As filed with the Securities and Exchange Commission on September 11, 1996
Registration No. 33-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM SB-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
GLOBAL MED TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Colorado 8741:8071:7372 84-1116894
-------- -------------- ----------
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Classification Code Identification
organization) Number) Number)
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
(303) 238-2000
(Address and telephone number of principal executive offices
and principal place of business)
Michael I. Ruxin, M.D.
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
(303) 238-2000
(Name, address and telephone number of agent for service)
Copies of all communications to:
Albert Brenman, Esq. Thomas S. Smith, Esq.
Brenman Key & Bromberg, P.C. Smith, McCullough & Ferguson, P.C
Mellon Financial Center 1610 Wynkoop Street
1775 Sherman Street, Suite 1001 Suite 300
Denver, Colorado 80203 Denver, Colorado 80202-1135
(303) 894-0234 (303) 892-6003
(303) 839- 1633 FAX (303) 892-0457 FAX
Approximate date of proposed sale to public: As soon as practicable after
the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of each Proposed
class of Amount Proposed maximum Amount of
securitites to to be maximum aggregate registration
be registered registered offering price (1) offering price (1) fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (2) 2,300,000 $ 6.00 $13,800,000 $4,759
----------------------------------------------------------------------------------------------------------------------------------
Class A Warrants to Purchase Common Stock (2) 1,150,000 .50 575,000 199
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying Class A Warrants
to Purchase Common Stock (3) 1,150,000 8.00 9,200,000 3,173
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock (4) 944,643 6.00 5,667,858 1,954
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Underlying Outstanding Warrants to 187,800 6.00 1,126,800 389
Purchase Common Stock (4)
- ----------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants to Purchase
Common Stock 1 50.00 50 Nil
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying Representative's
Warrants to Purchase Common Stock 200,000 7.20 1,440,000 497
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Warrants to Purchase Common Stock to
be issued to the Representative 100,000 .0005 50 Nil
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying Class A Warrants
to be issued to the Representative (3) 100,000 9.60 960,000 332
==================================================================================================================================
Total: $32,769,758 $11,303
==================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rules 457(a) and (g).
(2) Includes 300,000 Shares and 150,000 Warrants that may be issued upon exercise of the Underwriters' over-allotment option.
(3) Pursuant to Rule 416, there are also being registered such additional securities as may become issuable pursuant to the
anti-dilution provisions of the Warrants.
(4) Shares registered on behalf of Selling Securityholders.
</TABLE>
<PAGE>
Cross Reference Sheet
Form SB-2
Item No. Sections in Prospectus
- -------- ----------------------
1 Front of Registration Statement and Outside
Front Cover of Prospectus .................... Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus ................................... Inside Front Cover Pages
(i)(iii); Table of
Contents
3 Summary Information and Risk Factors .......... Prospectus Summary;
Risk Factors
4 Use of Proceeds ............................... Prospectus Summary;
Use of Proceeds
5 Determination of Offering Price ............... Cover Page; Underwriting
6 Dilution ..................................... Risk Factors; Dilution
7 Selling Security Holders ..................... Not Applicable
8 Plan of Distribution ......................... Prospectus Summary;
Underwriting
9 Legal Proceedings ............................ Litigation
10 Directors, Executive Officers, Promoters and
Control Persons .............................. Management - Directors
and Executive Officers
11 Security Ownership of Certain Beneficial
Owners and Management ........................ Security Ownership of
Certain Beneficial
Owners and Management
12 Description of Securities .................... Description of
Securities; Dividend
Policy
13 Interest of Named Experts and Counsel ........ Experts
14 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Statement as to
Indemnification
15 Organization within Last Five Years ........... The Company; Interests
of Management and Others
in Certain Transactions
16 Description of Business ....................... Prospectus Summary; Risk
Factors; The Company
17 Management's Discussion and Analysis or
Plan of Operation ............................. Management's Discussion
and Analysis or Plan of
Operation
<PAGE>
18 Description of Property ....................... The Company
19 Certain Relationships and Related Transactions Interests of Management
and Others in Certain
Transactions
20 Market for Common Equity and Related
Stockholder Matters ........................... Risk Factors
21 Executive Compensation ........................ Management - Executive
Compensation
22 Financial Statements .......................... Index to Financial
Statements
23 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure ........ Experts
24 Indemnification of Directors and Officers ..... Indemnification of
Directors and Officers
25 Other Expenses of Issuance and Distribution ... Other Expenses of
Issuance and
Distribution
26 Recent Sales of Unregistered Securities ....... Recent Sales of
Unregistered Securities
27 Exhibits ...................................... Exhibits
28 Undertakings .................................. Undertakings
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED
PROSPECTUS
GLOBAL MED TECHNOLOGIES, INC.
2,00O,000 Shares of Common Stock and
1,000,000 Class A Common Stock Purchase Warrants
This Prospectus relates to the offering (the "Offering") by Global Med
Technologies, Inc. (the "Company") of 2,000,000 shares of Common Stock (the
"Common Stock"), and 1,000,000 Class A Common Stock Purchase Warrants (the
"Warrants"). The Common Stock and Warrants must be purchased together (unless
waived by the Representative) but will be transferable separately upon issuance.
Prior to the Offering, there has not been any public market for the
securities of the Company. The initial public offering price of the Common Stock
and the Warrants and the initial exercise price and other terms of the Warrants
have been arbitrarily determined by negotiation between the Company and RAF
Financial Corporation (the "Representative"), as representative of the
participating underwriters (the "underwriters"). It is anticipated that the
offering price of the Common Stock will be between $4.00 and $6.00 per share and
the offering price of the Warrants will be $.50. It is anticipated that the
Common Stock and the Warrants will trade on the NASDAQ Small-Cap Market under
the trading symbols .......... and ............. , respectively.
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock at an exercise price $.......... (120% of the initial public
offering price of the Common Stock) per share, with a credit of $.50 per Warrant
surrendered on exercise, subject to adjustment in certain events, at any time
prior to......... , 1999. The Warrants are subject to redemption by the Company
at $.55 per Warrant, at any time during the first or second years after the date
of this Prospectus, and at $.75 per Warrant, at any time during the third year
after the date of this Prospectus and prior to their expiration, on 30 days'
prior written notice to the holders of Warrants, provided that the daily trading
price per share (as defined on page 62) of Common Stock has been as least $(140%
of the Warrant exercise price) for a period of at least 20 consecutive trading
days ending within 10 days prior to the date upon which the notice of redemption
is given. The Warrants will be exercisable until the close of the business day
preceding the date fixed for redemption, if any. See Description of Securities -
Class A Warrants.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION TO INVESTORS. POTENTIAL PURCHASERS SHOULD NOT INVEST IN
THESE SECURITIES UNLESS THEY CAN AFFORD THE RISK OF LOSING THEIR ENTIRE
INVESTMENT. SEE RISK FACTORS ON PAGE 8 OF THIS PROSPECTUS AND DILUTION ON PAGE
22 OF THIS PROSPECTUS.
After completion of this Offering, the Company will amend this Prospectus
to permit certain of its security holders to publicly offer and sell Common
Stock. See Shares Eligible for Future Sale.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
- --------------------------------------------------------------------------------
Per Share $ - $ - $ -
- --------------------------------------------------------------------------------
Per Warrant $ .50 $ .05 $ .45
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TOTAL $ - $ - $ -
================================================================================
Footnotes on following page.
RAF FINANCIAL CORPORATION FIRST OF MICHIGAN CORPORATION
The date of this Prospectus is , 1996.
<PAGE>
- ----------
(1) The Company has also agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the total Price to Public for the Common
Stock and Warrants and to issue to the Representative and its designees for
a nominal consideration (i) warrants to purchase 200,000 shares of Common
Stock at a purchase price equal to 120% of the Price to Public, and (ii)
warrants to purchase 100,000 shares of Common Stock at a purchase price
equal to 120% of the exercise price of the Warrants. The warrants to be
issued to the Representative and the shares of Common Stock underlying such
warrants have been registered under the Securities Act of 1933, as amended
("Securities Act"), by means of the Registration Statement of which this
Prospectus is a part. Subject to certain limitations, upon exercise of each
Warrant, which occurs after one year from the date of this Prospectus, the
Company has also agreed to pay the Representative a commission equal to 10%
of the exercise price of the Warrants. The Representative has a five year
right of first refusal with respect to future public or private offerings
for cash by the Company or any of its subsidiaries. In addition, the
Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. See
Underwriting.
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ , which excludes the non-accountable expense allowance described in
Note (1) above, and assumes no exercise of the Underwriters' over-allotment
option. See Use of Proceeds.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock and 150,000 additional
Warrants from the Company at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ , and $ , respectively. See
Underwriting.
It is expected that the delivery of the Common Stock and Warrants will be
made at the offices of the Representative on or about , 1996.
The following language appears in red on the left side of the cover page.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE SECURITIES OFFERED IN THIS OFFERING BY THE UNDERWRITERS ARE SUBJECT TO PRIOR
SALE. THE UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW, CANCEL OR MODIFY SUCH
OFFER (WHICH MAY BE DONE ONLY BY FILING AN AMENDMENT TO THE REGISTRATION
STATEMENT) AND TO REJECT ORDERS IN WHOLE OR IN PART FOR THE PURCHASE OF ANY OF
THE COMPANY'S SECURITIES AND TO CANCEL ANY SALE EVEN AFTER THE PURCHASE PRICE
HAS BEEN PAID IF SUCH SALE, IN THE OPINION OF THE UNDERWRITERS, WOULD VIOLATE
FEDERAL OR STATE SECURITIES LAWS OR A RULE OR POLICY OF THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC. ("NASD").
IN CONNECTION WITH THIS OFFERING, THE REPRESENTATIVE MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SHARES OF
COMMON STOCK AND THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
-ii-
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any of the Underwriters. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any of the securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date of this Prospectus.
