATION AND of THE DIRECTORS AND STOCKHOLDERS
Section 1. Number of Directors. The number of directors which shall
comprise the full Board of Directors of this Corporation shall be fixed
by, or in the manner provided in, the Bylaws of this Corporation.
Section 2. Power to Authorize Issuance of Stock. The Board of Directors
of this Corporation is hereby empowered to authorize the issuance from
time to time of shares of capital stock, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem
advisable, subject to such limitations as may be set forth in this
Certificate of Incorporation or in the Bylaws of this Corporation or in
the General Corporation Law.
Section 3. Limitation on Liability of Directors. A director of this
Corporation shall not be personally liable to this Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty
of loyalty to this Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law as now in effect, or any successor provision
thereto, (iii) under Section 174 of the General Corporation Law, or (iv)
for any transaction from which the director derived any improper personal
benefit. If the General Corporation Law is amended after approval by the
stockholders of this Article V to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the General Corporation Law, as so
amended.
Any repeal or modification of this Section 3 of Article V by the
stockholders of this Corporation shall not adversely affect any right or
protection of a director of this Corporation existing at the time of such
repeal or modification.
Section 4. Indemnification. Each director, officer and employee of this
Corporation shall be indemnified by this Corporation to the fullest
extent permitted by the General Corporation Law as now or hereafter in
force.
Section 5. Bylaws. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the board of directors of
this Corporation is expressly authorized and empowered to make, alter,
amend and repeal the Bylaws of this Corporation, subject to the power of
the stockholders of this Corporation to alter or repeal any Bylaw made by
the board of directors.
ARTICLE VI
AMENDMENTS
This Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed
by statute.
IN WITNESS WHEREOF, this Corporation has caused this First Amended and
Restated Certificate of Incorporation to be signed by its President and
attested by its Secretary this __ day of July, 2000.
BIOMERICA, INC.
By: /s/ Zackary Irani
-----------------------------------------
Zackary Irani, President
ATTEST:
By: /s/ Janet Moore
-----------------------------------------
Janet Moore, Secretary
----------------------------------------------------------
Exhibit 3.2; Bylaws of Nuclear Medical Systems, Inc.
(As adopted August 31, 1978)
BY-LAWS OF
NUCLEAR MEDICAL SYSTEMS, INC.
(a Delaware corporation)
ARTICLE I
Offices
1. The principal office of the corporation shall be at 229 South State
Street, in the City of Dover, County of Kent, State of Delaware, and the
name of the resident agent in charge thereof is The Prentice-Hall
Corporation System, Inc.
2. The corporation may also have an office or offices at such other place
or places, within or without the State of Delaware, as the Board of
Directors may from time to time designate or the business of the
corporation may require.
ARTICLE II
Stockholders' Meeting
1. The annual meeting or the stockholders of the corporation shall be
held at the offices of the corporation in the City of Newport Beach and
State of California, or at such other place within or without the State
of California as may be determined by the Board of Directors and as shall
be designated in the notice of said meeting, for the purpose of electing
directors and for the transaction of such other business as may properly
be brought before the meeting. The annual meeting of stockholders shall
be held on the 15th day of October of each year (or if said day be a
legal holiday, then on the next succeeding day not a legal holiday) at
1:30 o'clock P.M.
If the election of directors shall not be held on the day designated
herein for any annual meeting, or at the adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of
the stockholders as soon thereafter as conveniently may be. At such
meeting the stockholders may elect the directors and transact other
business with the same force and effect as at an annual meeting duly
called and held.
2. Special meetings of the stockholders shall be held at the principal
office of the corporation in the State of Delaware, or at such other
place within or without the State of Delaware as may be designated in the
notice of said meetings, upon call of the Board of Directors, and shall
be called by the Chairman of the Board or the President or the Secretary
at the request in writing of the stockholders owning of record at least
twenty-five percent of the issued and outstanding capital stock of the
corporation entitled to vote thereat.
3. Notice of the purpose or purposes and of the time and place within or
without the State of Delaware of every meeting of stockholders shall be
given by the Chairman of the Board or the President or the Secretary or
an Assistant Secretary either personally or by mail or by telegraph or by
any other lawful means of communication not less than ten nor more than
fifty days before the meeting, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be directed to each
stockholder at his address as it appears on the stock book unless he
shall have filed with the Secretary of the corporation a written request
that notices intended for him be mailed to some other address, in which
case it shall be mailed or transmitted to the address designated in such
request. Such further notice shall be given as may be required by law.
Except as otherwise expressly provided by statute, no publication of any
notice of meeting of stockholders shall be required to be given any
stockholder who shall attend such meeting in person or by proxy, or who
shall, in person or by attorney thereunto authorized, waive notice in
writing or by telegraph, cable, radio, or wireless either before or after
such meeting. Except where otherwise required by law, notice of any
adjourned meeting of the stockholders of the corporation shall not be
required to be given.
4. A quorum at all meetings of stockholders shall consist of the holders
of record of a majority of the shares of stock of the corporation, issued
and outstanding, entitled to vote at the meeting, present in person or by
proxy, except as otherwise provided by statute or the Certificate of
Incorporation. In the absence of a quorum at any meeting or any
adjournment thereof, a majority of those present in person or by proxy
and entitled to vote may adjourn such meeting from time to time. At any
such adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting as originally
called.
5. Meetings of the stockholders shall be presided over by the President.
If the President is not present, meetings of the stockholders shall be
presided over by a chairman to be chosen by a majority of the
stockholders entitled to vote who are present in person or by proxy at
the meeting. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present, the meeting
shall choose any person present to act as secretary of the meeting.
6. Except as otherwise provided in the By-Laws, the Certificate of
Incorporation, or in the laws of the State of Delaware, at every meeting
of the stockholders, each stockholder of the corporation entitled to vote
at such meeting shall have one vote in person or by proxy for each share
of stock having voting rights held by him and registered in his name on
the books of the corporation at the time of such meeting. Any vote on
shares of stock of the corporation may be given by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto
authorized and delivered to the secretary of the meeting. Except as
otherwise required by statute, by the Certificate of Incorporation or
these By-Laws, all matters coming before any meeting of the stockholders
shall be decided by a plurality vote of the stockholders of the
corporation present in person or by proxy at such meetings and entitled
to vote thereat, a quorum being present. At all elections of directors
the voting may but need not be by ballot and a plurality of votes cast
thereat shall elect.
7. A complete list of the stockholders entitled to vote at the ensuing
election of directors, arranged in alphabetic order, and showing the
address of each stockholder and the number of shares registered in the
name of each stockholder shall be prepared by the Secretary or other
officer of the corporation having charge of the stock ledger. Such list
shall be open to the examination of any stockholder during ordinary
business hours, for a period of at least ten days prior to the election,
either at a place within the city, town or village where the election is
to be held, which place shall be specified in the notice of the meeting,
or, if not so specified, at a place where said meeting is to be held, and
the list shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any
stockholder who may be present.
8. At all elections of directors, or in any other case in which
inspectors may act, two inspectors of election shall be appointed by the
chairman of the meeting, except as otherwise provided by law. The
inspectors of election shall take and subscribe an oath faithfully to
execute the duties of inspectors at such meeting with strict
impartiality, and according to the best of their ability and shall take
charge of the polls and after the vote shall have been taken shall make a
certificate of the result thereof. If there be a failure to appoint
inspectors or if any inspector appointed be absent or refuse to act, or
if his office become vacant, the stockholders present at the meeting, by
a per capita vote, may choose temporary inspectors of the number
required.
ARTICLE III
Directors
1. The property, affairs and business of the corporation shall be managed
by its Board of Directors consisting of not less than three (3) nor more
than nine (9) persons. the [sic] exact number of directors within the
maximum and minimum limitations specified shall be fixed from time to
time by resolution of the Board of Directors. Except as hereinafter
provided, directors shall be elected at the annual meeting of the stock-
holders by plurality vote and each director shall be elected to serve for
one year and until his successor shall be elected and shall qualify.
Directors need not be stockholders.
2. Meetings of the Board of Directors shall be held at such place within
or outside the State of Delaware as may from time to time be fixed by
resolution of the Board of Directors, or as may be specified in the
notice of the meeting. Regular meetings of the Board of Directors shall
be held at such times as may from time to time be fixed by resolution of
the Board of Directors, and special meetings may be held at any time upon
the call of the Chairman of the Board or the President or a majority of
the directors by oral, telegraphic or written notice duly served on or
sent or mailed to each director not less than one day before such
meeting. A meeting of the Board of Directors may be held without notice
immediately after annual meeting of the stockholders. Notice need not be
given of regular meetings of the Board of Directors. Meetings may be held
at any time without prior notice if all the directors are present, or if
at any time before or after the meeting those not present waive notice of
the meeting in writing.
3. A majority of the members of the Board of Directors then acting, but
in no event less than two (2) directors, acting at a meeting duly
assembled, shall constitute a quorum for the transaction of business, but
if at any meeting of the Board of Directors there shall be less than a
quorum present, a majority of those present may adjourn the meeting,
without further notice, from time to time until a quorum shall have been
obtained.
4. In case one or more vacancies shall occur in the Board of Directors by
reason of death, resignation, increase in the number of directors or
otherwise except in so far as otherwise provided in these By-Laws, the
remaining directors, although less than a quorum, may, by a majority
vote, elect a successor or successors for the unexpired term or terms.
5. At any special meeting of the stockholders, duly called as provided in
these By-Laws, any director or directors may by the affirmative vote of
the holders of a majority of all the shares of stock outstanding and
entitled to vote for election of directors be removed from office, either
with or without cause, and his successor or their successors may be
elected at such meeting; or the remaining directors may, to the extent
vacancies are not filled by such election, fill any vacancy or vacancies
created by such removal.
6. The corporation shall indemnify any person made a party to an action
by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he, his testator or intestate, is or was a
director or officer of the corporation, against expenses, including
attorneys' fees, actually and necessarily incurred by him in connection
with the defense of such action or in connection with an appeal therein,
except in relation to matters as to which such director or officer is
adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation except as otherwise provided by law. The
corporation shall indemnify any person made or threatened to be made a
party to an action or proceeding other than one of the type referred to
in the foregoing, whether civil or criminal, including, without
limitation, an action by or in the right of any other corporation which
any director or officer of the corporation served in any capacity at the
request of the corporation, by reason of the fact that he, his testator
or intestate was a director or officer of the corporation or served such
other corporation in any capacity, against judgments, fines, amounts paid
in settlement and expenses, including attorneys' fees, actually and
necessarily incurred as a result of such action or proceeding or any
Therein [sic], if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in the best interests of the
corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. The
termination of any such civil criminal action or proceeding by judgment,
settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such
director or officer did not act in good faith, for a purpose which he
reasonably believed to be in the best interest of the corporation or that
he had reasonable cause to believe that his conduct was unlawful.
Expenses incurred in defending a civil or criminal action or proceeding
may be paid by the corporation in advance of the final deposition of such
action or proceeding. The foregoing right of indemnification shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled as a matter of law or any By-Law, agreement, vote of
stockholders or otherwise.
7. Any action required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken without a
meeting if prior to such action a written consent thereto is signed by
all members of the Board of Directors or of the committee, as the case
may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or the committee.
8. Directors may, by resolution of the Board of Directors, be allowed a
fixed sum and expenses of attendance for attendance at regular or special
meetings of the Board of Directors; provided that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees, and others who attend pursuant
to direction, may, by vote of the Board of Directors, be allowed a like
fixed sum and expenses of attendance for attending committee meetings.
9. The Board of Directors, in its discretion, may appoint an Executive
Committee consisting of three or more directors of the corporation, one
of whom shall be the President of the corporation, who shall serve during
the pleasure of the Board of Directors for the terms fixed by it. Two
members of the Executive Committee shall constitute a quorum for the
transaction of business. The Executive Committee shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers. The Executive Committee shall
meet at such intervals between regular meetings of the Board as may from
time to time be fixed by the Board and shall keep regular records of its
meetings and report the same to the Board of Directors when required.
ARTICLE IV
Officers
1. The officers of the corporation shall be chosen by the Board of
Directors at its first meeting after the election of the directors by the
stockholders and shall be a President, one or more Vice Presidents, a
Secretary and a Treasurer. From time to time the Board of Directors may
appoint a Chairman of the Board, such Assistant Secretaries, Assistant
Treasurers and such other officers, agents and employees as it may deem
proper. Any number of offices, except the offices of President and
Secretary, may be held by the same person. The Chairman of the Board, if
such office exsists, [sic] and the President shall be chosen from among
the directors.
2. The term of office of all officers shall be one year and until their
respective successors are elected and qualify, but any officer may be
removed from office, either with or without cause, at any time by the
affirmative vote of a majority of the members of the Board of Directors
then in office. A vacancy in any office arising from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
3. Unless otherwise ordered by the Board of Directors, the President
shall have full power and authority on behalf of the corporation to
attend and to act and to vote at any meetings of security holders of the
corporations in which the corporation may hold securities, and at such
meeting shall possess and may exercise any and all rights and powers
incident to the ownership of such securities, and which as the owner
thereof the corporation might have possessed and exercised, if present.
The Board of Directors by resolution from time to time may confer like
power upon any other person or persons.
ARTICLE V
Duties of Officers
1. The President Shall be chief executive officer of the corporation and
as such shall have general and active direction of the management and
supervision of the business operations of the corporation. He shall have
such other duties and powers as may be assigned to him from time to time
by the Board of Directors and shall preside at all meetings of the
stockholders and Board of Directors.
2. During the absence or disability of the President, the Vice
Presidents, in the order designated by the Board of Directors, shall
exercise all the functions of the President. Each Vice President shall
have such powers and discharge such duties as may be assigned to him from
time to time by the Board of Directors.