Until ...................., 1996 all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
-----------------
Summary ...................... 1 Security Ownership of
The Offering ................. 2 Certain Beneficial Owners
Selected Financial and Management .............. 56
Information ................ 5 Certain Relationships and
Risk Factors ................. 6 Related Transactions ...... 57
Use of Proceeds .............. 17 Description of Securities ... 59
Capitalization ............... 19 Underwriting ................ 62
Dilution ..................... 20 Legal Matters ................ 64
Management's Discussion and Experts ...................... 65
Analysis or Plan of Shares Eligible for
Operations .................. 21 Future Sale ................. 65
The Company .................. 27 Additional Information ....... 66
Legal Proceedings ............ 42 Glossary ..................... 67
Management ................... 43 Financial Statements
Executive Compensation ....... 48
iii
<PAGE>
(Graphic of Company Logo Omitted)
GLOBAL MED TECHNOLOGIES
Medical Information Technologies For Healthcare And Industry
DataMed International
DataMed International, a divison of the Company, is a
medical information management company specializing in the
third party administration of substance abuse testing
programs for large corporations. Consequently, DataMed is (Graphic of two
taking advantage of what the management of the Company men looking at
believes are the current trends of corporate outsourcing and a computer
downsizing by selling its medical information services to Omitted)
principally Fortune 1000 and other corporations. DataMed
provides several products which allow corporations to
outsource all or part of their employee substance abuse
testing programs. DataMed's medical
review physicians
assist in
establishing the
legal defensibility
of its clients'
substance abuse
testing programs.
Partial Client List
Chevron Corporation Seagrams
Air Products and Chemicals Con Agra
Bechtel Corporation Laidlaw Transit
Nestle Marriott
New York State Department of Transportation Drug Testing International
New York Association for Pupil Transportation World Wide Shipping
Owens Corning KIL Management A/S
The Company believes that the key
to its success is to provide
medical information management
products and services to "boutique" (Graphic of
market niches. The Company believes Computer Keyboard
that this will create opportunities Omitted)
for quick penetration and leadership
in these market niches.
Right Inside Front Cover Page
<PAGE>
(Graphic of Company Logo Omitted)
GLOBAL MED TECHNOLOGIES
Medical Information Technologies For Healthcare And Industry
Wyndgate Technologies Wyndgate Technologies, a division of the
Company, is a medical software company
specializing in information systems that manage
blood and blood products from donor recruitment
and laboratory testing to patient transfusion
and records management.
Wyndgate's current product is Wyndgate's products
SafeTrace (TM), a blood bank help protect the safety
management information system. of blood and blood
Wyndgate is in the process products from donation
of developing SafeTrace Tx (TM), a (Graphic of through blood center
transfusion management information I.V. Bag delivery.
system. Wyndagate's products help (Omitted)
protect the safety of patient blood
and blood product use.
(Graphic for Wyndgate's products incorporate an underlying
EDEN-0A (R) proprietary technology, called EDEN-OA (R).
Omitted) EDEN-OA (R) is a rapid applications development
tool created by Wyndgate. EDEN-OA (R) provides
the Company with a strategic platform for future
growth. With the EDEN-OA (R) software tool, the
Company will attempt to enter other medical
information management niche markets.
Partial Client List
Stanford Medical School Blood Bank The Blood Center for S.E. Louisiana
Sacramento Blood Center Coffee Memorial Blood Center
Blood Bank of San Bernadino and Community Blood Bank of Erie
Riverside Counties County
Irwin Memorial Blood Center Community Blood Center (Appleton)
Blood Bank of the Alameda-Contra Costa Institute for Transfusion Medicine
Tri-Counties Blood Bank Belle Bonfils Memorial Blood Center
Blood Bank of the Redwoods Oklahoma Blood Institute
Peninsula Blood Bank Memorial Blood Centers of Minnesota
Community Blood Bank of Nebraska Gulf Coast Regional Blood Centers
Samuel W. Miller Memorial Blood Center Siouxland Community Blood Bank
Left Inside Front Cover
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere in this
Prospectus.
The Company
Global Med Technologies, Inc. (the "Company") provides information
management software products and services to the healthcare industry and
provides substance abuse (which includes drug and alcohol) testing program
services to companies, including certain Fortune 1000 companies. The Company
consists of two divisions, DataMed International ("DataMed") and Wyndgate
Technologies ("Wyndgate"), both of which operate under their respective trade
names. Wyndgate develops, markets, licenses and supports software for the
healthcare industry. DataMed manages and markets a variety of services that are
designed to assist companies with administering substance abuse testing
programs.
Founded in 1984, Wyndgate initially developed a Student Information System
("SIS"), an integrated software package for colleges and universities to track
student information. Wyndgate currently has five university contracts for SIS
still in effect. Pursuant to an agreement with eight California blood centers,
Wyndgate began development of a blood tracking system to assist community blood
centers, hospitals, plasma centers and outpatient clinics in the U.S. in
complying with the quality and safety standards of the Food and Drug
Administration ("FDA") for the collection and management of blood and blood
products. After several years of development and $1,080,000 paid by the eight
California blood centers, Wyndgate has completed development and commenced
marketing of the SAFETRACE(TM) blood bank management information system, which
it believes to be the most comprehensive and flexible system of its type
available today. In accordance with FDA regulations, the Company submitted a
510(k) application to the FDA in October, 1995 for review of its SAFETRACE (TM)
system, which is still pending. The Company is able to continue marketing the
SAFETRACE (TM) system during the review process. There are no assurances that
the Company's application will be approved. If not, the Company will be required
to discontinue marketing and licensing the SAFETRACE (TM) system.
In 1989, Wyndgate developed EDEN-OA (R) to utilize new technologies in the
evolving open systems computer market. EDEN-OA (R) is a rapid applications
development tool that can be used by software developers to produce software
products that operate in accordance with industry standards based computer
environments. EDEN-OA (R) can operate on different types of computer hardware
from different manufacturers and on several different software operating
systems.
-1-
<PAGE>
DataMed was founded in 1989 by Michael I. Ruxin, M.D., the Chairman and CEO
of the Company, to offer the services of a Medical Review Officer ("MRO") to the
regulated segment of the substance abuse testing market. Due to federal
regulations, companies involved in commercial transportation must comply with
requirements mandating substance abuse testing of employees in safety sensitive
positions and substance abuse awareness education for supervisors and employees.
Additionally, federal substance abuse testing requirements applicable to
commercial transportation mandate the use of an MRO to evaluate the quality and
accuracy of the testing laboratory and to determine legal or illegal use of
substances. Corporate outsourcing has been a positive factor for DataMed as some
large companies have contracted with DataMed to outsource the management of
their substance abuse testing programs.
DataMed provides customized program management services to companies in an
attempt to increase total program quality and decrease total program costs.
DataMed provides substance abuse testing management services which coordinate
and actively manage the specimen collection process, the laboratory testing
process, the MRO review process, the random testing process, the blind sample
quality control process, the substance abuse testing process, and the data
management process including compliance reporting and record keeping.
Key elements of the Company's strategy include (i) expanding its sales and
marketing efforts to increase its customer base nationally and internationally,
(ii) developing new healthcare management software products and services
utilizing the Company's existing technology and experience in blood bank
management software and substance abuse management services, (iii) expanding
international markets within the transportation and healthcare industries, (iv)
developing strategic relationships and selective acquisitions to capitalize on
opportunities in its industry, and (v) maintaining its technology advantage in
developing regulatory compliance tracking software and quality assurance
software products by continuing to focus on research and development.
National MRO,Inc., founded in 1989, changed its name to Global Data
Technologies, Inc. in June 1995 in connection with the merger of National MRO,
Inc. and The Wyndgate Group, Ltd. in May 1995, and changed its name again in May
1996 to Global Med Technologies, Inc. The Company's executive offices are
located at 12600 West Colfax, Suite A-500, Lakewood, Colorado 80215, and its
telephone number is (303) 238-2000.
THE OFFERING
Securities Offered ..................... 2,000,000 shares of Common
Stock and 1,000,000 Warrants. Each
Warrant entitles the holder thereof
to purchase one share of Common
Stock. The Common Stock and the
Warrants are separately tradeable
and transferable. See Description
of Securities and Underwriting.
Offering Prices ........................ $4.00 to $6.00 per share of Common
Stock and $.50 per Warrant.
Common Stock to be Outstanding
after this Offering (1) .............. 7,111,269 shares
Warrants to be Outstanding after
the Offering ........................ 1,000,000 Warrants
Exercise Price of Warrants ............. $ ....(120% of the initial public
offering price of the Common Stock)
per share of Common Stock with a
credit of $0.50 per Warrant
surrendered upon exercise, subject
to adjustment in certain
circumstances. See Description of
Securities - Warrants.
-2-
<PAGE>
Expiration Date of Warrants ............. ....., 1996 (three years after the
date of this Prospectus.)
Redemption of Warrants .................. Redeemable by the Company at any
time during the first and second
years after the date of this
Prospectus at a price of $.55 per
Warrant and during the third year
after the date of this Prospectus
at a rate of $.75 per Warrant and
prior to their expiration, upon not
less than 30 days' prior written
notice to the holders of Warrants,
provided that the closing bid price
per share of the Common Stock on
the NASDAQ SmallCap Market, or the
last sale price per share if listed
on the NASDAQ National Market
System or a national exchange, has
been at least $...... (140% of the
Warrant exercise price) for a
period of 20 consecutive trading
days ending on the tenth day prior
to the date on which the Company
gives notice of redemption. See
Description of Securities-Warrants.
Estimated net proceeds to the
Company (2) ............................. $8,500,000 (assuming an offering
price of $5.00 per share)
Use of Proceeds ......................... The Company intends to use the net
proceeds of this Offering to pay
research and development costs,
sales and marketing costs and
existing debt, and for general
working capital. See Use of
Proceeds and The Company.
Risk Factors ............................ An investment in the securities
offered by this Prospectus involves
a high degree of risk and immediate
substantial dilution. See Risk
Factors and Dilution.
NASDAQ Symbols (3) ...................... Common Stock:.............
Warrants:.............
-3-
<PAGE>
- ----------
(1) Includes: (i) 2,00O,000 shares of Common Stock to be sold by the Company in
this Offering and (ii) 137,646 shares of Common Stock issuable upon the
conversion of $516,200 of the principal amount of 10% Notes (plus an
estimated additional 6,997 shares issuable upon conversion of accrued
interest thereon). Does not include: (i) up to 30O,000 shares of Common
Stock subject to the over-allotment option; (ii) up to 1,000,000 shares of
Common Stock issuable upon exercise of the Warrants to be sold by the
Company in this Offering (1,15O,000 shares if the over-allotment option is
exercised); (iii) up to 30O,000 shares of Common Stock issuable upon the
exercise of the warrants to be issued to the Representative; (iv) 788,709
shares of Common Stock issuable upon the exercise of outstanding options to
purchase shares of Common Stock which includes, 187,800 shares of Common
Stock underlying warrants issued in connection with the 10% Notes.