3. The Treasurer shall have the custody of all the funds and securities
of the corporation. When necessary or proper he shall endorse on behalf
of the corporation, for collection, checks, notes and other obligations
and shall deposit the same to the credit of the corporation in such bank,
or banks, or depositories as may be designated by the Board of Directors,
or by any 6fficer acting under authority conferred by the Board of
Directors. He shall enter regularly in books to be kept for the purpose a
full and accurate account of all monies received and paid by him on
account of the corporation. Whenever required by the Board of Directors,
he shall render an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall at all reasonable
times exhibit his books and accounts to any director of the corporation
upon application at the office of the corporation during business hours
and he shall perform all things incident to the position of Treasurer,
subject to the control of the Board of Directors. He shall give bond for
the faithful discharge of his duties if the Board of Directors so
require. He shall do and perform such other duties as may be assigned to
him from time to time by the Board of Directors.
4. The Assistant Treasurers, in the order of their seniority, shall, in
the absence of or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties
as the Board of Directors shall prescribe.
5. The Secretary shall attend all meetings of the stockholders and all
meetings of the Board of Directors, and record all votes and the minutes
of all proceedings in a book to be kept for that purpose; and shall
perform like duties for other committees when so required. He shall give,
or cause to be given, notice of all meetings of stockholders and the
Board of Directors and of committees and shall perform such other duties
as may be prescribed by the Board of Directors. He shall keep in safe
custody the seal of the corporation and affix the same to any instrument
whose execution has been authorized. He shall be sworn to the faithful
discharge of his duties. He shall do and perform such other duties as may
be assigned to him from time to time by the Board of Directors.
6. The Assistant Secretaries, in the order of their seniority, shall in
the absence of or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties
as the Board of Directors shall prescribe.
7. In the case of absence or inability to act of any officer of the
corporation and of any person herein authorized to act in his place, the
Board of Directors may from time to time delegate the powers and duties
of such officer to any other officer or any director or any other person
whom it may select.
ARTICLE VI
Certificates of Stock
1. The interest of each stockholder of the corporation shall be evidenced
by certificates for shares of stock certifying the number of shares
represented thereby and in such form not inconsistent with the
Certificate of Incorporation as the Board may from time to time
prescribe.
Except as otherwise required by law, transfers of shares of stock of the
corporation shall be made only on the books of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
corporation, or with a transfer clerk or a transfer agent appointed as in
Section 4 of this Article provided, and on surrender of the certificate
or certificates for such shares properly endorsed and the payment of all
taxes thereon. The person in whose name shares of stock stand on the
books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation. The Board may, from time to time,
make such additional rules and regulations as it may deem expedient, not
inconsistent with these By-Laws, concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the
corporation.
The certificates of stock shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and sealed with the seal of the corporation.
Such seal may be a facsimile, engraved or printed. Where any such
certificate is signed by a transfer agent other than the corporation or
its employee, or by a registar [sic] other than the corporation or its
employee, the signatures of the President, Vice President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer upon such cer-
tificate may be facsimiles, engraved or printed. In case any such officer
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such certificate is issued, it may be
issued by the corporation with the same effect as if such officer had not
ceased to be such at the time of its issue.
2. In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders of any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distri-
bution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed:
The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on
which the meeting is held.
The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of Direct6rs
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new
record date for the adjournment meeting.
3. No certificate for shares of stock of the corporation shall be issued
in place of any certificate alleged to have been lost, destroyed or
stolen, except on production of such evidence of such loss, destruction
or theft and on delivery to the corporation, if the Board of Directors
shall so require, of a bond of indemnity in such amount (not exceeding
twice the value of the shares represented by such certificate), upon such
terms and secured by such surety as the Board of Directors may in its
discretion require.
4. The Board of Directors may appoint one or more transfer clerks or one
or more transfer agents and one or more registrars, and may require all
certificates for shares of stock to bear the signature or signatures of
any of them.
5. The books, accounts and records of the corporation, except as may
otherwise be required by statute, may be kept outside of the State of
Delaware, at such place or places as the Board of Directors may from time
to time appoint. The Board of Directors shall determine whether and to
what extent the books, accounts and records of the corporation, or any of
them, other than the stock ledger, shall be open to the inspection of
stockholders, and no stockholder shall have any right to inspect any
book, account or record of the corporation except as conferred by statute
or by resolution of the Board of Directors.
ARTICLE VII
Corporate Seal
The corporate seal of the corporation shall consist of two concentric
circles, between which shall be the name of the corporation, and its
state of incorporation, and in the center shall be inscribed the words,
"Corporate Seal".
ARTICLE VIII
Amendments
The By-Laws of the corporation shall be subject to alteration, amendment
or repeal, and new By-Laws not inconsistent with any provision of the
Certificates of Incorporation or statute, may be made, either by the
affirmative vote of the holders of a majority in interest of the
stockholders of the corporation present in person or by proxy at any
annual or special meeting of the stockholders and entitled to vote
thereat a quorum being present, provided that notice of such proposed
action shall have been given in the call for the meeting, or by the
affirmative vote of a majority of the whole Board, given at any regular
or special meeting of the Board of Directors.
ARTICLE IX
Fiscal Year
The fiscal year of the corporation shall end on the last day of May in
each year.
----------------------------------------------------------
Exhibit 3.3; Amendment to Bylaws of Biomerica, Inc.
AMENDMENT
TO
BY-LAWS
OF
BIOMERICA, INC.
(a Delaware corporation)
The undersigned, being all of the members of the Board of Directors of
Biomerica, Inc., a Delaware corporation (the "Company"), hereby amend the
By-Laws of the Company (formerly named Nuclear Medical Systems, Inc.) as
follows:
Paragraph 2 of Article II is amended in its entirety to read as follows:
"2. Special meetings of the stockholders shall to be held at the
principal office of the corporation in the State of Delaware, or at such
other place within or without the State of Delaware as may be designated
in the Notice of said meetings, upon call of the Board of Directors, and
shall be called by the Chairman of the Board or the President or the
Secretary at the request in writing of the stockholders owning of record
at least ten percent of the issued and outstanding capital stock of the
corporation entitled to vote thereat."
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment to
By-Laws as of this 4th day of February, 1992 and direct that the same be
included with the minutes of the Board of Directors of the Company.
/s/ Joseph H. Irani
------------------------
Joseph H. Irani
/s/ Philip B. Kaplan
------------------------
Philip B. Kaplan
/s/ Dr. Robert A. Orlando
------------------------
Dr. Robert A. Orlando
--------------------------------------------------------
Exhibit 5.1; Opinion of Michael D. Spadaccini, Esq. regarding legality of
the Common Stock being registered.
Law Office of Michael Spadaccini
731 9th Avenue, Suite E
San Diego, CA 92101
619.501.3825
fax: 419.735.2386
March 7, 2002
Biomerica, Inc.
Zackary Irani
Re: Registration Statement on Form S-4 of Shares of Common Stock, par
value $.08 per share, of Biomerica, Inc.
Dear Mr. Irani,
I have acted as counsel to Biomerica, Inc. (the "Company") in connection
with the preparation of a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended
("the Act"), which you are filing with the Securities and Exchange
Commission with respect to up to 984,274 additional shares of Common
Stock, par value $.08 per share, which may be issued pursuant to a
resolution of the Board of Directors.
I have examined the Registration Statement and such documents and records
of the Company, as I have deemed relevant and necessary for the purpose
of this opinion. In giving this opinion, I am assuming the authenticity
of all instruments presented to me as originals, the conformity with
originals of all instruments presented to me as copies and the
genuineness of all signatures.
Based upon and subject to the foregoing, I am of the opinion that any
shares that may be issued pursuant to the Registration Statement have
been duly authorized and that, upon the due execution by the Company and
the registration by its registrar of such shares, the sale thereof by the
Company in accordance with the terms of the Registration Statement and
the receipt of consideration therefor in accordance with the terms of the
Registration Statement, such shares will be validly issued, fully paid
and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, I do not admit that I am
in the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
/s/ Michael Spadaccini
--------------------------------------------------------
Exhibit 23.1; Consent of BDO Seidman, LLP, Independent Certified Public
Accountants
Biomerica, Inc.
Newport Beach, California
We hereby consent to the incorporation by reference in the prospectus
constituting a part of this Registration Statement of our reports dated
August 10, 2001, except as to note 6, which is as of September 11, 2001
and August 11, 2000, except as to note 11, which is as of September 12,
2000 relating to the consolidated financial statements of Biomerica, Inc.
appearing in the Company's 2001 and 2000 Annual Reports on Forms 10-KSB
for the years ended May 31, 2001 and 2000, respectively.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ BDO SEIDMAN LLP
Costa Mesa, California
April 09, 2002
----------------------
--------------------------------------------------------
Exhibit 23.2; Consent of BDO Seidman, LLP, Certified Public Accountants
Lancer Orthodontics, Inc.
San Marcos, California
We hereby consent to the incorporation by reference in the prospectus
constituting a part of this Registration Statement of our reports dated
July 26, 2001 and July 21, 2000, except as to note 8, which is as of July
31, 2000 relating to the consolidated financial statements of Lancer
Orthodontics, Inc. appearing in the Company's 2001 and 2000 Annual
Reports on Forms 10-KSB for the years ended May 31, 2001 and 2000,
respectively.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ BDO SEIDMAN LLP
Costa Mesa, California
April 09, 2002
----------------------
--------------------------------------------------------
Exhibit 99.1; Form of Proxy for Lancer
[This proxy card will be printed on white card stock.]
-------------------------
PROXY
LANCER ORTHODONTICS, INC.
Annual meeting of Shareholders to be held June 4, 2002, 10:30 a.m., local
time
Location: Biomerica, Inc.'s Corporate Offices, 1533 Monrovia Avenue,
Newport Beach, California 92663.
This proxy is solicited on behalf of the Lancer Board of Directors
The undersigned hereby appoints Zackary Irani and Janet Moore, and each
of them, with full power of substitution, proxies of the undersigned to
vote all shares of common stock of Lancer that the undersigned is
entitled to vote at the Annual meeting of Shareholders to be held on June
4, 2002, and all adjournments or postponements thereof, with all the
powers the undersigned would possess if personally present, and
particularly, without limiting the generality of the foregoing, to vote
and act on the following matter and in their discretion upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE ASSET
PURCHASE AGREEMENT AMONG BIOMERICA, INC. AND LANCER ORTHODONTICS, INC.
AND APPROVE THE ASSET PURCHASE CONTEMPLATED THEREBY.
Shareholders of record at the close of business on April 30, 2002
will be entitled to vote at the Annual meeting or any
adjournments or postponements thereof.
----- -----
SEE (continued, and to be signed, on the reverse side) SEE
REVERSE REVERSE
SIDE SIDE
----- -----
Lancer Orthodontics, Inc.
253 Pawnee Street
San Marcos, CA 92069
(760) 744-5585
PLEASE DETACH PROXY CARD HERE.
-------------------------------------------------------------
2
Please mark
votes as in
this [X] example
The Lancer Board of Directors recommends a vote FOR:
----
For Against Abstain
1. The proposal to approve and adopt [_] [_] [_]
the Asset Purchase Agreement between
Biomerica, Inc. and Lancer Orthodontics,
Inc., and approve the asset purchase
contemplated thereby.
For Against Abstain
2. To re-elect Zackary Irani as [_] [_] [_]
director and as Chairman of the
Board.
For Against Abstain
3. To re-elect Janet Moore as [_] [_] [_]
director.
For Against Abstain
4. To re-elect Dr. Robert [_] [_] [_]
Orlando as director.
For Against Abstain
5. To re-elect Dr. Francis [_] [_] [_]
Cano as director.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE CORRECTIONS AT LEFT [_]
Please sign as name appears. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such. If signer is a corporation, please sign with the full
corporation name by authorized officer or officers.
Signature: ________________________ Date: _____
Signature: ________________________ Date: _____
--------------------------------------------------------
Exhibit 99.2; California Corporations Code Section 1300-1312
CALIFORNIA CORPORATIONS CODE SECTION 1300-1312
1300.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and
(b) or subdivision (e) or (f) of Section 1201, each shareholder of the
corporation entitled to vote on the transaction and each shareholder of a
subsidiary corporation in a short-form asset purchase may, by complying
with this chapter, require the corporation in which the shareholder holds
shares to purchase for cash at their fair market value the shares owned
by the shareholder which are dissenting shares as defined in subdivision
(b). The fair market value shall be determined as of the day before the
first announcement of the terms of the proposed reorganization or short-
form asset purchase, excluding any appreciation or depreciation in
consequence of the proposed action, but adjusted for any stock split,
reverse stock split, or share dividend which becomes effective
thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short form
asset purchase either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (B) listed on the National Market System of the NASDAQ
Stock Market, and the notice of meeting of shareholders to act upon the
reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares
with respect to which there exists any restriction on transfer imposed by
the corporation or by any law or regulation; and provided, further, that
this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in subparagraph
(A) or (B) of paragraph (1) (without regard to the provisos in that
paragraph), were voted against the reorganization, or which were held of
record on the effective date of a short-form asset purchase; provided,
however, that subparagraph (A) rather than subparagraph (B) of this
paragraph applies in any case where the approval required by Section 1201
is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
1301.
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the
corporation to purchase their shares for cash, such corporation shall
mail to each such shareholder a notice of the approval of the
reorganization by its outstanding shares (Section 152) within 10 days
after the date of such approval, accompanied by a copy of Sections 1300,
1302, 1303, 1304 and this section, a statement of the price determined by
the corporation to represent the fair market value of the dissenting
shares, and a brief description of the procedure to be followed if the
shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation
to purchase at the price stated any dissenting shares as defined in
subdivision (b) of Section 1300, unless they lose their status as
dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and
who desires the corporation to purchase such shares shall make written
demand upon the corporation for the purchase of such shares and payment
to the shareholder in cash of their fair market value. The demand is not
effective for any purpose unless it is received by the corporation or any
transfer agent thereof (1) in the case of shares described in clause (i)
or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without
regard to the provisos in that paragraph), not later than the date of the
shareholders' meeting to vote upon the reorganization, or (2) in any
other case within 30 days after the date on which the notice of the
approval by the outstanding shares pursuant to subdivision (a) or the
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the
corporation purchase and shall contain a statement of what such
shareholder claims to be the fair market value of those shares as of the
day before the announcement of the proposed reorganization or short-form
asset purchase. The statement of fair market value constitutes an offer
by the shareholder to sell the shares at such price.