(2) After deduction of the Underwriting Discount and expense allowance and
additional offering expenses estimated at $ . Does not include any proceeds
from the sale of the shares of Common Stock or Warrants included in the
over-allotment option.
(3) The continuation of quotations on NASDAQ is subject to certain conditions.
The failure to meet these conditions may prevent the Company's securities
from continuing to be quoted on NASDAQ. Failure to maintain continued
quotations on NASDAQ may have an adverse effect on the market for the
Company's securities. See Risk Factors.
Other Securities Being Registered
As a result of agreements of the Company, the Registration Statement of
which this Prospectus is a part has registered for resale by certain persons an
additional 1,132,443 shares of Common Stock. Each such person has agreed that
they will not publicly offer, sell or otherwise dispose of, any of such shares
of the Company's Common Stock for a period of six months after the date of this
Prospectus. After the completion of this Offering, the Company will amend its
Registration Statement and this Prospectus to permit such persons to publicly
offer and sell such Common Stock. See Shares Eligible for Future Sale -
Registered Securities.
-4-
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial data should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in
this Prospectus. The consolidated statement of operations data for the years
ended December 31, 1995 and 1994 and six months ended June 30, 1995, and the
consolidated balance sheet data at December 31, 1995 are derived from and should
be read in conjunction with the consolidated financial statements of the Company
and notes thereto audited by Ernst & Young, LLP, independent auditors.
The selected financial data as of and for the six months ended June 30,
1996 are derived from the unaudited financial statements of the Company, which,
in the opinion of the Company reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results for the six
months ended June 30, 1996 which are not necessarily indicative of the results
for a full year.
<TABLE>
<CAPTION>
Statement of Operational Data:
Six Months
Years Ended December 31, Ended June 30,
------------------------ --------------
(Unaudited)
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 6,674,118 $4,976,255 $5,978,490 $3,264,368
Cost of sales 2,662,271 2,071,902 1,919,772 1,180,165
Gross profit 4,011,847 2,904,353 4,058,718 2,084,203
Selling, general and administrative 6,535,454 2,785,270 4,334,970 1,870,046
Income (loss) from operations (2,523,607) 119,083 (276,252) 214,157
Net income (loss) $(2,684,858) $ 172 247 $ (400,480) $ ( 17,078)
=========== ========== ========== ==========
Net income (loss) per share $ (.70) $ .05 $ (.10) $ (.0l)
=========== ========== ========== ==========
Weighted average common
shares outstanding: 3,826,823 3,619,221 4,144,722 3,719,221
Balance Sheet Data: Dec. 31, 1995 June 30, 1996 June 30, 1996
------------- ------------- -------------
(Unaudited) (As Adjusted (1))
Working capital (deficit) $( 2,171,397) $(1,983,650) $ 8,772,550
Total assets $ 2,720,862 $ 4,959,265 $14,144,165
Long-term liabilities $ 647,929 $ 807,479 $ 807,479
Stockholders' equity (deficit) $( 1,458,485) $(1,158,965) $ 9,597,235
- ----------
(1) Adjusted to give effect to (i) the sale by the Company of 800,330 shares of Common Stock that occurred after June 30, 1996,
whereby the Company received net proceeds of approximately $1,740,000, (ii) the sale by the Company of the 2,000,000 shares
of Common Stock at an assumed offering price of $5.00 per share and of the 1,000,000 Warrants and application of $8,500,000
of the net proceeds, (iii) payment of $235,000 of principal on the 10% Notes, (iv) conversion of $516,200 of principal on the
10% Notes into 137,646 shares of Common Stock and (v) payment of $820,100 on a line of credit. Does not include (i)
approximately $26,239 of accrued interest on the 10% Notes which will be converted into approximately 6,997 shares of Common
Stock or (ii) additional accrued interest on the 10% Notes of approximately $11,947 which will be paid in cash.
-5-
</TABLE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. The shares of Common Stock and Warrants should be purchased only
by persons who can afford to lose their entire investment. Therefore, prior to
making any purchase, each prospective investor should consider very carefully
the following risk factors, as well as all of the other information set forth
elsewhere in this Prospectus, including the information contained in the
financial statements.
Significant Operating Losses; Negative Net Worth
For the fiscal year ended December 31, 1995, the Company incurred a loss in
the amount of $2,684,858, as compared to a profit of $172,247 for the fiscal
year ended December 31, 1994. The loss was primarily due to (i) employee
compensation which increased because of additional sales and operations staff
hired by the Company in 1995 in anticipation of future growth of the Company's
operations and (ii) expenses related to the merger with The Wyndgate Group, Ltd.
The Company incurred a loss for the six months ended June 30, 1996 of $400,480
as compared to a loss of $17,078 for the six months ended June 30, 1995. The
increased loss was primarily due to increases in overall staffing and related
expenses necessary to handle recent and anticipated future growth of the
Company. As of June 30, 1996, the Company's current liabilities exceeded the
Company's current assets by $1,983,650 and the Company had a negative net worth
of $1,158,965. There can be no assurance that the Company will be able to
generate sufficient revenues to operate profitably in the future or to pay the
Company's debts as they become due. See Management's Discussion and Analysis or
Plan of Operations and Financial Statements.
Revenue Fluctuations
The Company has experienced revenue fluctuations when software for the
SAFETRACE(TM) product is delivered and towards year end, when clients of the
Company historically tend to increase their drug testing activity. The
SAFETRACE(TM) software license fees are recognized as revenue upon delivery of
the software if no significant vendor obligations exist as of the delivery date,
and therefore are subject to delays of the delivery service and customer delayed
delivery requests. Software sales and consulting revenues have not followed
seasonal patterns. The substance abuse testing business has historically
experienced higher volumes of testing in the last six months of every year
compared to the first six months of the same year. As a result, the Company's
operating results could fluctuate widely from quarter to quarter and investors
should put more emphasis on the Company's results for a fiscal year rather than
on the Company's quarterly results.
Lack of Significant Operating History
The Company has been in existence since 1989. As such, the Company is
subject to many of the risks common to enterprises with a limited operating
history, including potential undercapitalization, limitations with respect to
personnel, financial and other resources and limited customers and revenues. As
of the date hereof, only one of the SAFETRACE(TM) systems licensed by the
-6-
<PAGE>
Company, Wyndgate's blood tracking system, is operational. There is no assurance
that the additional SAFETRACE (TM) systems which have been licensed by the
Company to date will ever become operational, that the Company will be able to
license additional SAFETRACE(TM) systems, that the Company will be able to
develop and license new products or the Company will be successful. The
likelihood of success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the development and marketing of new products.
See The Company.
Government Regulation
The Company's products and services are subject to regulations adopted by
governmental authorities, including the FDA, which governs blood center computer
software products regulated as medical devices, and the U.S. Department of
Transportation which issues regulations regarding procedures applicable to
substance abuse testing programs required in six transportation industries.
Government regulations can be burdensome and may result in delays and expense to
the Company. In addition, modifications to regulations could adversely affect
the timing and cost of new products and services introduced by the Company.
Failure to comply with applicable regulatory requirements can result in, among
other things, operating restrictions and fines. For instance, if the Company is
unable to obtain clearance or approval from the FDA for the Company to market
the SAFETRACE (TM) system, the Company's business and proposed business could be
materially negatively impacted. See The Company - Wyndgate Technologies Division
- - Industry Overview and The Company - DataMed International Division - Industry
Overview.
Rapidly Changing Technology
The market for applications software is characterized by rapidly changing
technology and by changes from mainframe to client/server computer technology,
including frequent new product introductions and technological enhancements in
the applications software business. During the last five years the use of
computer technology in the information management industry has expanded
significantly to create intense competition. With rapidly expanding technology
there can be no assurance that the Company, with its limited resources, will be
able to acquire or maintain any technological advantage. The Company's success
will be in large part dependent on its ability to use the developing technology
to its maximum advantage and to remain competitive in price and product
performance. If the Company is unable to acquire or maintain a technological
advantage, or if the Company fails to stay current and evolve in the
applications software and information management fields, its efforts may not be
successful and shareholders may lose their entire investment. See The Company.
Possible Loss of Software Licenses Due to Failure to Meet Maintenance Schedules
The Wyndgate software license agreements have a license term that varies,
but are typically five year licenses which are automatically renewable. The
software license may be terminated by the customer if Wyndgate fails to deliver
the maintenance services consisting of product bug fixes, regulatory compliance
-7-
<PAGE>
and updates. Wyndgate may terminate the license if the customer fails to meet
its contractual obligations, primarily the payment of usage fees. However, there
can be no assurance that the Company will be able to meet all of the maintenance
services and contractual commitments required to keep the license agreements in
force or that the customers will continue to make the usage fee payments.
Possible Loss of DataMed Substance Abuse Management Contracts Due to
Material Default
DataMed's substance abuse testing service agreements have contract terms
that vary from one to five years and, unless cancelled ninety days prior to the
end of the license term, most are automatically renewable. Generally, either
party may terminate the service agreement upon material default or bankruptcy of
the other party, if such default or bankruptcy is not cured within thirty days.
Some of the service agreements permit DataMed to terminate the service agreement
if the customer does not agree to permit price increases due to changes in
regulations or technology or due to the percentage of positive results
increasing beyond those negotiated in the agreement. However, there can be no
assurance that the Company will be able to meet all of its contractual
obligations, or that the customers will continue to use the DataMed services
required to keep the service agreements in force.
Product and Reporting Liability
The Company has only recently completed the final testing stages for
SAFETRACE (TM) and is in the beginning stages of marketing and customer
implementation. As of the date hereof, only one of the Company's SAFETRACE (TM)
systems is operational. Currently, the Company has product liability exposure
for defects in SAFETRACE (TM) which may become apparent through widespread use
of SAFETRACE (TM). No claims have been filed against the Company involving
SAFETRACE (TM) and the Company is not aware of any material problems involving
SAFETRACE (TM). While the Company will continue to attempt to take appropriate
precautions, there can be no assurance that it will completely avoid product
liability exposure. The Company is in the process of applying for product
liability insurance for the SAFETRACE (TM) product in the aggregate of at least
$1 million. There can be no assurance that such coverage will be available, that
it will be adequate to cover any product liabilities that may be incurred by the
Company or that it will be available at reasonable prices in the future.