1302.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section
1110 was mailed to the shareholder, the shareholder shall submit to the
corporation at its principal office or at the office of any transfer
agent thereof, (a) if the shares are certificated securities, the
shareholder's certificates representing any shares which the shareholder
demands that the corporation purchase, to be stamped or endorsed with a
statement that the shares are dissenting shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed or (b) if
the shares are uncertificated securities, written notice of the number of
shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the
corporation, the new certificates, initial transaction statement, and
other written statements issued therefor shall bear a like statement,
together with the name of the original dissenting holder of the shares.
1303.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of the agreement. Any agreements
fixing the fair market value of any dissenting shares as between the
corporation and the holders thereof shall be filed with the secretary of
the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or
contractual conditions to the reorganization are satisfied, whichever is
later, and in the case of certificated securities, subject to surrender
of the certificates therefor, unless provided otherwise by agreement.
1304.
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market
value of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six
months after the date on which notice of the approval by the outstanding
shares (Section 152) or notice pursuant to subdivision (i) of Section
1110 was mailed to the shareholder, but not thereafter, may file a
complaint in the superior court of the proper county praying the court to
determine whether the shares are dissenting shares or the fair market
value of the dissenting shares or both or may intervene in any action
pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may
be consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court
shall first determine that issue. If the fair market value of the
dissenting shares is in issue, the court shall determine, or shall
appoint one or more impartial appraisers to determine, the fair market
value of the shares.
1305.
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and
file a report in the office of the clerk of the court. Thereupon, on the
motion of any party, the report shall be submitted to the court and
considered on such evidence as the court considers relevant. If the court
finds the report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such
further time as may be allowed by the court or the report is not
confirmed by the court, the court shall determine the fair market value
of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market
value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has
intervened, is entitled to require the corporation to purchase, with
interest thereon at the legal rate from the date on which judgment was
entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities,
only upon the endorsement and delivery to the corporation of the
certificates for the shares described in the judgment. Any party may
appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as
the court considers equitable, but, if the appraisal exceeds the price
offered by the corporation, the corporation shall pay the costs
(including in the discretion of the court attorneys' fees, fees of expert
witnesses and interest at the legal rate on judgments from the date of
compliance with Sections 1300, 1301 and 1302 if the value awarded by the
court for the shares is more than 125 percent of the price offered by the
corporation under subdivision (a) of Section 1301).
1306.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall
become creditors of the corporation for the amount thereof together with
interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such
debt to be payable when permissible under the provisions of Chapter 5.
1307.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the
outstanding shares (Section 152) and prior to payment for the shares by
the corporation shall be credited against the total amount to be paid by
the corporation therefor.
1308.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined.
A dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
1309.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of
any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this
chapter all necessary expenses incurred in such proceedings and
reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending
action as provided in Section 1304, within six months after the date on
which notice of the approval by the outstanding shares or notice pursuant
to subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any
proceedings under Sections 1304 and 1305 shall be suspended until final
determination of such litigation.
1311.
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid
in respect to such shares in the event of a reorganization or asset
purchase.
1312.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have
any right at law or in equity to attack the validity of the
reorganization or short-form asset purchase, or to have the
reorganization or short-form asset purchase set aside or rescinded,
except in an action to test whether the number of shares required to
authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the
event of a reorganization or short-form asset purchase is entitled to
payment in accordance with those terms and provisions or, if the
principal terms of the reorganization are approved pursuant to
subdivision (b) of Section 1202, is entitled to payment in accordance
with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form asset
purchase is directly or indirectly controlled by, or under common control
with, another party to the reorganization or short-form asset purchase,
subdivision (a) shall not apply to any shareholder of such party who has
not demanded payment of cash for such shareholder's shares pursuant to
this chapter; but if the shareholder institutes any action to attack the
validity of the reorganization or short-form asset purchase or to have
the reorganization or short-form asset purchase set aside or rescinded,
the shareholder shall not thereafter have any right to demand payment of
cash for the shareholder's shares pursuant to this chapter. The court in
any action attacking the validity of the reorganization or short-form
asset purchase or to have the reorganization or short-form asset purchase
set aside or rescinded shall not restrain or enjoin the consummation of
the transaction except upon 10 days' prior notice to the corporation and
upon a determination by the court that clearly no other remedy will
adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form asset
purchase is directly or indirectly controlled by, or under common control
with, another party to the reorganization or short-form asset purchase,
in any action to attack the validity of the reorganization or short-form
asset purchase or to have the reorganization or short-form asset purchase
set aside or rescinded, (1) a party to a reorganization or short-form
asset purchase which controls another party to the reorganization or
short-form asset purchase shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the
controlled party, and (2) a person who controls two or more parties to a
reorganization shall have the burden of proving that the transaction is
just and reasonable as to the shareholders of any party so controlled.
--------------------------------------------------------
Exhibit 99.3: Asset Purchase Agreement By and Between Lancer
Orthodontics, Inc., and Biomerica, Inc.
ASSET PURCHASE AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND
BIOMERICA, INC.
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of on or about February 25, 2002, by and between Lancer
Orthodontics, Inc., a California corporation ("Seller"), and Biomerica,
Inc., a Delaware corporation ("Buyer").
RECITALS
A. Seller manufactures and distributes orthodontic products such as
preformed bands, direct bonding brackets, buccal tubes, arch wires,
lingual attachments, related accessories and dental amalgams (the
"Business").
B. Seller desires to sell and Buyer desires to buy certain of the
assets used or held for use in the operation of the Business as described
herein and upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties, agreements, and conditions hereinafter set forth, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1 Defined Terms. The following terms shall have the
following meanings in this Agreement:
"Accounts Payable" means the obligations of Seller to cash payment
in connection with the operation of the Business, and all other amounts
that would be classified as an accounts payable of the Business in
accordance with GAAP, but excluding any Excluded Liability.
"Accounts Receivable" means the rights of Seller to cash payment in
connection with the sale of products in connection with the Business, and
other Inventory and all other amounts that would be classified as an
account receivable of the Business in accordance with GAAP, but excluding
any accounts receivable specifically listed as Excluded Assets.
"Affiliate" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership
or otherwise, to direct the policies or management of a person.
"Applicable Laws" means all laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, and writs of any
Governmental Entity having jurisdiction over the Acquired Assets or the
Business, as may be in effect on or prior to the Closing.
"Assumed Contracts" means those Contracts of Seller entered into in
the ordinary course of business that relate primarily to the Acquired
Assets or the Business or any part thereof; provided, that "Assumed
Contracts" shall not include any Employee Benefit Plan or any Contract
associated with an Employee Benefit Plan, or any Contract that is an
Excluded Contract.
"Assumed Liabilities" means (i) those obligations, debts and
liabilities set forth in Section 2.5.
"Bill of Sale and Assignment" means the Bill of Sale and Assignment
by Seller to Buyer in form and substance to be agreed upon by Buyer and
Seller prior to the Closing.
"business day" means any other day than (i) a Saturday or Sunday or
(ii) a day on which commercial banks in Los Angeles, California are
authorized or required to be closed.
"Choses in Action" means a right to receive or recover property,
debt, or damages on a cause of action, whether pending or not and whether
arising in contract, tort or otherwise. The term shall include rights to
indemnification, damages for breach of warranty or any other event or
circumstance, judgments, settlements, and proceeds from judgments or
settlements.
"Closing" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of ARTICLE V.
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended. All references to the Code, U.S. Treasury regulations or
other governmental pronouncements shall be deemed to include references
to any applicable successor regulations or amending pronouncement.
"Consents" means all consents and approvals of Governmental
Entities, and all material consents and approvals of third parties, in
each case that are necessary in order to transfer ownership in the
Acquired Assets to Buyer and otherwise to consummate the transactions
contemplated hereby.
"Contracts" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any
amendments and other modifications thereto), to which Seller is a party
or is otherwise bound and which relate primarily to the conduct of the
Business.
"Conversion Rate" means the ratio that the total number of Buyer's
shares constituting the Purchase Price bears to the total number of
outstanding shares of Seller upon the Closing.
"Debt," without duplication, means (a) all indebtedness (including
the principal amount thereof or, if applicable, the accreted amount
thereof and the amount of accrued and unpaid interest thereon) of Seller,
whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (b) all deferred
indebtedness of Seller for the payment of the purchase price of property
or assets purchased, (c) all obligations of Seller to pay rent or other
payment amounts under a lease of real or personal property which is
required to be classified as a capital lease in accordance with GAAP, (d)
any outstanding reimbursement obligation of Seller with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of Seller, (e) any payment obligation of Seller under any
interest rate swap agreement, forward rate agreement, interest rate cap
or collar agreement or other financial agreement or arrangement entered
into for the purpose of limiting or managing interest rate risks, (f) all
indebtedness for borrowed money secured by any Lien existing on property
owned by Seller, whether or not indebtedness secured thereby shall have
been assumed, (g) all guaranties, endorsements, assumptions and other
contingent obligations of Seller in respect of, or to purchase or to
otherwise acquire, indebtedness for borrowed money of others, and (h) all
premiums, penalties and change of control payments required to be paid or
offered in respect of any of the foregoing as a result of the
consummation of the transactions contemplated by this Agreement
regardless if any of such are actually paid.
"Employee Benefit Plans" means any (i) "employee benefit plan"
within the meaning of Section 3(3) of ERISA, (ii) employment agreement,
and (iii) bonus, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, vacation,
severance, disability, death benefit, hospitalization or insurance plan,
program or arrangement, which is sponsored, maintained or contributed to,
or has been sponsored, maintained or contributed to, by Seller or any
Commonly Controlled Entity for the benefit of Seller's employees or
former employees.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Contracts" means all Contracts that are not Assumed
Contracts, including (a) all employment, change of control and severance
Contracts; (b) all Employee Benefit Plans and contracts associated with
Employee Benefit Plans, including all assets or funds held in trust, or
otherwise, associated with or used in connection with the Employee
Benefit Plans or contracts associated with Employee Benefit Plans; (c)
any collective bargaining agreement; (d) all Contracts that have
terminated or expired prior to the Closing Date in the ordinary course of
business; and (e) all insurance Contracts.
"Excluded Liabilities" means all debts, obligations and liabilities
of Seller of any kind or character, whether known or unknown, absolute,
accrued, contingent or otherwise, including debts, obligations and
liabilities arising under the Excluded Contracts, other than the Assumed
Liabilities.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Entity" means any governmental department, commission,
board, bureau, agency, court or other instrumentality of any foreign
country or of the United States or any state, county, parish or
municipality, jurisdiction, or other political subdivision thereof.
"Hazardous Substances" means any substance, material or waste that is
classified, characterized or otherwise regulated by any applicable
Environmental Law as hazardous, toxic, pollutant, contaminant, or words
of similar meaning and effect.
"Intellectual Property" means confidentiality, proprietary, moral,
technology, intellectual property or similar rights and includes without
limitation all rights in or to (i) service marks, trademarks, trade
names, business names (including the name and mark "Lancer
Orthodontics"), domain, trade styles, trade dress, product designations,
logos, product designs, proprietary designs, phrases, slogans and other
identifications, mask works, advertising copy, and all goodwill
associated with any of the foregoing; (ii) United States and foreign
copyrights; (iii) United States and foreign patents, inventions,
discoveries, works in progress, improvements, ideas, know- ideas, know-
know-how, formula, methodology, processes, technology, patent
applications, priority rights, industrial designs and models; (iv) trade
secrets (including secret formulae, customer lists, vendor lists,
processes, know-how, computer programs and routines) and all other
proprietary rights and information, technology, database interests,
operating instructions, inventions, drawings and technical or marketing
information; (v) all applications, registrations, renewals, extensions,
reissues, continuations, divisions and continuations-in-continuations-in-
part of any of the foregoing items referenced in clauses (i) through
(iv); (vi) any similar rights to any of the foregoing items which are now
or hereafter protected or legally enforceable under state or federal
common laws or statutory laws of the United States or under laws of
foreign jurisdictions; and (vii) the right to sue for past infringement
of any of the foregoing.
"Inventory" means all work-in-progress, raw materials, and finished
goods of Seller as used or held for use in the Business and located at
any facilities of Seller or otherwise in the possession of the Business
personnel held for use in the Business.
"Knowledge" means, with respect to a specified party hereto, the
actual knowledge of such party (including, but not limited to, (a) the
actual knowledge of any subsidiaries of such party and (b) the actual
knowledge of the officers, directors, employees and counsel of such party
and of any subsidiaries of such party whose job responsibilities
encompass the subject matter in question), together with such additional
knowledge as would be acquired by a reasonable person upon conducting
reasonable and diligent inquiry concerning the subject matter in
question; provided, that no knowledge shall be imputed to Seller based on
the actual or constructive knowledge of the Seller's officers and
managers.
"Leased Real Property" means all of the Seller's leasehold
interests, easements, licenses, rights to access and rights-of-way which
are used in connection with the operation of the Business.
"Licenses" means all permits, registrations, licenses,
authorizations and the like issued or required to be issued by any
Governmental Entity or person to Seller relating primarily to the
Business.
"Liens" means all liens, pledges, security interests, mortgages,
deeds of trust, tenancies, possessory interests, conditional sale or
other title retention agreements, assessments, easements, covenants,
restrictions, rights of first refusal, options or encumbrances of any
kind, other than the Assumed Liabilities.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, condition (financial or otherwise),
results of operations, Acquired Assets, liabilities, or prospects of the
Business, taken as a whole.
"Patents" means the issued patent and patent applications owned by
Seller as of the Closing Date.
"person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, or
other entity.
"Personal Property" means the machinery, equipment, tools, motor
vehicles, furniture, furnishings, leasehold improvements, office
equipment, Inventory, supplies, plant, spare parts, and other tangible or
intangible personal property which are owned or, to the extent assignable
pursuant to Section 4.6, leased by Seller and which are used or held for
use primarily in the Business, including all URLs employing "Lancer" and
telephone numbers used primarily in the Business.