Similarly, if DataMed were to release an erroneous substance abuse test
report to an employer stating that an employee's test had shown positive results
(a "false positive"), the Company could be held liable for the publication of
such information. Although the Company carries medical professional liability
insurance which insures against liability associated with such an occurrence,
there can be no assurance that a recovery or multiple recoveries may not exceed
the insurance limit, or that such coverage will continue to be available at
reasonable prices. See The Company and Legal Proceedings.
-8-
<PAGE>
Dependence on Major Customers
During the six months ended June 30, 1996, two of the Company's customers,
Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center, each accounted for
more than 10% of the Company's revenues. During 1995, three of the Company's
customers, Laidlaw Transit, Inc., Chevron Corporation, and The Royalty Group,
each accounted for more than 10% of the Company's revenues. See The Company -
Wyndgate Technologies Division - Development Agreements. During 1994, two of the
Company's customers, Chevron Corporation and a group consisting of eight
California blood centers, each accounted for more than 10% of the Company's
revenues. Laidlaw Transit, Inc. is associated with the transportation industry.
Chevron Corporation is associated with extraction and distribution of oil and
gas. A group consisting of eight California blood centers, through a 1992
development agreement with Wyndgate, assisted in financing the development of
Wyndgate's SAFETRACE (TM) software. Gulf Coast Regional Blood Center is a blood
bank located in Texas. Non-renewal or termination of the contractual
arrangements with these key customers could have a material adverse effect on
the Company. There can be no assurance that the Company will be able to retain
these key customers or, if such customers are not retained, that the Company
would be able to attract and retain new customers to replace the revenues
currently generated by these customers. See The Company - Customers.
Substantial Competition
There is substantial competition in all aspects of the blood bank and
hospital information management and substance abuse testing industries. Numerous
companies are developing technologies and marketing products and services in the
health care information management area and many companies are engaged in
substance abuse testing. Many of these competitors have been in business longer
than the Company and have substantially greater personnel and financial
resources available to them than the Company, and there can be no assurance that
the Company will be able to compete with these competitors successfully. See The
Company - Wyndgate Technologies Division -Competition and The Company - DataMed
International Division - Competition.
Dependence on Development of New Businesses
Through the merger with The Wyndgate Group, Ltd., the Company became
engaged in the information management section of the blood center market. To
effect its plan of operations, which includes the generation of increased
revenues, the Company must expand its operations significantly beyond the
historical operations of DataMed and Wyndgate to other markets which require
similar management information services. There is no assurance that the Company
will be able to expand its business operations. The current activities of
DataMed and Wyndgate in the substance abuse and blood center markets do not
assure future business expansion or profitability. See The Company.
Proprietary Rights and Licenses
The Company's success depends in part on its ability to obtain and enforce
intellectual property rights for its technology and software, both in the United
States and in other countries. The Company's proprietary software is potected by
-9-
<PAGE>
the use of copyrights, trademarks, confidentiality agreements and license
agreements that restrict the unauthorized distribution of the Company's
proprietary data and limit the Company's software products to the customer's
internal use only. While the Company has attempted to limit unauthorized use of
its software products or the dissemination of its proprietary information, there
can be no assurance that the Company will be able to retain its proprietary
software rights and prohibit the unauthorized use of proprietary information.
The Company may file additional applications for patents, copyrights, and
trademarks as management deems appropriate. There can be no assurance that any
patents, copyrights, or trademarks the Company may obtain will be sufficiently
broad to protect the Company's products, or that applicable law will provide
effective legal or injunctive remedies to stop infringement on the Company's
patents (if obtained), trademarks, or copyrights. In addition, there can be no
assurance that any patent, trademark, or copyright obtained by the Company will
not be challenged, invalidated or circumvented, that intellectual property
rights obtained by the Company will provide competitive advantages, or that the
Company's competitors will not independently develop technologies or products
that are substantially equivalent or superior to those of the Company. In
addition, if the Company's software tools or products infringe upon the rights
of others, the Company may be subject to suit for damages or an injunction to
cease the use of such tools or products. The Company is not aware of any claims
or infringements of the Company's software tools or products upon the rights of
others. See The Company.
Future Capital Needs; Uncertainty of Additional Financing
The Company anticipates that its existing capital resources, including the
net proceeds of the sale of shares of Common Stock and Warrants in this
Offering, will be adequate to satisfy its cash requirements for the next 12
months. Thereafter, the Company will likely require substantial funds in
addition to the proceeds of this Offering in order to continue to develop and
market its products. See Management's Discussion and Analysis or Plan of
Operations, Use of Proceeds and The Company.
Dependence on Personnel
The Company is significantly dependent on a limited number of personnel,
including Dr. Michael I. Ruxin, (Chairman and Chief Executive Officer), Joseph
Dudziak (President and Chief Operating Officer), William J. Collard
(Secretary/Treasurer, Director and President of the Wyndgate division), and
Gerald Willman (Director and Vice President of the Wyndgate division). Although
all of these individuals are subject to employment agreements, such agreements
are difficult to enforce against employees. If the Company fails to retain the
services of one or more of these employees, the Company's operations may be
adversely affected. The Company does not have key man insurance on any of its
officers or employees; however, the Company is the designated beneficiary of a
term life insurance policy for Dr. Ruxin in the face amount of $1,000,000. See
Management.
-10-
<PAGE>
Potential Future Dilution
Currently, the Company has outstanding options and warrants to issue up to
788,709 shares of the Company's Common Stock that are exercisable from $1.00 to
$3.75 per share. In addition, the Company has reserved for issuance 144,643
shares of Common Stock underlying the 10% Notes. The issuance of any shares
pursuant to exercise of the options and warrants or conversion of the 10% Notes
at less than the then book value per share of the Company's Common Stock could
dilute the book value of the Shares. In addition, shareholders of the Company
who purchased shares in the Company's May 1995 private placement will receive a
"share adjustment" to the extent that the share price in this Offering is less
than $4.90. Any required adjustment pursuant to the terms of the May 1995
Private Placement will dilute a purchaser's investment herein. See Dilution.
Dividends
The Company does not anticipate paying any cash dividends for the
foreseeable future. The Company expects that future earnings, if any, will be
used to finance growth. See Certain Relationships and Related Transactions -
Voting Agreements. No person seeking dividend income from an investment should
invest in this Offering. See Description of Securities - Dividend Policy.
Authorized Stock Available for Issuance by the Company
After the sale of the shares of Common Stock and Warrants being offered
hereby, the Company will have 7,111,269 shares of Common Stock outstanding, out
of a total of 40,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock authorized for future issuance under the Company's Articles of
Incorporation. This figure includes 137,646 shares of Common Stock issuable upon
the conversion of $516,200 of the principal amount of 10% Notes and up to 6,997
shares issuable upon conversion of accrued interest thereon but does not include
1,000,000 shares issuable upon exercise of the Warrants or 788,709 shares
issuable upon exercise of other outstanding options and warrants. The remaining
shares of Common Stock and Preferred Stock not issued or reserved for specific
purposes may be issued without any action or approval of the Company's
shareholders. Although there are no present plans, agreements or undertakings
involving the issuance of such shares except as disclosed in this Prospectus,
any such issuances could be used as a method of discouraging, delaying or
preventing a change in control of the Company or could dilute the public
ownership of the Company. There can be no assurance that the Company will not
undertake to issue such shares if it deems it appropriate to do so. See Dilution
and Description of Securities.
Substantial Dilution to Investors
The Company has previously issued 4,966,626 shares of Common Stock. Of
these shares, 3,307,405 shares, including 1,960,000 shares issued in conjunction
with the May 1995 Wyndgate merger, were issued to subscribers during the past
two years at prices ranging from $2.45 to $3.75 per share. As a result of some
of these prior issuances of Common Stock by the Company, and the net losses the
Company has incurred, there will be immediate and substantial dilution to the
investors in this Offering in that the net tangible book value per share of the
Common Stock after the Offering will be substantially less than the public
-11-
<PAGE>
offering price of the Shares. The dilution to new investors after giving effect
to the sale of 80O,330 shares of Common Stock after June 30, 1996 and after
giving effect to the sale of shares of Common Stock in this Offering will be
approximately $3.71 per share or approximately 74% of the $5.00 offering price.
See Dilution.
No Prior Joint Operations
Both of the Company's divisions have prior operating histories and
revenues. However, the principals of the Company have worked together for only
the past year, and have experience in the industries only in which their
respective divisions were engaged. Consequently, there can be no assurance that
the Company will be able to successfully operate either division or both
divisions. Furthermore, the Company may be considered as being in an early stage
of development due to the lack of operating history in two business segments.
See The Company.
Limited Capitalization
The Company has only limited capitalization available to it and is
dependent on the proceeds of this Offering to effect its intended operations.
The Company may need additional capital to pursue its intended business plan;
however, the Company has received no commitment from any person for that
financing, and there can be no assurance that adequate financing will be
available on reasonable terms, if and when needed. See The Company.
Control by Present Shareholders
After giving effect to the sale of 2,000,000 shares of Common Stock to be
issued in this Offering and the conversion of $516,200 principal amount of the
10% Notes and accrued interest thereon, the present shareholders will control
approximately 72% of the outstanding shares of Common Stock of the Company,
without giving effect to the exercise of the Warrants, other outstanding options
and warrants or the Underwriters' over-allotment option. The Company's officers,
directors, 5% or more shareholders and their affiliates will own approximately
49% of the outstanding Common Stock of the Company and will be able to
substantially influence all matters requiring approval by the shareholders of
the Company, including the election of directors. The Company does not provide
for cumulative voting in the election of directors; hence, purchasers of the
securities offered hereby should not expect to be able to elect any directors to
the Company's Board of Directors.
Determination of Offering and Exercise Prices
The offering prices of the shares of Common Stock and Warrants and the
exercise price of the Warrants were determined arbitrarily by negotiation
between the Company and the Representative. In determining the prices, the
Company and the Representative considered (among other things) estimates of the
business potential of the Company, the management of the Company, the Company's
plans for the expansion of its business base, the general condition of the
securities markets and the amount of retained equity to the present
shareholders. Prospective investors should not consider the offering prices of
the shares of Common Stock or the Warrants or the exercise price of the Warrants
as necessarily indicative of the actual value of the shares of Common Stock or
Warrants. The offering prices of the shares of Common Stock and Warrants and the
exercise price of the Warrants do not bear any direct relationship to the
Company's assets, book value, net worth or business potential, or to any other
traditionally recognized criteria of value.
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<PAGE>
Restrictions on Exercise of Warrants; Possible Redemption of Warrants
Investors purchasing shares of Common Stock and Warrants in this Offering
will not be able to exercise the Warrants unless at the time of exercise a
post-effective amendment to this Registration Statement is current or a new
registration statement registering the Common Stock issuable upon exercise of
the Warrants is effective and such shares have been registered and/or qualified
or deemed to be exempt under the securities laws of the state of residence of
the holder of the Warrants. The Company does not intend to advise holders of the
Warrants of their inability to exercise the Warrants other than in response to a
specific written inquiry to the Company. The value of the Warrants may be
greatly reduced if a current registration statement covering the shares of
Common Stock underlying the Warrants is not effective or if such Common Stock is
not registered or exempt from registration in the states in which the holders of
the Warrants reside. The Warrants are subject to redemption by the Company on 30
days prior written notice provided that the closing bid price for the shares is
above $ (140% of the Warrant exercise price) for at least 20 consecutive trading
days ending within ten days prior to the date of the notice of redemption. If
the Warrants are redeemed, Warrantholders will lose their right to exercise the
Warrants except during such 30 day redemption period. See Description of
Securities - Warrants.
Shares Eligible for Future Sale
All of the 4,966,626 shares of the Company's Common Stock presently issued
and outstanding are "restricted securities" as that term is deemed under Rule
144 promulgated under the Securities Act of 1933, as amended. Of this amount,
1,659,221 shares have been held in excess of two years, and will be available
for sale 90 days after the date hereof pursuant to Rule 144. In addition,
1,132,443 shares, including 187,800 shares underlying warrants exercisable at
$3.75 per share, have been registered for sale under the Registration Statement
of which this Prospectus is a part, and will be eligible for sale commencing six
months after the date of this Prospectus. Before this Offering, there has been
no public market for the securities of the Company. Sales of substantial amounts
of shares by shareholders after such six month period pursuant to this
Prospectus or sales made pursuant to Rule 144 or otherwise could adversely
affect the market price of the Company's securities and make it more difficult
for the Company to sell equity securities in the future at a time and price
which it deems appropriate. The Company is unable to predict the effect that
sales made after such six month period or Rule 144 or otherwise may have on the
then prevailing market price of the Common Stock. Nonetheless, the possibility
exists that the sale of these shares may have a depressive effect on the prices
of the Company's Common Stock and Warrants. See Description of Securities.
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<PAGE>
No Prior Public Market and Possible Volatility of Price of Shares of Common
Stock and Warrants
The prices of securities of publicly traded corporations tend to fluctuate
widely. It can be expected, therefore, that if and when trading commences in the
Company's Common Stock and Warrants, there may be wide fluctuations in price.
There has been no prior public market for the Common Stock or Warrants and
despite the initial listing of the Common Stock and Warrants on NASDAQ, there is
no assurance that a market will develop in the Common Stock and/or Warrants or
be sustained. The lack of a current market for the Common Stock and Warrants,
fluctuations in trading interest and changes in the Company's operating results,
financial condition and prospects could have a significant impact on the market
prices for the Common Stock and the Warrants. See Underwriting.
NASDAQ Maintenance Requirements and Effects of Possible Delisting
Although the Company's Common Stock and Warrants have been approved for
initial listing on the NASDAQ Small-Cap Market upon notice of issuance of such
securities, the Company must continue to meet certain maintenance requirements
in order for such securities to continue to be listed on NASDAQ. If the
Company's securities are delisted from NASDAQ, this could restrict investors'
interest in the Company's securities and could materially and adversely affect
the trading market and prices for such securities. In addition, if the Company's
securities are delisted from NASDAQ, and if the Company's net tangible assets do
not exceed $2 million, and if the Company's Common Stock is trading for less
than $5.00 per share, then the Company's Common Stock and Warrants would each be
considered a "penny stock" under federal securities law. Additional regulatory
requirements apply to trading by broker-dealers of penny stocks which could
result in the loss of effective trading markets, if any, for the Company's
Common Stock and Warrants.
Warrants to Representative
Upon successful completion of this Offering, the Company will sell to the
Representative and its designees, for a nominal cost, the warrants to purchase
up to 200,000 shares of Common Stock at a purchase price equal to 120% of the
Price to Public and warrants to purchase up to 100,000 shares of Common Stock at
120% of the exercise price of the Warrants. The warrants to purchase up to
200,000 shares of Common Stock will be exercisable for a four year period,
commencing 12 months from the date of this Prospectus and ending 48 months
thereafter, at an exercise price equal to 120% of the public offering price of
the shares of Common Stock. The Representative will be given the opportunity to
profit from a rise in the market price of the Company's Common Stock with a
resulting dilution of the interest of stockholders. Furthermore, the Company
will give certain registration rights with regard to the Common Stock issuable
upon exercise of the warrants to purchase up to 200,000 shares of Common Stock
and such registration could result in substantial expense to the Company. See
Underwriting.
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<PAGE>
Risks Associated with Forward-Looking Statements
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and the Company intends that
such forward-looking statements be subject to the safe harbors for such
statements under such sections. The Company's forward-looking statements include
the plans and objectives of management for future operations, including plans
and objectives relating to the Company's planned national advertising campaign
and future economic performance of the Company. The forward-looking statements
and associated risks set forth in this Prospectus include or relate to: (i) the
ability of the Company to obtain a meaningful degree of consumer acceptance for
its software products, proposed software products and substance abuse testing
services, (ii) the ability of the Company to market its software products and
proposed software products and substance abuse testing services on a national
and international basis at competitive prices, (iii) the ability of the
Company's software products, proposed software products and substance abuse
testing services to meet government regulations and standards, (iv) the ability
of the Company to develop and maintain an effective national and international
sales network, (v) success of the Company in forecasting demand for its software
products, proposed software products and substance abuse testing services, (vi)
the ability of the Company to maintain pricing and thereby maintain adequate
profit margins and (vii) the ability of the Company to achieve adequate
intellectual property protection for the Company's software products, proposed
software products and substance abuse testing services.
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will market and provide
software products and substance abuse testing services on a timely basis, that
there will be no material adverse competitive or technological change in
condition in the Company's business, that demand for the Company's software
products and substance abuse testing services will significantly increase, that
the Company's Chief Executive Officer will remain employed as such by the
Company, that the Company's forecasts accurately anticipate market demand, and
that there will be no material adverse change in the Company's operations,
business or governmental regulation affecting the Company or its suppliers. The
foregoing assumptions are based on judgments with respect to, among other
things, future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control. Accordingly, although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any such assumption could prove to be inaccurate and therefore
there can be no assurance that the results contemplated in forward-looking
statements will be realized. In addition, as disclosed elsewhere in the "Risk
Factors" section of this Prospectus, there are a number of other risks inherent
in the Company's business and operations which could cause the Company's
operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Growth in absolute and
relative amounts of cost of goods sold, research and development and selling,
general and administrative expenses or the occurrence of extraordinary events
could cause actual results to vary materially from the results contemplated by
the forward-looking statements. Management decisions, including budgeting, are
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<PAGE>
subjective in many respects and periodic revisions must be made to reflect
actual conditions and business developments, the impact of which may cause the
Company to alter its marketing, capital investment and other expenditures, which
may also materially adversely affect the Company's results of operations. In
light of significant uncertainties inherent in the forwardlooking information
included in this Prospectus, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
Company's objectives or plans will be achieved See Management's Discussion and
Analysis of Financial Condition or Plan of Operations, Use of Proceeds and
Business.
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USE OF PROCEEDS
Assuming an offering price of $5.00 per share, the net proceeds to the
Company after deduction of the underwriting discount (10%) and estimated
expenses of the offering, including the Representative s nonaccountable expense
allowance will be approximately $8,500,000. The net proceeds are anticipated to
be used as follows:
Notes payable (1) $ 246,947
Sales and marketing (2) 2,500,000
Research and development (3) 2,500,000
Debtrepayment (4) 970,000
Working capital (5) 2,283,053
----------
$8,500,000
==========
- ----------
(1) Includes $235,000 principal and estimated accrued interest of $11,947 on
the 10% Notes, $85,000 principal amount of which are owned by certain
directors and officers of the Company and a principal shareholder of the
Company. See Certain Relationships and Related Transactions. Holders of an
additional $516,200 principal amount of 10% Notes have indicated their
intention to convert their 10% Notes for 137,646 shares of Common Stock
plus an estimated additional 6,997 shares for approximately $26,239 of
accrued interest. The proceeds from the sale of the 10% Notes were used for
working capital.
2) Included in sales and marketing are planned increases in direct sales,
marketing, technical support, customer support, contract management
personnel, related support staff, and other related costs.
3) Included in research and development is the planned development of an
integrated Transfusion Management Information System to SAFETRACE (TM)
development and integration of new applications into EDEN-OA (R), continued
FDA 510(k) certification of the new products and expansion of the "Customer
Help Line." It likely will be necessary to increase the Company's
documentation staff for the maintenance and implementations of the FDA
510(k) certification, if obtained, of which there are no assurances.
4) The Company has a revolving line of credit with Mountain Parks Bank which
bears interest at 2% plus prime compounded monthly per annum. As of June
30, 1996, the Company's outstanding balance on the line of credit was
$820,000. The borrowed funds were used for working capital.
5) The Company may use a portion of the funds allocated for working capital
to acquire companies and/or technology in fields related to the Company's
business.