"Schedules" means the Schedules attached hereto.
"Taxes" means taxes, charges, fees, imposts, levies, interest,
penalties, additions to tax or other assessments or fees of any kind,
including, but not limited to, income, corporate, capital, excise,
property, sales, use, turnover, value added and franchise taxes,
deductions, withholdings and customs duties, imposed by any Governmental
Entity and any payments with respect thereto required under any tax-
sharing agreement.
"Tax Returns" means any return, report, information return or other
document (including any related or supporting information) filed or
required to be filed with any Governmental Entity in connection with the
determination, assessment, collection or administration of any Taxes or
the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Trademarks" means (a) trademarks, service marks, trade names, trade
dress, labels, logos, and all other names and slogans associated with any
products manufactured in the Business or embodying the goodwill of the
Business, whether or not registered, and any applications or
registrations therefor and (b) any associated goodwill incident thereto
owned by Seller.
SECTION 1.2 References and Titles. Titles appearing at the beginning
of any Articles, Sections, subsections, or other subdivisions of this
Agreement are for convenience only, do not constitute any part of such
Articles, Sections, subsections or other subdivisions, and shall be
disregarded in construing the language contained therein. The word "or"
is not exclusive, and the word "including" (in its various forms) means
"including, without limitation." Pronouns in masculine, feminine, or
neuter genders shall be construed to state and include any other gender
and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa,
unless the context otherwise expressly requires.
ARTICLE II
SALE AND PURCHASE OF ACQUIRED ASSETS
SECTION 2.1 Agreement to Sell and Buy. Subject to the terms and
conditions set forth in this Agreement and except for the Excluded
Assets, Seller shall sell, assign, transfer and deliver to Buyer on the
Closing Date, and Buyer shall purchase on the Closing Date, free and
clear of any Liens or liabilities (except for Permitted Liens and
liabilities assumed by Buyer in accordance with Section 2.7) the
following (the "Acquired Assets"):
(a) The Personal Property located on the Leased Real Property, or
otherwise in the possession of or used primarily in the Business;
(b) The Leased Real Property;
(c) To the extent assignable pursuant to Section 4.6, the Licenses
benefiting or used primarily in the Business;
(d) To the extent assignable pursuant to Section 4.6, the Assumed
Contracts;
(e) To the extent assignable pursuant to Section 4.6, the Patents
and Intellectual Property;
(f) All Accounts Receivable for services provided or Inventory
shipped;
(g) (i) All of Seller's right, title and interest in and to the
name(s) "Lancer" and derivations thereof, each of the additional trade
names used in connection with the operation of the Business, and any
Trademarks and/or Service Marks associated with such names;
(h) All of Seller's stock, certificates and other indicia of
ownership or interests in other persons, including all of Seller's stock
in its subsidiary Lancer Orthodontics de Mexico (a Mexican Corporation;
(i) The technical information and data, machinery and equipment
warranties (to the extent such warranties are assignable), if any, maps,
plans, diagrams, blueprints, schematics, projections, analysis, ideas,
promotional literature, and similar data and information relating
primarily to the Business, and goodwill relating to the foregoing;
(j) Copies or originals of, all customer and supplier lists and
similar data and information related to the Business with all use,
exploitation, modification and other rights associated therewith, but
without payment of royalty or accounting by either party; provided, that
each party shall own all right, title and interest in and to any
modifications or derivations thereof created by such party;
(k) (i) Executed copies of the Assumed Contracts, or if no executed
agreement exists, summaries of each Assumed Contract transferred pursuant
to clause (d) above and (ii) all records required by any Governmental
Entity to be kept by the Business, subject to the right of Seller to copy
and have such books and records made reasonably available to Seller for
Tax and other purposes for a period of seven years after the Closing
Date;
(l) All claims, rights and interest of Seller relating to the
Business or the Acquired Assets in and to any deposits or utility
deposits;
(m) All Choses in Action relating primarily to the Business or the
Acquired Assets pending or arising for the benefit of Seller;
(n) All intellectual property of whatever kind including, but not limited
to, processes, inventions, copyrights, domain names,
(n) All applications and programs and web sites, including source and
object codes relating to the Business or the Acquired Assets; and
(o) All vendor lists, customer lists, and goodwill associated with
the foregoing Acquired Assets.
SECTION 2.2 Excluded Assets. The "Excluded Assets" shall mean all
assets and rights of Seller not specifically listed in Section 2.1,
including the following:
(a) Seller's general books of account and books of original entry
that comprise Seller's permanent accounting or tax records and books and
records that Seller is required to retain pursuant to any applicable
statute, rule or regulation; provided, that Buyer shall be entitled to
reasonable access to and copies of the foregoing;
(b) All Excluded Contracts listed on Schedule 2.2(c);
(c) The Accounts Receivable listed on Schedule 2.2(d);
(e) Cash in an amount not to exceed $20,000.00, and the regular bank
accounts used in connection with the operation of the Business.
SECTION 2.3 Purchase Price. "Purchase Price" shall mean the
following: In addition to the liabilities and obligations assumed by
Buyer pursuant to Section 2.7, the aggregate purchase price payable by
Buyer to Seller on the Closing Date in consideration for the sale of the
Acquired Assets shall be shares of Buyer's common stock, par value $0.08
per share, such that the total number of shares comprising the Purchase
Price multiplied by the Applicable Share Price (as defined below), shall
equal $600,000.00. The "Applicable Share Price" shall mean, with respect
to shares of the Buyer's common stock, the average closing bid price as
reported on the Nasdaq SmallCap market during normal trading for the 5
trading days immediately preceding the Closing Date; however, in no event
shall the Applicable Share Price be less than $0.62 per share or greater
than $1.25 per share.
SECTION 2.4 Proration of Expenses, Tax and Deposits. The ad valorem
taxes, utility charges, rent and lease payments, and certificates of
insurance for customers (but excluding principal and interest payments on
Debt, Debt service or fees and amounts that have been or should be set
forth as general and administrative expenses of Seller in accordance with
GAAP) shall be prorated between Buyer and Seller as of 11:59 p.m. on the
Closing Date. All of such prorated items shall be settled between Buyer
and Seller as a net adjustment to the Purchase Price as soon as
reasonably practicable after the Closing Date. To the extent that the
parties are not able to determine the actual amounts of such prorations
as of the Closing Date, such amounts shall be determined based upon the
parties' reasonable estimates thereof. The parties shall adjust the
proration based on actual taxes and charges within a reasonable time
after such actual numbers become first available (but in no event later
than three months after the Closing Date) and shall settle such amounts
in cash.
SECTION 2.5 Assumption of Liabilities and Obligations; Excluded
Liabilities. As of the Closing Date, Buyer shall assume and undertake to
pay, discharge and perform only the following Assumed Liabilities, but
only to the extent that a Consent, if required, is obtained with respect
to such Assumed liabilities:
(a) all Accounts Payable attributable to the operation of the Business,
and incurred in the ordinary course of business,
(b) all accrued payroll and related benefits expenses attributable to the
operation of the Business,
(c) all sums under payable under Seller's line of credit,
(d) all sums payable with respect to any Leased Real Property, and
(e) all sums classified as "other current liabilities" on the Seller's
most recent Form 10-Q.
All other obligations and liabilities of Seller shall be "Excluded
Liabilities."
SECTION 2.6 Allocation. On or before the Closing Date, Seller and
Buyer shall negotiate in good faith an allocation of the Purchase Price
among the Acquired Assets (as well as any liabilities assumed by Buyer)
that complies with Section 1060 of the Code with respect to the
allocation of the Purchase Price. If the allocation is not agreed upon on
or before the Closing Date, then Buyer and Seller agree that the
allocation shall be made and consistently reported by Buyer and Seller in
compliance with Section 1060 based upon an asset valuation supplied by
the Referee. The cost of such appraisal shall be shared equally by Buyer
and Seller. Buyer will order such appraisal as soon as practicable after
such date as Buyer and Seller fail to agree on such allocation.
SECTION 2.7 Tax Treatment. The parties intend that the transactions
contemplated hereby shall be treated as a non-taxable transaction under
the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Seller. Except as set
forth on Schedule 3.1, Seller represents and warrants to Buyer as
follows. EXCEPT AS SET FORTH IN THIS AGREEMENT AND THE SCHEDULES TO THIS
AGREEMENT, THE SALE OF THE ACQUIRED ASSETS HEREUNDER WILL BE MADE WITHOUT
REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS, IMPLIED OR
OTHERWISE.
(a) Organization, Good Standing, etc. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California, has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now
being conducted and is duly qualified and in good standing to do business
in each state and jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification
necessary, unless the failure to so qualify would not be likely to give
rise to a Material Adverse Effect. Seller has delivered to Buyer true and
complete copies of its Articles of Incorporation and Bylaws, as in effect
at the date of this Agreement. Seller is not in violation of any
provisions of its Articles or Certificate of Incorporation or Bylaws.
(b) Authority. Subject to approval on or prior to the Closing Date
of the sale of Acquired Assets in accordance with California Law, Seller
has all requisite corporate power and authority to enter into this
Agreement, the Bill of Sale and Assignment, and each other agreement,
document, and instrument required to be executed in accordance herewith
(collectively, the "Seller's Agreements") to which Seller is a party and
to consummate the transactions contemplated hereby or thereby. Seller is
not subject to any bankruptcy or reorganization proceedings or
arrangements or moratorium affecting the enforcement of creditors rights
generally and Seller is solvent. The execution and delivery of the
Seller's Agreements by Seller and the consummation by Seller of the
transactions contemplated hereby or thereby have been duly authorized by
all necessary action on the part of Seller, subject to the requisite
approval of the holders of the outstanding capital stock of Seller
entitled to vote thereon. The Seller's Agreements have been, or upon
execution and delivery will be, duly executed and delivered and
constitute, or upon execution and delivery will constitute, the valid and
binding obligations of Seller enforceable against it in accordance with
their terms, subject as to enforceability to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) No Conflict; Required Filings and Consents. The execution and
delivery of the Seller's Agreements by Seller do not, and, except for a
vote or consent of the stockholders of Seller in accordance with
California Law and the applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the performance by Seller
of the transactions contemplated hereby or thereby will not (i) violate,
conflict with, or result in any breach of any provision of Seller's
Certificate of Incorporation or Bylaws, (ii) subject to obtaining any
necessary Consents, violate, conflict with, or result in a violation or
breach of, or constitute a default (with or without due notice or lapse
of time or both) under, or permit the termination of, or result in the
acceleration of, or entitle any party to accelerate (whether as a result
of a change of control of Seller or otherwise) any material obligation,
or result in the loss of any material benefit, or give any person the
right to require any security to be repurchased, or give rise to the
creation of any Lien upon any of the Acquired Assets under any of the
terms, conditions, or provisions of any material Contract to which Seller
is a party or by which it or any of the Acquired Assets may be bound or
subject, or (iii) violate any order, writ, judgment, injunction, decree,
statute, law, rule, or regulation applicable to Seller or by which or to
which any of the Acquired Assets is bound or subject, unless such
violation would not be reasonably likely to give rise to a Material
Adverse Effect. No Consent of any Governmental Entity is required by or
with respect to Seller in connection with the execution and delivery of
any Seller's Agreements by Seller or the consummation of the transactions
contemplated hereby or thereby.
(d) Compliance with Applicable Laws.
(i) The Business has been conducted in compliance with each Applicable
Law, unless the failure to so comply would not be reasonably likely to
give rise to a Material Adverse Effect. To the Seller's Knowledge, no
investigation or review by any Governmental Entity with respect to Seller
is pending or threatened. In addition, Seller has duly and timely filed,
or caused to be so filed with the appropriate Governmental Entities all
reports, statements, documents, registrations, filings, or submissions
with respect to the operation of the Business and the ownership of the
Acquired Assets, except where the failure to so file would not be
reasonably likely to give rise to a Material Adverse Effect.
(ii) Seller is in compliance with all Licenses issued in connection with
the operation of the Business, except where the failure to so comply
would not be reasonably likely to give rise to a Material Adverse Effect.
(iii) To the extent consummation of the transactions contemplated by this
Agreement constitutes a "plant closing" or a "mass layoff" as those terms
are defined in the Worker Adjustment and Retraining Notification Act (29
U.S.C. sec. 2101, et seq.) (the "WARN Act"), Seller hereby assumes
responsibility for giving any and all notices required by the WARN Act or
any similar state law or regulation. Seller assumes all liability for any
and all claims asserted under the WARN Act or any similar state law or
regulation because of any action taken by Seller with respect to the
Business prior to the Closing. The parties hereby designate the Closing
Date as the "effective date" for purposes of the WARN Act.
(e) Absence of Litigation. There is no claim, action, suit,
judicial, or administrative proceeding, grievance, or arbitration pending
or, to the Knowledge of Seller, threatened against Seller, the Business
or any of the Acquired Assets by or before any arbitrator or Governmental
Entity, nor, to the Knowledge of Seller, are there any investigations
relating to Business or any of the Acquired Assets pending or threatened
by or before any arbitrator or Governmental Entity. There is no judgment,
decree, injunction, order, determination, award, finding, or letter of
deficiency of any Governmental Entity, or arbitrator, or settlement
agreement, outstanding against Seller or any of the Acquired Assets,
except for items that would not be reasonably likely to give rise to a
Material Adverse Effect. There is no action, suit or judicial or
administrative proceeding pending or, to the Knowledge of Seller,
threatened against Seller relating to the transactions contemplated by
this Agreement.
(f) Insurance. No event has occurred, including the failure by
Seller to give any notice or information or the delivery of any
inaccurate or erroneous notice or information, which limits or impairs
the rights of Seller under any insurance policies maintained by or for
the benefit of Seller or its assets in such a manner as has had or could
reasonably be expected to have a Material Adverse Effect. Excluding
insurance policies that have expired and been replaced in the ordinary
course of business, no insurance policy has been canceled within the last
two years prior to the date hereof.
(g) Owned Real Property. The Acquired Assets do not include any real
property, other than the Leased Real Property.