The allocation of the net proceeds from this Offering set forth above
represents the Company s best estimate based on its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
anticipated future revenues and expenditures. If any of these factors change,
the Company may find it necessary or advisable to reallocate some of the
proceeds from working capital to other of the above-described categories. The
Company anticipates, based on its current proposed plans and assumptions
relating to its operations, that the proceeds of this Offering, together with
projected cash flow from operations and its existing line of credit, will be
sufficient to satisfy its contemplated cash requirements for the next 12 months,
although the Company may incur operating losses and significant capital expenses
during that period. The Company s cash requirements beyond the 12 month period
will depend on many factors, including (but not limited to)
-17-
<PAGE>
the Company's cash flow from operations, the length of time it may take for the
Company to develop or acquire products or services for the market, the market
acceptance of these products or services, and the response of competitors who
may develop competing products or services at lower cost. To the extent that the
funds generated by this Offering are insufficient to fund the Company's
activities in the short or long term, the Company may need to raise additional
debt or equity through public or private financings. The Company has no
commitment for any such financing, and there can be no assurance that any
additional financing will be available to the Company, when needed, and on
reasonable terms. See Risk Factors.
If the over-allotment option is exercised (of which there can be no
assurance), the Company will receive additional net proceeds of approximately
$1,367,250. Any proceeds received from the exercise of the over-allotment option
will be added to working capital.
The amounts set forth above merely indicate the proposed use of proceeds,
and the actual expenditures may vary substantially from the estimates. None of
the items set forth in the foregoing table should be considered as a firm
commitment by the Company.
To the extent that the net proceeds are not used immediately, the Company
will invest such net proceeds in short-term government securities through a bank
or in a non-discretionary account of the Company with the Representative.
-18-
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of June 30, 1996, and as adjusted to reflect the sale of 800,330 shares of
Common Stock and the receipt of net proceeds of approximately $1,740,000 after
June 30, 1996, and to reflect the sale of the 2,000,000 shares of Common Stock
at an assumed offering price of $5.00 per share and the sale of 1,000,000
Warrants offered hereby and receipt of net proceeds of approximately $ 8,500,000
therefrom.
June 30, 1996
-------------------------------
Unaudited As Adjusted
Notes payable $751,200 -0- (1)
Current portion of capital lease
obligations 356,708 356,708
Line of credit 820,100 -0-
Capital lease obligations,
less current portion 807,479 807,479
Stockholders' Equity (deficit):
Preferred Stock, $.01 par value;
10,000,000 shares authorized,
no shares issued and outstanding 0 0
Common Stock, $.01 par value;
40,000,000 shares authorized,
4,166,296 shares issued and
outstanding; 7,104,272 issued
and outstanding, as adjusted $ 41,663 $ 71,042
Additional paid in capital $ 2,399,462 $13,126,283
Accumulated deficit $(3,600,090) $(3,600,090)
Total Stockholders' Equity (deficit) $(1,158,965) $ 9,597,235
(1) Assumes holders of $516,200 principal amount of 10% Notes convert their 10%
Notes for 137,646 shares of Common Stock. Does not include (i)
approximately $26,239 of accrued interest on the 10% Notes which will be
converted into approximately 6,997 shares of Common Stock or (ii)
additional accrued interest on the 10% Notes of approximately $11,947 to be
paid in cash.
-19-
<PAGE>
DILUTION
The Company's net tangible book value (deficiency) as of June 30, 1996 was
($1,573,044) or ($.38) per share. The "net tangible book value per share"
represents the Company's total tangible assets less its total liabilities,
divided by the number of shares of Common Stock outstanding at June 30, 1996.
After giving effect to (i) the sale of 800,330 shares of Common Stock after June
30, 1996 and the realization of approximately $1,740,000 of net proceeds
therefrom; (ii) the conversion of $516,200 principal amount plus accrued
interest thereon of outstanding 10% Notes for a total of 144,645 shares of
Common Stock and (iii) the sale of the 2,000,000 shares of Common Stock at an
assumed offering price of $5.00 per share and the sale of the 1,000,000 Warrants
offered hereby, but without giving effect to the possible exercise of the
over-allotment option, the Company's pro forma net tangible book value at June
30, 1996, would have been approximately $9,183,156 or $1.29 per share. This
represents an immediate increase in net tangible book value (deficiency) per
share of $1.67 to existing shareholders, and an immediate dilution of $3.71 per
share to the investors purchasing Shares in this Offering. The following table
illustrates dilution in net tangible book value on a per share basis to new
investors:
Price to investors ........................................ $5.00
Net tangible book value before Offering ................. $(.38)
Pro forma net tangible book value after Offering ........... $1.29
Increase attributable to sale of shares of
Common Stock and Warrants ................................. $1.67
Dilution to new investors (1) .............................. $3.71
- ----------
If the over-allotment option is exercised in full, dilution to new
investors would be $3.57.
The following table sets forth the number of shares of Common Stock
purchased from the Company, the effective cash contribution made and the price
per share paid by existing shareholders and by purchasers of the 2,000,000
shares of Common Stock offered hereby (at an assumed offering price of $5.00 per
share), without deducting estimated expenses and fees of the Representative.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Paid Avg. Price Per
---------------- ------------------------ --------------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Officers, Directors and
Promoters (1)(2) 2,531,520 36.0% $ 47,000 0.0% $ .02
Other Shareholders (2) 2,579,749 36.0 4,937,044 33.0 $1.91
New Investors 2,000,000 28.0 10,000,000 67.0 $5.00
--------- ---- ---------- ----
Total 7,111,269 100.0% $14,984,044 100.0%
========= ====== =========== =====
</TABLE>
- ----------
(1) Includes shares owned by Michael I. Ruxin, William J. Collard and Gerald F.
Willman, Jr. Mr. Collard and Mr. Willman's shares were issued in connection
with the merger with The Wyndgate Group, Ltd. No value has been assigned to
such shares.
(2) Includes shares (other than shares issued to Mr. Collard and Mr. Willman)
issued in connection with the merger with The Wyndgate Group, Ltd., as to
which no value has been assigned, 800,330 shares issued subsequent to June
30, 1996, and 137,646 shares issuable upon the conversion of $516,200 of
the principal amount of the 10% Notes (plus an estimated additional 6,997
shares issuable upon conversion of accrued interest of $26,239 thereon).
The computations in the tables set forth above assume no exercise of
outstanding warrants or stock options as of the date hereof, and assume no
exercise of the Underwriters' over-allotment option. On the date of this
Prospectus, there were outstanding options and warrants to purchase 788,709
shares of Common Stock (including, but not limited to, 187,800 shares of Common
Stock underlying warrants issued in connection with the sale of the 10% Notes)
at a weighted average exercise price of $2.82 per share.
-20-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
General
The Company and its two divisions are in the business of providing
information management software products and services to the healthcare industry
and substance abuse testing program services to companies. The services provided
by DataMed include medical review functions, data management, record storage and
coordination of all substance abuse testing program elements. DataMed serves
international, national and regional clients in a variety of industries.
Wyndgate is primarily involved in providing software products, services and
maintenance to purchasers of licenses for its SAFETRACE (TM). Revenues from the
sales of software licenses are recognized upon delivery of the software product
to the customer unless the Company has significant related vendor obligations
remaining. Revenue from post contract customer support is recognized over the
period the customer support services are provided, and software services revenue
is recognized as services are performed.
DataMed provides employee substance abuse testing management services.
Revenues from DataMed are recognized as services are provided. DataMed typically
contracts with its customers to provide for laboratory and collection site
services (which DataMed obtains from others), Medical Review Officer ("MRO")
services and for the storage of records, coordination and training of the
collection of specimens and management of all aspects of the client's substance
abuse testing program.
-21-
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
Year Ended December 31, Six Months Ended June 30,
----------------------- -------------------------
Unaudited
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Drug testing and other $5,740,487 $3,836,136 $ 3,116,265 $2,380,790
Software sales and consulting 933,631 1,140,119 2,862,225 883,578
---------- ---------- ----------- ----------
Total revenue 6,674,118 4,976,255 5,978,490 3,264,368
Cost of sales and product
development 2,662,271 2,071,902 1,919,772 1,180,165
---------- ---------- ----------- ----------
Gross profit $4,011,847 $2,904,353 $ 4,058,718 $2,084,203
Operating expenses
Payroll and other 3,355,893 1,122,285 2,105,207 806,753
General and administration 1,537,298 691,317 1,300,806 478,809
Marketing 870,284 516,450 444,492 235,492
Research and development 654,500 403,714 270,260 309,760
Depreciation and amortization 116,979 51,504 214,205 39,232
---------- ---------- ----------- ----------
Income/Loss from operations $(2,523,607) $ 119,083 $ (276,252) $ 241,157
Other Income (Expense)
Interest income (expense), net (61,112) 6,339 (109,620) ( 301)
Other (70,608) - (14,608) -
Income (loss) before
provision for(benefit from)
income taxes (2,655,327) 125,422 (400,480) 213,856
Provision for (benefit from)
income taxes 29,531 (46,825) - 230,934
---------- ---------- ----------- ----------
Net Income (Loss) $(2,684,858) $ 172,247 $ ( 400,480) $ (17,078)
=========== ========= === ======= ==========
</TABLE>
Six Months Ended June 30, 1996 as Compared to Six Months Ended June 30, 1995
Revenues. The Company, in the first half of 1996, had an increase in
consolidated revenues of 83 % to $5,978,490 from $3,264,368 for the same period
in 1995. The increase in revenues in the first half of 1996 can be attributed to
the growth in substance abuse (drug and alcohol testing) testing volume and the
growth of Wyndgate's SAFETRACE (TM) software customers. Donor record volume grew
in the f1rst six months of 1996 to 107,340 from 79,681 for the same period in
1995.
Software license sales and consulting revenues increased in the first six
months of 1996 compared to the first six months of 1995 from $883,578 to
$2,862,225. For the six month period ended June 30, 1996, Wyndgate delivered the
software for ten SAFETRACE (TM) systems which did not have related significant
obligations remaining upon delivery. Revenues in the first six months of 1996
include the $60,000 final payment for the development of the SAFETRACE (TM)
product.
-22-
<PAGE>
Cost of Sales and Product Development. The cost of sales for the first six
months of 1996 is 32% of revenues compared to 36% of revenues for the same
period of 1995. The decreased cost of sales is due to improved costs from
vendors and increased sales of higher margin products such as SAFETRACE (TM).
The cost of sales for DataMed includes the total amount of laboratory costs and
cost of collection for completed substance abuse tests.
Payroll and Other. Payroll and other increased for the six month period
ended June 30, 1996 by $1,298,454 to $2,105,207 from $806,753 for the six month
period ended June 30, 1995. This increase was primarily due to increases in
operations and customer service staff necessary to handle recent and anticipated
future growth of the Company's operations.
General and Administrative. General and administrative expenses increased
from $478,809 for the six month period ended June 30, 1995 to $1,300,806 for the
same period ended June 30, 1996. The additional expense is mainly attributed to
the increased amount of leases related to office space, and travel and mailing
charges as a result of the growth in the Company's operations.
Research and Development. Research and development expenses remained
relatively consistent during the six months ended June 30, 1996 as compared to
the same period in 1995.
Marketing. Marketing expense for the first six months ended June 30, 1996
increased by $209,000 to $444,492 from $235,492 for the same period in 1995. The
increase is primarily due to the increased amount of advertising and trade show
activity for both divisions of the Company.
Depreciation and Amortization. In the first six months ended June 30, 1996
depreciation and amortization increased $174,973 from $39,232 for the first six
months ended June 30, 1995. The increase is due to the addition of computers and
furniture and fixtures to support the additional personnel.
Income (loss) from Operations. Income (loss) from operations before
depreciation and amortization for the six months ended June 30, 1996 was
$(32,898) and $274,389 for the six months ended June 30, 1995. The decrease in
income (loss) from operations before depreciation and amortization is primarily
due to increases in overall staffing and related expenses necessary to handle
recent and anticipated future growth of the Company. Net income (loss) after tax
for the six months ended June 30, 1996 was $(400,480) and net income after tax
for the six months ended June 30, 1995 was $(17,078).
-23-
<PAGE>
Year Ended December 31, 1995 as Compared to the Year Ended December 31, 1994
Revenues. The Company's revenues increased 34% to $6,674,118 for the year
ended December 31, 1995 from $4,976,255 for the year ended December 31, 1994.
The increase in revenues is due to an increase in substance abuse test volume,
and implementation and enhancement of medical information management service
contracts.
Substance abuse testing and medical information management revenues
increased by 50% to $5,740,487 in 1995 from $3,836,136 in 1994. Substance abuse
testing and medical information management revenues comprised 86% of
consolidated revenues in 1995 compared to 77% in 1994. The increase was
primarily due to an increase in customers and development of medical information
management products and services. DataMed's donor record volume grew to 210,000
in 1995 from 127,639 in 1994 and 102,492 in 1993.
Wyndgate's software sales and consulting revenues decreased by 18% to
$933,631 for the year ended December 31, 1995 from $1,140,119 for 1994. This
decrease in revenues principally resulted from a decrease in revenue related to
a development agreement for the SAFETRACE(TM) product that was modified in 1995.
Software sales and consulting represented 14% of revenues in 1995 compared to
23% of revenues in 1994.
Cost of Sales and Product Development. The cost of sales was 40% of
revenues in 1995 compared to 42% of revenues in 1994. In 1995 DataMed began
renegotiating several supplier agreements to reduce laboratory and collection
site costs of retrieving and analyzing medical specimens.
Payroll and Other. Payroll and other increased for the year ended December
31, 1995 by $2,233,608 to $3,355,893 from $1,122,285 for the year ended December
31, 1994. This increase was primarily due to an increase in customer service and
operations staff necessary to manage growth and anticipated future growth of the
Company's operations.
General and Administrative. General and administrative expenses increased
to 23 % of total revenues for the twelve month period ended December 31, 1995
from 14% of total revenues in 1994. The increase in expenses can primarily be
attributed to the following one time 1995 related events: merger and related
expenses ($164,500); increase in allowance for doubtful accounts ($244,000);
non-compete agreements ($350,000); and shareholder options granted ($161,047).
Research and Development. Research and development expenses increased
$250,786 or 62% from 1994 to 1995. This increase is primarily due to a focused
effort by Wyndgate to complete the development of its SAFETRACE(TM) software
product during the second half of 1995.
Marketing. Marketing expenses increased by 69% to $870,284 for 1995 from
$516,450 for 1994. The increase in expenses is related to the increase in sales
and marketing personnel (five persons), advertising trade show activity and
marketing research and consulting services. Marketing expense represents 13 % of
total revenues in 1995 compared to 10% in 1994. Marketing expenses include sales
and marketing salaries, communication expenses, travel expenses, trade show
expenses and advertising expenses.
-24-
<PAGE>
Depreciation and Amortization. Depreciation and amortization increased to
$116,979 for the year ended December 31, 1995 compared to $51,504 for 1994. The
increase is due to the addition of several computers and furniture and fixtures
to support the additional personnel.
Credit Loss Experience. The Company maintains an allowance for doubtful
accounts at a level management believes adequate to absorb potential losses in
the Company's portfolio. In 1995 the Company increased its allowance for
doubtful accounts to cover contracts that had potential pricing discrepancies.
The Company's charge off policy is based on an account by account review for all
contracts in the Company's portfolio, which are charged off when deemed
uncollectible. Bad debt loss experience for the Company has averaged less than 3
% of total revenue per year.
Liquidity and Capital Resources
The components of the Company's cash flow are summarized below:
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------- -------------------------
Unaudited
---------
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash provided by (used in) operating activities $(552,712) $ 338,758 $(1,666,485) $ 84,346
Cash used in investing activities $(190,604) $(298,048) $ (91,009) $ (281,604)
Cash provided by financing activities $ 855,208 $ 58,459 $ 1,616,369 $ 446,116
Net increase (decrease) in cash $ 111,892 $ 99,169 $ (141,125) $ 248,858
</TABLE>
The Company has funded its operations through three principal sources of
capital: (i) sale of substance abuse testing management services and licensing
of software products and services; (ii) borrowing from a line of credit; and
(iii) private placements of common stock, warrants, and convertible notes. The
Company intends to use proceeds from this Offering primarily to pay debt, for
additional sales and marketing personnel, for research and development and for
general working capital purposes. See Use of Proceeds.
The cash provided by operating activities decreased by $891,470 for the
year ended December, 1995, compared to the year ended December 31, 1994. The
decreased cash flow from operating activities resulted primarily from the costs
of the merger and increased research and development expenses.
-25-
<PAGE>
The Company's cash flows have been used primarily in investing in
additional software development. The Company's cash from financing activities
increased by $796,749 for the year ended December 31, 1995 compared to the year
ended December 31, 1994. The primary financing activity in 1995 was bank
borrowing from a line of credit and issuance of common stock ($735,000) and
related common stock warrants ($15,000).
Net cash used in operations increased in the six month period ended June
30, 1996 to ($1,666,485) from $84,346 for the same period in 1995. Much of this
change can be attributed to payments related to the non-compete agreements due
to the merger with The Wyndgate Group, Ltd., cash paid in exchange for a note
receivable and increased operating costs and increases in both accounts
receivable and unbilled receivables.
The Company experienced reduced cash outflows from investing activities of
($91,009) for the period ended June 30, 1996 from ($281,604) for the same period
in 1995. This reduction was in large part due to a decrease in capitalized
software development costs.
The Company received cash from financing activities of $1,616,369 for the
six month period ended June 30, 1996 compared to $446,116 for the six month
period ended June 30, l995. In the first six months of 1996, the Company
received $700,000 for issuance of common stock, increased short term borrowings
by $320,000 and received $751,200 related to the 10% Note offering.
During the third quarter of 1996, the Company received gross proceeds from
a private offering of $2,000,000. After deduction of $260,000 payable to the
Representative for commissions and a non-accountable expense allowance, the net
proceeds to the Company were approximately $1,740,000. The net proceeds from the
private offering are being used for (i) payment of the $40,000 deposit on the
non-accountable expense allowance payable to the Representative, (ii) research
and development, and (iii) working capital, including but not limited to, other
costs associated with the Offering, such as legal, accounting, and filing fees.
-26-
<PAGE>
THE COMPANY
Global Med Technologies, Inc. (the "Company") provides information
management software products and services to the healthcare industry and
provides substance abuse testing program services to companies, including
certain Fortune 1000 companies. National MRO, Inc., founded in 1989, changed its
name to Global Data Technologies, Inc. in June 1995 in connection with the
merger of National MRO, Inc. and The Wyndgate Group, Ltd. in May 1995, and
changed its name again in May 1996 to Global Med Technologies, Inc. The Company
now consists of two divisions, DataMed International ("DataMed") and Wyndgate
Technologies ("Wyndgate"), both of which operate under their respective trade
names. Wyndgate develops, markets, licenses and supports software for the
healthcare industry. DataMed manages and markets a variety of services that are
designed to assist companies with administering substance abuse testing
programs.
Founded in 1984, Wyndgate initially developed a Student Information System
("SIS"), an integrated software package for colleges and universities to track
student information. Wyndgate currently has five university contracts for SIS
still in effect. Pursuant to an agreement with eight California blood centers,
Wyndgate began development of a blood tracking system to assist community blood
centers, hospitals, plasma centers and outpatient clinics in the U.S. in
complying with the quality and safety standards of the FDA for the collection
and management of blood and blood products. After several years of development
and $1,080,000 paid by the eight California blood centers, Wyndgate has
completed development and commenced marketing of the SAFETRACE(TM) blood bank
management information system, which it believes to be the most comprehensive
and flexible system of its type available today. In accordance with FDA
regulations, the Company submitted a 510(k) application to the FDA in October,
1995 for review of its SAFETRACE(TM) system, which is still pending. The Company
is able to continue marketing the SAFETRACE(TM) system during the review
process. There are no assurances that the Company's application will be
approved. If not, the Company will be required to discontinue marketing and
licensing the SAFETRACE(TM) system. See The Company - Wyndgate Technologies
Division - Industry Overview.
In 1989, Wyndgate developed EDEN-OA (R)utilize new technologies in the
evolving open systems computer market. EDEN-OA (R) a rapid applications
development tool that can be used by software developers to produce software
products that operate in accordance with industry standards based computer
environments. EDEN-OA (R)erfaces with database management systems and operates
on multiple computer and operating system platforms. The Company plans to
continue to use EDEN-OA (R)develop other medical software applications.
DataMed was founded in 1989 by Michael I. Ruxin, M.D. to offer the
services of a Medical Review Officer ("MRO") to the regulated segment of the
substance abuse testing market. Due to federal regulations, companies involved
in commercial transportation must comply with requirements mandating substance
abuse testing of employees in safety sensitive positions and substance abuse
awareness education for supervisors and employees. Additionally, federal
substance abuse testing requirements applicable to commercial transportation
mandate the use of an MRO to evaluate the quality and accuracy of the testing
laboratory and to determine legal or illegal use of substances.