(h) Leased Real Property. Each and every lease underlying all Leased
Real Property is a valid and binding obligation of Seller and is in full
force and effect without amendment. Seller is not, and to the Knowledge
of the Seller, no other party is, in default under any such lease.
Subject to obtaining Consents to assignment of the Leased Real Property,
Seller has the full legal power and authority to assign its rights under
such leases to Buyer.
(i) Personal Property. The Acquired Assets comprise all Personal
Property used or held for use primarily in connection with the Business
or which permit the operation of the Business as now conducted. Seller
has good and valid title to, or a valid leasehold or license interest in,
all Personal Property and none of the Personal Property is subject to any
Lien or other encumbrances, other than the Liens listed on the Schedule
hereto ("Permitted Liens"). Seller is not, and to the Knowledge of the
Seller, no other party is, in default under any of the Contracts relating
to the Personal Property where such default would be reasonably likely to
adversely affect the Personal Property governed by such Contract. The
Personal Property is in good operating condition and repair (ordinary
wear and tear excepted).
(j) Liens and Encumbrances. All of the Acquired Assets are free and
clear of all Liens, except for the Permitted Liens. At the Closing, all
of the Acquired Assets shall be free and clear of all Liens, other than
Permitted Liens, none of which will adversely affect the use and
possession by Buyer of such Acquired Assets.
(k) Environmental Matters. To the Knowledge of Seller, there are not
any Hazardous Substances in, on or under the Acquired Assets or the Lease
Real Property that (i) are in a condition or location that violates any
Applicable Laws, (ii) required or would require remediation under
Applicable Laws, (iii) give rise to a claim for damages or compensation
by any effected person, or (iv) would cause any material loss, cost,
liability or expense in connection with any violation of any Applicable
Law, any order of any Governmental Entity or any claim by any private or
public person arising out of any exposure of any person or property to
any such Hazardous Substance.
(l) Taxes. Seller has timely filed or caused to be timely filed all
Tax Returns affecting the Business or the Acquired Assets which are
required to be filed by Seller, all such Tax Returns which have been
filed are accurate and complete in all material respects, and Seller has
timely paid all Taxes shown on such returns or on any Tax assessment
received by Seller to the extent that such Taxes have become due (except
to the extent that such Taxes are being contested in good faith by
Seller, which contests are listed on the Schedule hereto). Seller is not
currently the beneficiary of any extension of time within which to file
any Tax Return. There are no Liens for Taxes upon the Business or the
Acquired Assets, other than statutory liens for Taxes not yet due and
payable. Seller has not received notice of any Tax deficiency or
delinquency applicable to the Business. To the Knowledge of Seller, there
are no legal, administrative, or Tax proceedings pursuant to which Seller
is or could reasonably be made liable for any taxes, penalties, interest,
or other charges, the liability for which could extend to Buyer as
transferee of the Business or the Acquired Assets. None of the Acquired
Assets directly or indirectly secures any debt the interest on which is
exempt from tax under sec. 103(a) of the Code, and none of the Acquired
Assets is "tax-exempt use property" within the meaning of sec. 168(h) of
the Code.
(m) Employee Benefit Matters; Labor; Employment. Except as set
forth on the Schedule hereto, to the extent that any of the following
could in any way adversely affect the Buyer, the Acquired Assets or the
Business:
(i) Neither the Seller nor any corporation, trade, business, or entity
under common control with the Seller, within the meaning of Section
414(b), (c), (m), or (o) of the Code or Section 4001 of ERISA, ("Commonly
Controlled Entity") contributes to or has an obligation to contribute to,
nor has the Seller or any Commonly Controlled Entity at any time within
six years prior to the Closing Date contributed to or had an obligation
to contribute to, either (1) a multiemployer plan within the meaning of
Section 3(37) of ERISA or (2) any plan subject to Title IV of ERISA;
(ii) All obligations, whether arising by operation of law or by contract,
required to be performed under Section 4980B of the Code (or similar
state law) have been performed; and
(iii) Seller shall retain or assume each Employee Benefit Plan, and Buyer
shall not assume or be liable for any of the obligations under any
Employee Benefit Plan maintained by a Commonly Controlled Entity.
(iv) Seller is not bound by or subject to any written or oral, express or
implied, contract, commitment or arrangement with any labor union and the
labor union has not requested or to Seller's Knowledge sought to
represent any of the employees, representatives or agents of Seller.
There is no strike or other labor dispute involving Seller pending or to
Seller's Knowledge threatened that could have Material Adverse Effect on
the Business nor is Seller aware of any labor organizing activity
involving employees of the Business.
(n) Patents, Trademarks, etc. Seller owns or has the right to
license to Buyer all such Trademarks, as well as the Patents, and
Intellectual Property (together, the "Acquired Intellectual Property")
used in connection with the operation of the Business in accordance with
the terms of this Agreement. Seller has taken all actions reasonable in
light of its financial position to protect the Acquired Intellectual
Property. To Seller's Knowledge, the Acquired Intellectual Property as
used in the Business, does not infringe or violate any intellectual
property rights of any other person and does not require the Seller, and
to the knowledge of Seller will not require Buyer to obtain any license
or other agreement to use any intellectual property rights of any other
person. To the Knowledge of Seller, the Patents do not infringe or
violate any patents or other intellectual property rights of any other
person. There are no outstanding options, licenses or agreements of any
kind relating to the Acquired Intellectual Property (excluding the
Patents), nor is Seller bound by or a party to any options, licenses or
agreements of any kind with respect to the Acquired Intellectual Property
that are necessary for the Business. Seller has not granted rights to
manufacture, produce, assemble, license, market or sell any products of
the Business to any other person and is not bound by any agreement that
affects Seller's exclusive right to develop, manufacture, assemble,
distribute and market all of the products sold in the Business, except as
set forth on the Schedule. No approval or consent is required to be
obtained, and no notice is required to be given, with respect to the
Acquired Intellectual Property in connection with this Agreement or the
consummation of the transactions contemplated hereunder.
(o) Relationships with Suppliers. To the Seller's Knowledge, no
current supplier to the Business of items material to the conduct of the
Business has threatened to terminate its relationship with Seller for any
reason.
(p) No Commissions. Neither Seller nor any person on Seller's behalf
has incurred any finder's, broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated
hereby which would impose any obligation or liability upon Buyer.
(q) Disclosure. Notwithstanding anything to the contrary contained
in this Agreement, neither Buyer, nor any of Buyer's officers or
directors, shall be entitled to assert the breach of or be entitled to
indemnification with respect to a representation or warranty to the
extent that the Seller's officers and managers had actual knowledge that
such representation or warranty was false or inaccurate as of the date
hereof.
SECTION 3.2 Representations and Warranties of Buyer. Except as set
forth in Schedule 3.2, Buyer represents and warrants to Seller as
follows:
(a) Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own, lease, and operate its properties and to carry on its business as
now being conducted.
(b) Authority. Buyer has all requisite corporate power and authority
to enter into this Agreement and each other agreement, document, and
instrument required to be executed in accordance herewith (collectively,
the "Buyer's Agreements") to which Buyer is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery
of the Buyer's Agreements by Buyer and the consummation by Buyer of the
transactions contemplated hereby or thereby have been duly authorized by
all necessary action on the part of Buyer. The Buyer's Agreements have
been, or upon execution and delivery will be, duly executed and delivered
and constitute, or upon execution and delivery will constitute, the valid
and binding obligations of Buyer, subject, as to enforceability, to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) No Conflict. The execution and delivery of the Buyer's
Agreements by Buyer do not, and the performance by Buyer of the
transactions contemplated hereby or thereby will not (i) violate,
conflict with, or result in any breach of any provision of Buyer's
Certificate of Incorporation or Bylaws, (ii) violate, conflict with, or
result in a violation or breach of, or constitute a default (with or
without due notice or lapse of time or both) under, or permit the
termination of, or result in the acceleration of, or entitle any party to
accelerate (whether as a result of a change of control of Seller or
otherwise) any material obligation, or result in the loss of any material
benefit, or give any person the right to require any security to be
repurchased under any of the terms, conditions, or provisions of any
material Contract to which Buyer is a party or by which it may be bound
or subject, or (iii) violate any order, writ, judgment, injunction,
decree, statute, law, rule, or regulation applicable to Buyer or by which
it is bound or subject, unless such violation would not be reasonably
likely to give rise to a Material Adverse Effect.
(d) Consents. The execution, delivery and performance of Buyer's
Agreements by Buyer does not require the consent of a Governmental Entity
or a third party not affiliated with Buyer.
(e) No Commissions. Neither Buyer nor any person on Buyer's behalf
has incurred any finder's, broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated
hereby which would impose any obligation or liability upon Seller.
(f) Solvency. The fair value of the property of Buyer is greater
than the total amount of the liabilities of Buyer as of the date hereof,
and, as of the date hereof, Buyer is able to pay all indebtedness of
Buyer as such indebtedness matures.
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business. Except as contemplated by this
Agreement or to the extent that Buyer shall otherwise consent in writing,
from the date of this Agreement until the Closing, Seller covenants and
agrees that Seller shall conduct the Business in the ordinary course.
SECTION 4.2 Cooperation in Operations of the Business. During the
period from the date hereof through the Closing Date, Seller shall
provide Buyer and Buyer's officers, directors and employees full access
to the operation and management of the Business and the right to
participate, where commercially practicable, in the operations,
management and decision-making processes of the Business.
SECTION 4.3 Proxy Statement; Fairness Opinion. As promptly as
practicable after the execution of this Agreement, Seller shall use
commercially reasonable efforts to (i) prepare the Proxy Statement and
all related materials required pursuant to the Exchange Act to consummate
the transactions contemplated hereby, (ii) file such materials with the
Commission and (iii) call a meeting of Seller's stockholders for the
purpose of, among other things, securing the adoption of the sale of the
Acquired Assets by the stockholders of Seller in accordance with Seller's
certificate of incorporation and bylaws and California Law. Seller shall
use commercially reasonable efforts to have the Proxy Statement declared
effective as promptly as practicable by the Commission. Seller's board of
directors shall recommend that the Seller's stockholders approve the sale
of the Acquired Assets pursuant to the terms of this Agreement, and shall
state in the Proxy Statement and in a resolution approving the sale of
the Acquired Assets that Seller's board of directors deems such sale
pursuant to the terms of this Agreement to be in the best interests of
the corporation. Seller and Buyer (but at Seller's expense) shall jointly
use commercially reasonable efforts to obtain prior to the mailing of the
Proxy Statement a favorable opinion for inclusion in the Proxy Statement
as to the fairness, from a financial point of view, to the Seller's
stockholders of the Purchase Price.
SECTION 4.4 Access and Information. Until the Closing, Seller shall
afford to Buyer and its representatives (including accountants and
counsel) full access, during normal business hours, upon reasonable
notice and in such manner as will not unreasonably interfere with the
conduct of the business of Seller, to all properties, books, records, and
Tax Returns of Seller and all other information with respect to the
Business, together with the opportunity to make copies of such books,
records, and other documents and to discuss the Business with such
officers, directors, managerial personnel, accountants, consultants, and
counsel for Seller as Buyer deems reasonably necessary or appropriate,
including the right to visit Seller's facilities. In furtherance of the
foregoing, Seller shall authorize and instruct its independent public
accountants to meet with Buyer and its representatives, including Buyer's
independent public accountants, to discuss the business and accounts of
Seller and to make available (with the opportunity to make copies) to
Buyer and its representatives, including its independent public
accountants, all the work papers of its accountants related to their
audit or review of the consolidated financial statements and Tax Returns
of Seller. From and after the Closing Date, Buyer shall afford Seller
access to its books and records or financial reports upon reasonable
notice solely to the extent necessary to prepare Seller's Tax Returns, to
comply with the requirements of Seller's independent auditors, to comply
with Exchange Act or other legal requirements.
SECTION 4.5 Notification of Certain Matters. Each party hereto shall
give prompt written notice to the other party of (a) the occurrence, or
failure to occur, of any event of which it becomes aware that has caused
or that would be likely to cause any representation or warranty of such
party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing Date,
(b) the failure of such party, or any officer, director, employee, or
agent of such party, to comply with or satisfy in any material respect
any covenant, condition, or agreement to be complied with or satisfied by
it hereunder, and (c) with respect to Seller, the occurrence of any
threat made to Seller by any key employee, to resign or otherwise
terminate their employment or independent contractor relationship with
Seller. No such notification shall affect the representations or
warranties of the parties or the conditions to their respective
obligations hereunder.
SECTION 4.6 Consents. After the date hereof and prior to the
Closing, Seller shall use commercially reasonable efforts to (i) obtain
the written Consent from any party to any Contract, including each
Assumed Contract and any leases related to the Leased Premises, which is
required to permit the consummation of the transactions contemplated
hereby, and (ii) obtain all Consents of or from Governmental Entities
necessary to consummate the transactions contemplated hereby.
Notwithstanding anything in this Agreement to the contrary, (i) the
obligation to use "commercially reasonable efforts" shall not obligate
either party to expend in excess of $25,000 in the aggregate in obtaining
any such Consents (other than obtaining the approval of Seller's
stockholders pursuant to California Law and the Exchange Act), and (ii)
this Agreement shall not constitute an assignment of any Contract or
License if an attempted assignment thereof, without a Consent, would
constitute a breach thereof or in any way adversely affect the rights of
Seller (or Buyer as its assignee) thereunder. If such Consent is not
obtained, or if any attempt at an assignment thereof would be ineffective
or would affect the rights of Seller or Buyer thereunder so that Buyer
would not in fact receive all such rights, Seller shall cooperate with
Buyer to the extent reasonably necessary to provide for Buyer the
benefits under such Contract or License, including enforcement for the
benefit of Buyer of any and all rights against a third party thereto
arising out of the breach or cancellation by such third party or
otherwise.
SECTION 4.7 Employee Matters.
(a) Transfer of Employees. On or prior to the Closing, Buyer will
extend offers of employment to substantially all of the employees of
Seller who provide services primarily to the Business. Any offers so
extended by Buyer shall be on such terms and conditions that Buyer shall
determine in its sole discretion. Seller waives any claims against Buyer
and any of Seller's employees who are extended an offer of employment by
Buyer arising from such employment by Buyer including any claims arising
under any employment agreement, confidentiality agreement, intellectual
property agreement or non-competition agreement between such person and
Seller. An employee formerly in the employ of Seller that accepts an
offer of employment made pursuant to this paragraph shall be deemed a
"Hired Employee" for purposes of this Agreement.
(b) Accrued Vacation. Buyer shall assume, on the date each such
person accepts an offer of employment with Buyer, liability for vacation
accrued by Seller for all of Seller's employees hired by Buyer pursuant
to Section 4.7(a). Seller shall provide Buyer a true and correct
accounting of all accrued vacation of such persons within fifteen (15)
days of such hiring.
(c) Stock Options. Within 60 days of the Closing, with respect to
all Hired Employees that upon the closing date had received grants of
stock options or warrants to purchase shares of Seller, Buyer shall offer
such Hired Employees the right to exchange such stock options or warrants
for equivalent stock options or warrants to purchase shares of Buyer at
the Conversion Rate.
SECTION 4.8 Risk of Loss.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Acquired Assets from any cause whatsoever
shall be borne by Seller at all times prior to the Closing. In the event
of any such loss, damage, impairment, confiscation, or condemnation,
whether or not covered by insurance, Seller shall promptly notify Buyer
of such loss, damage, impairment, confiscation, or condemnation, which
notice shall provide an estimate of the costs to repair, restore or
replace such Acquired Assets and shall state whether Seller intends to
repair, restore or replace such assets.
(b) If Seller, at its expense, repairs, replaces, or restores such
Acquired Assets to their prior condition to the satisfaction of Buyer
before the Closing, Seller shall be entitled to all insurance proceeds
and condemnation awards, if any, by reason of such award or loss.
(c) If Seller does not or cannot restore or replace lost, damaged,
impaired, confiscated or condemned Acquired Assets, Buyer may at its
option:
(i) terminate this Agreement by notice forthwith without any further
obligation hereunder and without further liability to Buyer if the
replacement cost of such Acquired Assets exceeds $25,000 in the
aggregate; or
(ii) proceed to the Closing of this Agreement without Seller completing
the restoration and replacement of such Acquired Assets, provided that
Seller shall assign all rights under applicable insurance policies and
condemnation awards, if any, to Buyer and that the Purchase Price shall
be reduced by the repair or replacement costs of any Acquired Asset to
the extent not covered by such insurance proceeds or condemnation award,
and in such event, Seller shall have no further liability with respect to
the condition of the Acquired Assets directly attributable to the loss,
damage, impairment, confiscation, or condemnation.
(d) Buyer will notify Seller of a decision under the options
described in Section 4.8(c) above within five (5) business days after
Seller's notice to Buyer of the damage or destruction of Acquired Assets;
provided, that if Seller states that it intends to restore the damaged
Acquired Assets and if Seller has not restored such damaged Acquired
Assets immediately prior to the Closing Date, notwithstanding Buyer's
prior delivery of a notice to proceed pursuant to this Section, Buyer
shall have the right to either postpone the Closing or terminate this
Agreement by notice forthwith.
SECTION 4.9 Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto will use all
commercially reasonable efforts to do, or cause to be taken all action
and to do, or cause to be done, all things necessary, proper, or
advisable under Applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. If at any time
after the Closing Date, any further action is necessary or desirable to
carry out the purposes of this Agreement, the parties to this Agreement
and their duly authorized representatives shall take all such action.
Without limiting the generality of the foregoing, if, after the Closing
Date, Buyer seeks indemnification or recovery from one or more other
parties to an Assumed Contract or otherwise seeks to enforce such Assumed
Contract and, in order to obtain such indemnification, recovery or
enforcement, it is necessary for Seller to initiate a suit, participate
in any enforcement proceeding or otherwise provide assistance to Buyer,
then, at the request and the sole expense of Buyer, Seller shall take
such action as Buyer may reasonably request in connection with Buyer's
efforts to obtain such indemnification, recovery or enforcement.
SECTION 4.10 Registration Statement. Buyer shall, within 30 days of the
execution of this Agreement, cause to be filed with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-4 (or
alternative registration statement as appropriate) (the "Registration
Statement"). The Registration Statement shall seek to register the Common
Stock that comprises the Purchase Price. Buyer shall make commercially
reasonable efforts to pursue the Registration Statement to final approval
by the SEC. Buyer will be deemed to have made commercially reasonable
efforts to pursue the Registration Statement if Buyer (i) files the
Registration Statement with 30 days of the execution of this Agreement,
(ii) files necessary amendments to the Registration Statement (following
comments by the SEC staff) in good faith and within 20 days of receiving
such comments, and (iii) files three or more amendments to the
Registration Statement.
ARTICLE V
CLOSING; CLOSING DELIVERIES AND CONDITIONS PRECEDENT
SECTION 5.1 Closing. Subject to the satisfaction or waiver of the
conditions set forth below, the Closing will take place at the offices of
Buyer, at 10:00 a.m., local time, on a date to be agreed upon by the
parties, as soon thereafter as the satisfaction or waiver of all
conditions to the obligations of the parties hereto to consummate the
transactions contemplated hereby shall have occurred (other than with
respect to actions to be taken at the Closing), or at such other place
and time as Buyer and Seller may agree (the "Closing Date").
SECTION 5.2 Conditions to Each Party's Obligation. The respective
obligations of Buyer and Seller to effect the transactions contemplated
hereby are subject to the satisfaction on or prior to the Closing Date of
the following conditions:
(a) Consents and Approvals. All authorizations, Consents, orders, or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall
have been filed, occurred, or been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall
be in effect.
(c) No Action. No action shall have been taken nor any statute,
rule, or regulation shall have been enacted by any Governmental Entity
that makes the consummation of the transactions contemplated hereby
illegal.
(d) License Agreement. Buyer and Seller shall each have been
furnished with a fully executed copy of a License Agreement suitable to
transfer the Intellectual Property, Acquired Intellectual Property,
Patents, Software, and Know-How that comprises the Acquired Assets.
(e) Consents Under Agreements. Buyer and Seller shall each have been
furnished with evidence reasonably satisfactory to it of the Consent or
approval of each person that is a party to a material Contract (including
evidence of the payment of any required payments) whose consent or
approval shall be required in order to permit the consummation of the
transactions contemplated hereby, and such consent or approval shall be
in form and substance satisfactory to Buyer.
(f) Certificate of Stockholder Consent. The stockholders of Seller
shall have approved the performance of the transaction contemplated by
this Agreement in accordance with Seller's Certificate/Articles of
Incorporation and Bylaws and the Exchange Act and California Law, and
Seller shall have delivered to buyer a certificate from Seller's
corporate secretary certifying Seller's stockholder's approval of the
performance of the transaction contemplated by this Agreement.
(g) Certificate of Director's Consent. The Board of Directors of
both parties shall have approved the performance of the transaction
contemplated by this Agreement in accordance with each parties'
Certificate/Articles of Incorporation and Bylaws and the Exchange Act and
Delaware or California Law as the case may be, and each party shall have
delivered to the other party a certificate from each party's corporate
secretary certifying the Board of Director's approval of the performance
of the transaction contemplated by this Agreement.
(h) Fairness Opinion. A reputable accountant shall have delivered to
Seller and Buyer a favorable opinion for inclusion in the Proxy Statement
as to the fairness, from a financial point of view, to the Seller's
stockholders of the Purchase Price.
(i) Registration Statement. Buyer shall have filed the Registration
Statement pursuant to its obligations under Section 4.10.
(j) Amendment to the Schedules. Seller shall have delivered to Buyer
any updates or amendments to the Schedules executed concurrently with
this Agreement and Buyer, in its discretion, shall have accepted such
updates and amendments.
(k) Line of Credit. Seller shall have delivered to Buyer a Consent
sufficient to transfer Seller's line of credit to Buyer.
(l) Buyer's Agreement Waiving Right to Distribution and/or Dividend
of Biomerica Shares. Buyer and Seller shall have executed a contractual
agreement whereby Buyer, in its capacity as a shareholder in Seller,
waives any and all right to any distribution or dividend of Buyer's
shares that comprise the Purchase Price.
SECTION 5.3 Conditions to Obligation of Buyer. The obligation of
Buyer to effect the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in
part, by Buyer:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and
correct in all material respects (provided that any representation or
warranty of Seller contained herein that is qualified by a materiality
standard or a Material Adverse Effect qualification shall not be further
qualified hereby) as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, and Buyer shall have
received a certificate to such effect signed on behalf of Seller by the
chief executive officer or president of Seller.
(b) Performance of Obligations. Seller shall have performed in all
material respects all obligations required to be performed by it under
this Agreement prior to the Closing Date, and Buyer shall have received a
certificate to such effect signed on behalf of Seller by the chief
executive officer or president of Seller.
(c) Material Adverse Effect. No events or conditions shall have
occurred since the date hereof and neither Seller nor Buyer shall have
Knowledge of any event or condition reasonably likely to occur after the
Closing Date which, individually or in the aggregate, have or could
reasonably be expected to have a Material Adverse Effect.
(d) Closing Deliveries. At the Closing, Seller shall deliver to
Buyer the following:
(i) Bill of Sale and Assignment. A counterpart of the Bill of Sale and
Assignment executed by Seller, together with any other assignments and
other transfer documents as requested by Buyer;
(ii) Landlord Consent. Landlord consent letters from the lessors of the
Leased Real Property in a form and substance reasonably satisfactory to
Buyer and its lenders or other financing sources;
(iii) Contracts, Business Records, etc. Copies and, to the extent they
are in the possession of Seller, originals of all Assumed Contracts,
customer and vendor lists used by Seller in connection with the Business,
which copies shall be available at the Closing or at the principal
business offices of the Business;
(iv) Non-Foreign Affidavit. A non-foreign affidavit within the meaning of
Section 1445(b)(2) of the Code from the chief executive officer or chief
financial officer of Seller.
SECTION 5.4 Conditions to Obligations of the Seller. The obligation
of Seller to effect the transactions contemplated hereby is subject to
the satisfaction of the following conditions unless waived, in whole or
in part, by Seller.
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct
in all material respects (provided that any representation or warranty of
Buyer contained herein that is qualified by a materiality standard shall
not be further qualified hereby) as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date, and
Seller shall have received a certificate to such effect signed on behalf
of Buyer by the chief executive officer or president of Buyer.
(b) Performance of Obligations of Buyer. Buyer shall have performed
in all material respects all obligations required to be performed by it
under this Agreement prior to the Closing Date, and Seller shall have
received a certificate to such effect signed on behalf of Buyer by the
chief executive officer or president of Buyer.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated prior to
the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by either Seller or Buyer:
(i) in the event of a breach by the other party of any representation,
warranty, covenant or other agreement contained in this Agreement which
cannot be or has not been cured within 20 days following receipt by the
breaching party of written notice of such breach;
(ii) if a court of competent jurisdiction or other Governmental Entity
shall have issued an order, decree, or ruling or taken any other action
(which order, decree or ruling the parties hereto shall use their
reasonable efforts to lift), in each case restraining, enjoining, or
otherwise prohibiting the transactions contemplated by this Agreement;
(iii) if the Closing shall not have occurred by April 30, 2002; provided,
that the right to terminate this Agreement under this clause (iii) shall
not be available to any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(iv) if a meeting of the stockholders of Seller (including any
adjournments thereof) shall have been held and completed and Seller's
stockholders shall have taken a final vote on a proposal to approve the
sale of the Acquired Assets and such sale was not approved by the
requisite vote of holders of Seller's Common Stock under Seller's
certificate of incorporation and bylaws and California Law; or
(c) by Buyer pursuant to the provisions of Section 4.8;
(d) by either party if Seller and Buyer cannot obtain a fairness
opinion as described in Section 4.3 on or prior to the date of the
mailing of the Proxy Statement; or
(e) by Seller following receipt of a proposal from an unaffiliated
third party involving (i) a purchase, lease, exchange or transfer of the
Acquired Assets or all or substantially all of the assets of Seller, or
(ii) any merger, consolidation, share exchange or similar transaction for
the acquisition of Seller, and the determination by Seller's board of
directors that such proposal is more beneficial to Seller's stockholders
than the transactions contemplated herein.
Notwithstanding anything in the foregoing to the contrary, no party
that is in material breach of this Agreement shall be entitled to
terminate this Agreement except with the consent of the other party.
SECTION 6.2 Effect of Termination. In the event of a termination of
this Agreement by either Seller or Buyer as provided above, there shall
be no liability on the part of either Buyer or Seller. This ARTICLE VI
shall survive the termination of this Agreement. Except as provided in
Section 6.3 below, each of the parties hereto shall be responsible for
its own expenses and those of its advisors, and no party hereto, nor any
of their Affiliates, shall be responsible to the other parties, or any of
their Affiliates, for any expenses relating to the transactions
contemplated by this Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Indemnification of Buyer. Subject to the provisions of
this ARTICLE VII, Seller shall indemnify and hold harmless Buyer and each
officer, director and Affiliate of Buyer (the "Buyer Indemnified
Parties") from and against any and all damages, losses, claims,
liabilities, demands, charges, interest, suits, penalties, costs, and
expenses (including court costs, reasonable attorneys' fees and other
expenses incurred in investigating and preparing for, or otherwise in
connection with, any litigation or proceeding) ("Losses") that any of the
Buyer Indemnified Parties incurs and that relate to, result from or arise
out of:
(a) any and all liabilities arising under the Assumed Contracts
which relate to events occurring prior to the Closing Date;
(b) any breach or default by Seller of any of the representations,
warranties, covenants or agreements under this Agreement or any other
agreement or document executed in connection herewith;
(c) any claim, action, suit, proceeding, grievance or arbitration
set forth on Section 3.1(f) of the Schedule;
(d) any and all obligations or liabilities under any Excluded
Contract;
(e) any action, claim, proceeding or demand by a third party based
on Seller's failure to comply with all requirements of the Securities Act
of 1933, as amended, and the Exchange Act or any statement made or failed
to be made in any filing or communication governed thereby; and
(f) any law or contract with respect to each (i) Employee Benefit
Plan and all associated contracts and documents, (ii) employee benefit
plan (as such term is described in Section 3(3) of ERISA), which is or
was sponsored, maintained, or contributed to by any Commonly Controlled
Entity either presently or at any time and all associated contracts and
documents, and (iii) employee and former employee of Seller or any
Commonly Controlled Entity, in connection with any event commencing,
occurring, or failing to occur on or prior to the Closing Date.
SECTION 7.2 Indemnification of Seller. Subject to the provisions of
this ARTICLE VII, Buyer shall indemnify and hold harmless Seller and each
officer, director and Affiliate of Seller (the "Seller Indemnified
Parties") from and against any and all Losses that any of the Seller
Indemnified Parties incurs and that relate to, result from or arise out
of:
(a) any and all liabilities arising under the Assumed Contracts
which relate to events occurring after the Closing Date and any and all
liabilities arising under the Assumed Liabilities;
(b) any breach or default by Buyer of any representation, warranty,
covenant or agreement under this Agreement or any agreement or document
executed in connection herewith; and
(c) the WARN Act with respect to actions taken by Buyer after the
Closing Date.
SECTION 7.3 Defense of Third-Party Claims. A Buyer Indemnified Party
or a Seller Indemnified Party, as the case may be (an "Indemnified
Party") shall give prompt written notice to any entity or person who is
obligated to provide indemnification hereunder (an "Indemnifying Party")
of the commencement or assertion of any action, proceeding, demand, or
claim by a third party (collectively, a "third-party action") in respect
of which such Indemnified Party shall seek indemnification hereunder. Any
failure so to notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it may have to such
Indemnified Party under this ARTICLE VII except to the extent (and solely
to the extent) that the failure to give such notice materially and
adversely prejudices such Indemnifying Party. The Indemnifying Party
shall have the right to assume control of the defense of, settle, or
otherwise dispose of such third-party action on such terms as it deems
appropriate; provided, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, that the
Indemnifying Party shall pay the attorneys' fees of the Indemnified Party
if (i) the employment of separate counsel shall have been authorized in
writing by such Indemnifying Party in connection with the defense of such
third-party action, (ii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to have charge
of such third-party action, (iii) the Indemnified Party shall have
reasonably concluded that there may be defenses available to such
Indemnified Party that are different from or additional to those
available to the Indemnifying Party, or (iv) the Indemnified Party's
counsel shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a conflict of interest
that could make it inappropriate under applicable standards of
professional conduct to have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval
of the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such third-
party action or any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party or if, in the opinion of the Indemnified Party, such
settlement, compromise, admission, or acknowledgment could have an
adverse effect on its business;
(c) No Indemnifying Party or Indemnified Party shall consent to the
entry of any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by each claimant or plaintiff
to each Indemnified Party and Indemnifying Party of a release from all
liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of),
and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement, compromise, admission, or acknowledgment of
any third-party action (i) as to which the Indemnifying Party fails to
assume the defense within 30 days after notice thereof, or (ii) to the
extent the third-party action seeks an order, injunction, or other
equitable relief against the Indemnified Party which, if successful,
would materially adversely affect the business, operations, assets, or
financial condition of the Indemnified Party; provided, that the
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of any
Indemnifying Party without the prior written consent of such Indemnifying
Party.
The parties hereto shall extend reasonable cooperation in connection
with the defense of any third-party action pursuant to this ARTICLE VII
and, in connection therewith, shall furnish such records, information,
and testimony and attend such conferences, discovery proceedings,
hearings, trials, and appeals as may be reasonably requested.
SECTION 7.4 Direct Claims. In any case in which an Indemnified Party
seeks indemnification hereunder which is not subject to Section 7.3
because no third-party action is involved, the Indemnified Party shall
notify the Indemnifying Party in writing of any Losses which such
Indemnified Party claims are subject to indemnification under the terms
hereof. The failure of the Indemnified Party to exercise promptness in
such notification shall not amount to a waiver of such claim unless the
resulting delay materially prejudices the position of the Indemnifying
Party with respect to such claim.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Survival of Representations, Warranties, and Covenants.
Regardless of any investigation at any time made by or on behalf of any
party hereto or of any information any party may have in respect thereof,
each of the representations and warranties made hereunder or pursuant
hereto or in connection with the transactions contemplated hereby shall
survive the Closing for a period of eighteen (18) months. To the extent
that such are performable after the Closing, each of the covenants and
agreements contained in each of the Transaction Documents shall survive
the Closing indefinitely.
SECTION 8.2 Further Actions. After the Closing Date, Seller shall
execute and deliver such other certificates, agreements, conveyances, and
other documents, and take such other action, as may be reasonably
requested by Buyer in order to transfer and assign to, and vest in, Buyer
the Acquired Assets pursuant to the terms of this Agreement.
SECTION 8.3 Amendment and Modification. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.4 Waiver of Compliance. Any failure of Buyer on the one
hand, or Seller, on the other hand, to comply with any obligation,
covenant, agreement, or condition contained herein may be waived only if
set forth in an instrument in writing signed by the party or parties to
be bound thereby, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any other
failure.
SECTION 8.5 Specific Performance. The parties recognize that in the
event either party should refuse to perform under the provisions of this
Agreement, monetary damages alone will not be adequate. Each party shall
therefore be entitled, in addition to any other remedies which may be
available, including money damages, to obtain specific performance of the
terms of this Agreement. In the event of any action to enforce this
Agreement specifically, each party hereby waives the defense that there
is an adequate remedy at law.
SECTION 8.6 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule
of Applicable Law, or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated
herein are not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the court or other Governmental
Authority making such determination is authorized and instructed to
modify this Agreement so as to effect the original intent of the parties
as closely as possible in order that the transactions contemplated herein
are consummated as originally contemplated to the fullest extent
possible.
SECTION 8.7 Expenses and Obligations. Except as otherwise expressly
provided in this Agreement or as provided by law, all costs and expenses
incurred by the parties hereto in connection with the consummation of the
transactions contemplated hereby shall be borne solely and entirely by
the party which has incurred such expenses. Notwithstanding the
foregoing, all sales Taxes arising out of the transactions contemplated
by this Agreement shall be paid by Buyer. In the event of a dispute
between the parties in connection with this Agreement and the
transactions contemplated hereby, each of the parties hereto hereby
agrees that the prevailing party shall be entitled to reimbursement by
the other party of reasonable legal fees and expenses incurred in
connection with any action or proceeding.
SECTION 8.8 Parties in Interest. This Agreement shall be binding
upon and, except as provided below, inure solely to the benefit of each
party hereto and their successors and assigns, and nothing in this
Agreement, except as set forth below, express or implied, is intended to
confer upon any other person (other than the Indemnified Parties as
provided in ARTICLE VII) any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 8.9 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
sent by facsimile, mailed by registered or certified mail (return receipt
requested) or sent by overnight courier to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) If to Buyer, to
Biomerica, Inc.
1533 Monrovia Avenue
Newport Beach, CA 92663
Fax: (949) 722-6674
(b) If to Seller, to
Lancer Orthodontics, Inc.
253 Pawnee Street
San Marcos, CA 92069
Fax: (760) 744-5842
Any of the above addresses may be changed at any time by notice
given as provided above; provided, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed given (i) on
the date of delivery, if hand delivered, (ii) on the date of receipt, if
sent by facsimile, (iii) three business days after the date of mailing,
if mailed by registered or certified mail, return receipt requested, and
(iv) one business day after the date of sending, if sent by Federal
Express or other recognized overnight courier.
SECTION 8.10 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 8.11 Entire Agreement. This Agreement (which term shall be
deemed to include the Exhibits and Schedules hereto and the other
certificates, documents and instruments delivered hereunder) constitutes
the entire agreement of the parties hereto and supersedes all prior
agreements, letters of intent and understandings, both written and oral,
among the parties with respect to the subject matter hereof. There are no
representations or warranties, agreements, or covenants other than those
expressly set forth in this Agreement.
SECTION 8.12 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
EACH OF BUYER AND SELLER SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS LOCATED IN ORANGE COUNTY, IN THE STATE OF
CALIFORNIA.
SECTION 8.13 Public Announcements. All notices, releases, statements
and communications to employees, suppliers, distributors and customers of
Buyer and Seller and to the general public and the press relating to the
transactions contemplated by this Agreement shall be made only at such
times and in such manner as may be mutually agreed upon by Buyer and
Seller. Notwithstanding the foregoing sentence, any party shall be
entitled to make a public announcement or statement or other public
disclosure relating to the transactions contemplated hereby if, in the
written opinion of its legal counsel, such announcement or statement or
other public disclosure is required to comply with any applicable law,
subpoena or other process; provided, that the disclosing party gives the
other party prior written notice of its intention to make such
disclosure, the content of such disclosure and the provision of law,
subpoena or process requiring such disclosure and cooperates, to the
extent reasonably allowable, with the other party in the content and
timing of such disclosure. Notwithstanding anything to contrary in this
Section, Seller shall be permitted to file this Agreement and to describe
the transactions contemplated hereby in a Current Report on Form 8-K or
Quarterly Report on Form 10-Q filed under the Exchange Act.
SECTION 8.14 Confidentiality. Each party hereto agrees that it will
keep confidential and will not disclose or divulge any confidential,
proprietary or secret information which such party may obtain from the
other party pursuant to this Agreement or otherwise, or pursuant to
visitation or inspection rights granted hereunder, unless such
information is known, or until such information becomes known, to the
public; provided, that a party may disclose such information (i) to its
attorneys, accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with this Agreement as
long as such attorneys, accountants, consultants and other professional
are informed of the confidential nature of such information, (ii) if
required or compelled by law or regulation, to the extent advised by an
opinion of counsel that such disclosure is necessary or required, or
(iii) with the prior review and approval of Buyer, by Seller in a press
release relating to the execution hereof and in the related Form 8-K and
in the Proxy Statement.
SECTION 8.15 Assignment. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto, whether by operation of law or otherwise; provided,
that nothing in this Agreement shall limit Buyer's ability to make a
collateral assignment of its rights under this Agreement to any
institutional lender that provides funds to Buyer without the consent of
Seller. Seller shall execute an acknowledgment of such assignment(s) and
collateral assignments in such forms as Buyer or its lenders may from
time to time reasonably request; provided, further, that unless written
notice is given to Seller that any such collateral assignment has been
foreclosed upon, Seller shall be entitled to deal exclusively with Buyer
as to any matters arising under this Agreement or any of the other
agreements delivered pursuant hereto. In the event of such an assignment,
the provisions of this Agreement shall inure to the benefit of and be
binding on Buyer's assigns.
SECTION 8.16 Headings. The headings of this Agreement are for
convenience of reference only and are not part of the substance of this
Agreement.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to
be executed by their Board of Directors as of the date first written
above.
SELLER:
LANCER ORTHODONTICS, INC.
/s/ Zackary Irani
--------------------------------------
Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
/s/ Dr. Francis Cano
--------------------------------------
Dr. Francis Cano
BUYER:
BIOMERICA, INC.
/s/ Allen Barbieri
--------------------------------------
Allen Barbieri
/s/ Dr. Carlos St. Aubyn Beharie
--------------------------------------
Dr. Carlos St. Aubyn Beharie
/s/ David Burrows
--------------------------------------
David Burrows
/s/ Dr. Francis Cano
--------------------------------------
Dr. Francis Cano
/s/ Zackary Irani
--------------------------------------
Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
SCHEDULES TO ASSET PURCHASE AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS,
INC., AND BIOMERICA, INC
Schedule 2.2(c) Excluded Contracts:
Schedule 2.2(d) Excluded Accounts Receivable:
Schedule 3.1 Exceptions to Representations and Warranties of Seller:
Schedule 3.2 Exceptions to Representations and Warranties of Buyer
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
BIOMERICA, INC.
Pursuant to the Delaware General Corporation Law, the undersigned,
constituting all of the members of the Board of Directors of BIOMERICA,
INC. (the "Corporation"), in accordance with the Corporation's Articles
and Bylaws, do hereby adopt, approve, confirm, and ratify in writing
without a meeting the following resolutions of the Board of Directors of
the Corporation.
WHEREAS, the Boards of Directors of Biomerica, Inc. and Lancer
Orthodontics, Inc. have pursued discussions regarding the possible
acquisition by Biomerica, Inc. of the assets and liabilities of Lancer
Orthodontics, Inc. through the vehicle of an Asset Purchase Agreement, in
a transaction to take place in the Spring of 2002.
RESOLVED, that upon discussion and consideration, the Directors have
determined that the asset purchase is advisable;
RESOLVED, that the purchase price to be paid, to wit, common stock of
Biomerica equal to $600,000.00, as well as the other terms of the
proposed Asset Purchase Agreement is fair to and in the best interests of
the Corporation and its shareholders;
RESOLVED, that the Corporation has entered into an ASSET PURCHASE
AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC.
on or about February 25, 2002 (the "Asset Purchase Agreement"), whereby
the Corporation has agreed to acquire all or substantially all of the
assets of Lancer Orthodontics, Inc. The Asset Purchase Agreement is
hereby ratified, and the Board of Directors hereby elects to proceed with
the transaction underlying the Asset Purchase Agreement.
/s/ Allen Barbieri
--------------------------------------
Allen Barbieri
/s/ Dr. Carlos St. Aubyn Beharie
--------------------------------------
Dr. Carlos St. Aubyn Beharie
/s/ David Burrows
--------------------------------------
David Burrows
/s/ Dr. Francis Cano
--------------------------------------
Dr. Francis Cano
/s/ Zackary Irani
--------------------------------------
Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
LANCER ORTHODONTICS, INC.
Pursuant to the California Corporations Code, the undersigned,
constituting all of the members of the Board of Directors of LANCER
ORTHODONTICS, INC. (the "Corporation"), in accordance with the
Corporation's Articles and Bylaws, do hereby adopt, approve, confirm, and
ratify in writing without a meeting the following resolutions of the
Board of Directors of the Corporation.
WHEREAS, the Boards of Directors of Biomerica, Inc. and Lancer
Orthodontics, Inc. have pursued discussions regarding the possible
acquisition by Biomerica, Inc. of the assets and liabilities of Lancer
Orthodontics, Inc. through the vehicle of an Asset Purchase Agreement, in
a transaction to take place in the Spring of 2002.
RESOLVED, that upon discussion and consideration, the Directors have
determined that the asset purchase is advisable;
RESOLVED, that the purchase price to be paid, to wit, common stock of
Biomerica equal to $600,000.00, as well as the other terms of the
proposed Asset Purchase Agreement is fair to and in the best interests of
the Corporation and its shareholders;
RESOLVED, that the Corporation has entered into an ASSET PURCHASE
AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC.
on or about February 25, 2002 (the "Asset Purchase Agreement"), whereby
the Corporation has agreed to sell all or substantially all of the assets
of the Corporation to Biomerica, Inc. The Asset Purchase Agreement is
hereby ratified, and the Board of Directors hereby elects to proceed with
the transaction underlying the Asset Purchase Agreement;
RESOLVED, that the Directors shall recommend to the Corporation's
shareholders to they vote "for" a proposal to approve the Asset Purchase
Agreement.
/s/ Zackary Irani
--------------------------------------
Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
/s/ Dr. Francis Cano
--------------------------------------
Dr. Francis Cano
--------------------------------------------------------
Exhibit 99.4: Amendment Number One to Asset Purchase Agreement by and
Between Lancer and Biomerica
AMENDMENT NUMBER ONE TO ASSET PURCHASE AGREEMENT BY AND BETWEEN LANCER
ORTHODONTICS, INC., AND BIOMERICA, INC.
This AMENDMENT NUMBER ONE TO ASSET PURCHASE AGREEMENT BY AND BETWEEN
LANCER ORTHODONTICS, INC., AND BIOMERICA, INC. (this "Amendment") is
hereby entered into as of on or about March 12, 2002 to that ASSET
PURCHASE AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND
BIOMERICA, INC. (the "Agreement"), entered into as of on or about
February 25, 2002, by and between Lancer Orthodontics, Inc., a California
corporation ("Seller"), and Biomerica, Inc., a Delaware corporation
("Buyer").
RECITALS
A. Seller manufactures and distributes orthodontic products such as
preformed bands, direct bonding brackets, buccal tubes, arch wires,
lingual attachments, related accessories and dental amalgams (the
"Business").
B. Seller desires to sell and Buyer desires to buy certain of the
assets used or held for use in the operation of the Business as described
herein and upon the terms and conditions hereinafter set forth.
C. On February, 25, 2002, Seller and Buyer entered into the
Agreement. The parties, by executing this written Amendment to the
Agreement, hereby amend the Agreement as follows to adjust the number of
shares of Buyer's common stock that constitute the Purchase Price under
the Agreement.
AMENDMENT TO AGREEMENT
1. Paragraph to Be Stricken From the Agreement. The follow paragraph
shall be stricken from the Agreement:
SECTION 2.3 Purchase Price. "Purchase Price" shall mean the following: In
addition to the liabilities and obligations assumed by Buyer pursuant to
Section 2.7, the aggregate purchase price payable by Buyer to Seller on
the Closing Date in consideration for the sale of the Acquired Assets
shall be shares of Buyer's common stock, par value $0.08 per share, such
that the total number of shares comprising the Purchase Price multiplied
by the Applicable Share Price (as defined below), shall equal
$600,000.00. The "Applicable Share Price" shall mean, with respect to
shares of the Buyer's common stock, the average closing bid price as
reported on the Nasdaq SmallCap market during normal trading for the 5
trading days immediately preceding the Closing Date; however, in no event
shall the Applicable Share Price be less than $0.62 per share or greater
than $1.25 per share.
2. Paragraph to Be Substituted into the Agreement. In place of the
paragraph to be stricken in the section just previous, the follow
paragraph shall substituted, and shall form a part of the Agreement, as
amended.
SECTION 2.3 Purchase Price. "Purchase Price" shall mean the following: In
addition to the liabilities and obligations assumed by Buyer pursuant to
Section 2.7, the aggregate purchase price payable by Buyer to Seller on
the Closing Date in consideration for the sale of the Acquired Assets
shall be shares of Buyer's common stock, par value $0.08 per share, such
that the total number of shares comprising the Purchase Price multiplied
by the Applicable Share Price (as defined below), shall equal
$610,250.00. The "Applicable Share Price" shall mean, with respect to
shares of the Buyer's common stock, the average closing bid price as
reported on the Nasdaq SmallCap market during normal trading for the 5
trading days immediately preceding the Closing Date; however, in no event
shall the Applicable Share Price be less than $0.62 per share or greater
than $1.25 per share.
IN WITNESS WHEREOF, Seller and Buyer have caused this Amendment to
be executed by their Board of Directors as of the date first written
above.
SELLER:
LANCER ORTHODONTICS, INC.
/s/ Zackary Irani
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Zackary Irani
/s/ Janet Moore
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Janet Moore
/s/ Dr. Robert Orlando
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Dr. Robert Orlando
/s/ Dr. Francis Cano
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Dr. Francis Cano
BUYER:
BIOMERICA, INC.
/s/ Allen Barbieri
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Allen Barbieri
/s/ Dr. Carlos St. Aubyn Beharie
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Dr. Carlos St. Aubyn Beharie
/s/ David Burrows
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David Burrows
/s/ Dr. Francis Cano
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Dr. Francis Cano
/s/ Zackary Irani
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Zackary Irani
/s/ Janet Moore
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Janet Moore
/s/ Dr. Robert Orlando
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Dr. Robert Orlando
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
BIOMERICA, INC.
Pursuant to the Delaware General Corporation Law, the undersigned,
constituting all of the members of the Board of Directors of BIOMERICA,
INC. (the "Corporation"), in accordance with the Corporation's Articles
and Bylaws, do hereby adopt, approve, confirm, and ratify in writing
without a meeting the following resolutions of the Board of Directors of
the Corporation.
WHEREAS, the Boards of Directors of Biomerica, Inc. and Lancer
Orthodontics, Inc. have pursued discussions regarding the possible
acquisition by Biomerica, Inc. of the assets and liabilities of Lancer
Orthodontics, Inc. through the vehicle of an Asset Purchase Agreement, in
a transaction to take place in the Spring of 2002.
RESOLVED, that upon discussion and consideration, the Directors have
determined that the asset purchase is advisable;
RESOLVED, that the Corporation has entered into an ASSET PURCHASE
AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC.
on or about February 25, 2002 (the "Asset Purchase Agreement"), whereby
the Corporation has agreed to acquire all or substantially all of the
assets of Lancer Orthodontics, Inc. The Asset Purchase Agreement was
ratified on or about February 25, 2002;
RESOLVED, that the Directors desire to modify the Asset Purchase
Agreement by a written AMENDMENT NUMBER ONE TO ASSET PURCHASE AGREEMENT
BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC. (the
"Amendment") whereby the purchase price shall be common stock of
Biomerica equal to $610,250.00, and such Asset Purchase Agreement, as
amended, is fair to and in the best interests of the Corporation and its
shareholders.
Executed on or about March 12, 2002.
/s/ Allen Barbieri
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Allen Barbieri
/s/ Dr. Carlos St. Aubyn Beharie
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Dr. Carlos St. Aubyn Beharie
/s/ David Burrows
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David Burrows
/s/ Dr. Francis Cano
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Dr. Francis Cano
/s/ Zackary Irani
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Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
LANCER ORTHODONTICS, INC.
Pursuant to the California Corporations Code, the undersigned,
constituting all of the members of the Board of Directors of LANCER
ORTHODONTICS, INC. (the "Corporation"), in accordance with the
Corporation's Articles and Bylaws, do hereby adopt, approve, confirm, and
ratify in writing without a meeting the following resolutions of the
Board of Directors of the Corporation.
WHEREAS, the Boards of Directors of Biomerica, Inc. and Lancer
Orthodontics, Inc. have pursued discussions regarding the possible
acquisition by Biomerica, Inc. of the assets and liabilities of Lancer
Orthodontics, Inc. through the vehicle of an Asset Purchase Agreement, in
a transaction to take place in the Spring of 2002.
RESOLVED, that upon discussion and consideration, the Directors have
determined that the asset purchase is advisable;
RESOLVED, that the purchase price to be paid, to wit, common stock of
Biomerica equal to $600,000.00, as well as the other terms of the
proposed Asset Purchase Agreement is fair to and in the best interests of
the Corporation and its shareholders;
RESOLVED, that the Corporation has entered into an ASSET PURCHASE
AGREEMENT BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC.
on or about February 25, 2002 (the "Asset Purchase Agreement"), whereby
the Corporation has agreed to acquire all or substantially all of the
assets of Lancer Orthodontics, Inc. The Asset Purchase Agreement was
ratified on or about February 25, 2002;
RESOLVED, that the Directors desire to modify the Asset Purchase
Agreement by a written AMENDMENT NUMBER ONE TO ASSET PURCHASE AGREEMENT
BY AND BETWEEN LANCER ORTHODONTICS, INC., AND BIOMERICA, INC. (the
"Amendment") whereby the purchase price shall be common stock of
Biomerica equal to $610,250.00, and such Asset Purchase Agreement, as
amended, is fair to and in the best interests of the Corporation and its
shareholders;
RESOLVED, that the Directors shall recommend to the Corporation's
shareholders to they vote "for" a proposal to approve the Asset Purchase
Agreement, as Amended.
Executed on or about March 12, 2002.
/s/ Zackary Irani
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Zackary Irani
/s/ Janet Moore
--------------------------------------
Janet Moore
/s/ Dr. Robert Orlando
--------------------------------------
Dr. Robert Orlando
/s/ Dr. Francis Cano
--------------------------------------
Dr. Francis Cano
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Exhibit 99.5: Opinion Re: Fairness of the Asset Purchase Agreement
March 15, 2001
Board of Directors
Lancer Orthodontics, Inc.
253 Pawnee Street
San Marcos, CA 92069-2437
Dear Board of Directors:
We understand that Lancer Orthodontics, Inc. ("Lancer"), a California
corporation whose common shares are publicly traded on the OTC Bulletin
Board, intends to enter into an Asset Purchase Agreement (the
"Agreement"), dated on or about February 25, 2002 and amended by
Amendment Number One to the Agreement, dated on or about March 12, 2002,
with Biomerica, Inc. ("Biomerica"), a Delaware corporation. The parties
anticipate entering into the Agreement, pursuant to which, Lancer will
sell, assign, transfer, and deliver to Biomerica, and Biomerica will
purchase, nearly all of Lancer's assets and liabilities-essentially all
of Lancer's operations will become a wholly-owned subsidiary of
Biomerica.
Lancer is a partially owned and consolidated subsidiary of Biomerica.
Prior to the date of the Agreement, Biomercia owned approximately 30.78
percent of the outstanding shares of Lancer. Consideration for the assets
of Lancer will be paid to the shareholders of the balance of the 69.22
percent outstanding shares of Lancer.
Pursuant to the Agreement and in consideration of the sale of Lancer's
assets, Biomerica at closing will deliver shares of their common stock,
par value $0.08 per share, to Lancer such that the total number of shares
comprising the "Purchase Price" multiplied by the Applicable Share Price
(as defined below), will equal $610,250.00. The "Applicable Share Price"
will mean, with respect to shares of Biomerica's common stock, the
average closing bid price as reported on the Nasdaq SmallCap market
during normal trading for the five trading days immediately preceding the
transaction closing date; however, the Applicable Share Price must not be
less than $0.62 per share nor greater than $1.25 per share. Biomerica
will also assume the liabilities and obligations of Lancer.
You have requested us to render our opinions with respect to: (i) the
fair market value of Lancer, on a controlling ownership interest basis,
as of a date on or before the effective date of the proposed acquisition
of the assets of Lancer by Biomerica; and (ii) based upon our conclusion
of value and other relevant factors, that the transaction is fair to the
shareholders of Lancer, from a financial point of view.
In arriving at our opinions, we reviewed and analyzed: (i) the Asset
Purchase Agreement dated on or about February 25, 2002 and Amendment
Number One to the Asset Purchase Agreement dated on or about March 12,
2002 (ii) projections, prepared by Lancer's management, for Lancer's
operations for the six months ending May 31, 2002 and the fiscal year
ending May 31, 2003; (iii) Lancer's audited financial statements for the
fiscal years ended May 31, 1997 through May 31, 2001, and Lancer's
internal unaudited financial statement for the six month period ended
November 30, 2001; (iv) certain internal analyses related to the
acquisitions of the assets of Lancer, as of November 30, 2001 (v) stock
prices and financial performance of publicly traded companies that we
deemed to be similar to Lancer; (vi) certain industry trends related to
the industry in which Lancer participates; and (vii) other information
that we deemed appropriate for our analysis.
We have assumed and relied upon the accuracy and completeness of the
financial and other information provided by Lancer and Biomerica in
arriving at our opinion without independent verification and have further
relied upon the assurances of Lancer and Biomerica management that they
are not aware of any facts that would make such information inaccurate or
misleading. Our opinions are necessarily based upon market, economic, and
other conditions as they exist on, and can be evaluated as of, the date
of this letter.
Based upon and subject to the foregoing, it is our opinion, as of the
date hereof: that the value of the consideration to be received by Lancer
in the transaction is reasonably equivalent to the fair market value of
Lancer on a controlling ownership interest basis; and that the
transaction is fair from a financial point of view, to the shareholders
of Lancer.
This letter is solely for the use and benefit of the Board of Directors
of Lancer. Any summary of, or reference to, the opinions expressed in
this letter or any other reference to Willamette Management Associates by
Lancer or Biomerica in connection with the Agreement will be subject to
Willamette Management Associates' prior review and written approval,
which shall not be unreasonably withheld. The opinion will not be
included in, summarized, or referred to in any manner in materials
distributed to the public without Willamette's prior written consent.
Very truly yours,
/s/ WILLAMETTE MANAGEMENT ASSOCIATES
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