-27-
<PAGE>
Corporate outsourcing has been a positive factor for DataMed as some large
companies have contracted with DataMed to outsource the management of their
substance abuse testing programs.
DataMed provides customized program management services to companies in an
attempt to increase total program quality and decrease total program costs.
DataMed provides substance abuse testing management services which coordinate
and actively manage the specimen collection process, the laboratory testing
process, the MRO review process, the random testing process, the blind sample
quality control process, the substance abuse testing process, and the data
management process including compliance reporting and record keeping.
Strategy
The following are key elements of the Company's strategy; however, there
can be no assurance that the Company will be successful in its strategy.
Expand on sales & marketing efforts. Upon completion of this Offering, the
Company intends to increase its sales and marketing efforts by hiring additional
field sales and other marketing personnel during the 12 months following this
Offering. The Company has hired five sales and marketing personnel in the last
12 months. The Company believes it can increase its penetration of the U.S.
blood bank information management market as well as the substance abuse testing
program management market through this expanded sales and marketing staff.
Develop new software products and services. The Company believes that it
can develop new products and services from its existing technology base. The
Company plans to build upon its technology base by using EDEN-OA (R) to develop
new applications. In the future, the Company intends to introduce a transfusion
management information system, to be known as SAFETRACE (TM).
Expand international markets. The Company is focused on expanding
international markets. The Company continues to pursue new international
customers within the transportation industries including shipping. The Company
also plans to pursue international growth as it relates to blood banks, plasma
centers and hospitals.
-28-
<PAGE>
Develop strategic relationships. The Company intends to pursue strategic
relationships in order to utilize its technology. Additionally, the Company may
work with other healthcare information providers to develop applications based
on EDEN-OA (R).
Maintain technology advantage. The Company believes that the foundation of
its SAFETRACE (TM) system, EDEN-OA (R), is an important technological
advancement, and that the maintenance of this technological advancement is
essential in order for the Company to compete effectively. The Company will
continue to focus research and development on evolving its software development
tool. The funds generated by this Offering may not be sufficient to enable the
Company to accomplish its goal, and additional financing may be required.
Sales and Marketing
The Company intends to continue to sell and market its medical information
management products and services through a direct sales force. Each sales
representative will have a geographic area and will market all products and
services. Additionally, the Company will continue to respond to requests for
proposals ("RFPs") issued by blood banks, plasma centers, hospitals and
principally Fortune 1000 companies. The Company is pursuing opportunities within
the blood bank industry, and will continue to focus on Fortune 1000 companies to
market DataMed's services.
Customers
The Company's current customer base includes Fortune 1000 companies that
are required by the U.S. Department of Transportation or their own company
policy to have a substance abuse testing program and small to large community
blood banks.
During the six months ended June 30, 1996, two of the Company's customers,
Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center, each accounted for
more than 10% of the Company's revenues. During 1995, three of the Company's
customers, Laidlaw Transit, Inc., Chevron Corporation and a group consisting of
eight California blood centers, each accounted for more than 10% of the
Company's revenues. See Wyndgate Technologies Division - Development Agreements.
During 1994, two of the Company's customers, Chevron Corporation and the group
consisting of eight California blood centers, each accounted for more than 10%
of the Company's revenues. Laidlaw Transit, Inc. is associated with the
transportation industry. Chevron Corporation is associated with the oil and gas
industry. The group consisting of eight California blood centers, through a 1992
development agreement with Wyndgate, assisted in the financing of the
development of Wyndgate's SAFETRAcE(TM) software. Gulf Coast Regional Blood
Center is a blood bank located in Texas. Non-renewal or termination of the
contractual arrangements with these key customers could have a material adverse
effect on the Company. There can be no assurance that the Company will be able
to retain these key customers or, if such customers were not retained, that the
Company will be able to attract and retain new customers to replace the revenues
currently generated by these customers. See The Company - Sales and Marketing.
The Company currently has 20 blood banks as customers for its SAFETRACE(TM)
system and intends to continue to target domestic and international blood banks,
plasma centers and hospitals.
-29-
<PAGE>
DataMed has a number of customers for its substance abuse testing services,
including certain Fortune 1000 companies and transportation companies.
Research and Development
During the fiscal years ended December 31, 1995 and 1994, and during the
six months ended June 30, 1996, the Company expended $654,500, $403,714 and
$270,260, respectively, for research and development.
Employees
As of July 31, 1996, the Company had 123 full-time employees, consisting of
11 employees for the Company, 47 at Wyndgate and 65 at DataMed. Of the 123
full-time employees, 35 employees were in research and development, eight
employees were in sales and marketing, 12 employees were in administration, and
68 employees were in program management and implementation. The Company has
employment agreements with certain personnel. See Management. The Company's
employees are not represented by a labor union or subject to collective
bargaining agreements.
Properties
The Company currently occupies two primary locations. The Company occupies
approximately 15,479 square feet of office space in Lakewood, Colorado pursuant
to a lease that expires on December 31, 2000. The Company also leases
approximately 7,300 square feet of office space in Sacramento, California
pursuant to a lease that expires on August 31, 1998. The Company also has
employees located in Virginia, Pennsylvania and Texas. No office lease is
required at those locations because the employees work out of their homes.
During the six months ended June 30, 1996, total lease expenditures per month
for the Company were approximately $24,500. Additional leased space will be
required to accommodate the planned personnel increases.
Wyndgate Technologies Division
Wyndgate designs, develops, markets, licenses and supports software for the
healthcare industry. Pursuant to an agreement with eight California blood
centers, Wyndgate developed a blood tracking system called SAFETRACE (TM) to
assist community blood centers, plasma centers, hospitals and outpatient clinics
in the U.S. in complying with the quality and safety standards of the FDA for
the collection and management of blood and blood products. Wyndgate incorporates
and integrates products and services for the management of the blood supply and
its derived products from donor recruitment to shipment from the blood bank to
the hospital, clinic, medical research institution or other purchaser.
SAFETRACE(TM) was developed using the Company's application development tool,
EDEN-OA (R). The Company intends to utilize its proprietary EDEN-OA (R);
software development tool to attempt to develop new products for the medical
information market.
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<PAGE>
In addition, Wyndgate provides training and consulting services for
installation, implementation, special programming, system design, and
maintenance for the SAFETRACE (TM) system. The majority of customers for the
SAFETRACE (TM) system and student information systems use all or a portion of
these services. Historically, maintenance and product upgrades from Wyndgate's
student information system products have provided an on-going revenue stream and
information concerning Wyndgate's customers' requirements and satisfaction.
Special programming services can result in customer funded development, as was
done with the SAFETRACE (TM) product.
Industry Overview
The management of the Company believes that market driven forces to
increase quality while containing rising healthcare costs have resulted in an
increasing demand for healthcare information systems that meet the changing
needs of the marketplace. This shift has resulted in systems that utilize new
technologies to provide higher-accuracy information.
With the spread of AIDS and Hepatitis-B, stringent FDA guidelines have been
imposed on blood banks in order to ensure a safe blood supply. Some community
blood centers ("CBCs") have been cited by the FDA for noncompliance and some
have even been closed. The American Red Cross and Blood Systems, Inc. blood
centers are currently under consent decrees requiring them to comply with FDA
guidelines. The blood banking industry has developed various in-house systems to
track blood collection, testing, processing, distribution and transfusion
activities. The Company believes that most blood center in-house developed
systems are not fully integrated and do not offer the capabilities required by
the FDA in view of the fact that the Company's current customers are switching
from their in-house systems to the Company's SAFETRACE(TM) system. While
laboratory equipment vendors have developed automated testing and reporting
procedures directed at a segment of the community blood center process, these
systems address only the laboratory function and are not integrated. The Company
believes that blood centers and the laboratory equipment products vendors are
looking for a way to meet the FDA guidelines and minimize their risk and cost.
The FDA required all blood tracking application software vendors to submit
a 510(k) application for review by March 31, 1996. The application process for
FDA review and compliance with the new guidelines relates to blood establishment
computer software products regulated as medical devices. The FDA considers
software products intended for the following to be medical devices: (i) use in
the manufacture of blood and blood components; or (ii) maintenance of data used
to evaluate the suitability of donors and the release of blood or blood
components for transfusion or further manufacture. As medical device
manufacturers, the Company and its competitors are required to register with the
Center for Biologics Evaluation and Research ("CBER"), list their medical
devices, and submit a pre-market notification or application for pre-market
review. There is no deadline for approval and the FDA has allowed those vendors
that have submitted a 510(k) by March 31, 1996, to market and license their
product.
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Wyndgate Strategy
The key elements of Wyndgate's strategy to address the market include:
Expand sales and marketing efforts to increase its customer base nationally
and internationally. In the near term, the Company will aggressively pursue
opportunities in the U.S. and abroad in blood tracking and management with its
SAFETRACE (TM) system. The Company has no reason to believe that it will not
receive an FDA 510(k) clearance letter in the future. However, there can be no
assurance of this. If the Company does not receive a 510(k) approval letter, the
Company plans on responding to any and all requests by the FDA for additional
information up to and including resubmission of the 510(k) application.
Develop new healthcare management software products and services. By using
its background in healthcare information systems, the Company will continue to
attempt to develop new applications based upon its EDEN-OA (R) architecture. In
the future, the Company intends to introduce the SAFETRACE (TM) transfusion
management information system. However, there can be no assurance that such
introduction to the market will occur.
Strategic relationships and selective acquisitions. Wyndgate intends to
continue to pursue strategic relationships to further develop uses for its
technology.
Software Products
SAFETRACE (TM) is a set of integrated software modules that are used to
manage and control multiple aspects of blood and plasma operations, from
recruiting of donors and collecting donated blood or plasma, to testing and
manufacturing of blood products, distribution and billing. The Company currently
markets its SAFETRACE (TM) system to blood banks and plasma centers and
eventually will market it to hospitals and transfusion centers. A customer can
license one or more modules as needed to automate its operations.
SAFETRACE (TM) Modules Function
- ---------------------- --------
Donor Recruitment Used by the marketing department of a
blood or plasma center to systematically
solicit, recruit and schedule donors.
Facilitates the recruiting process by
producing call lists on demand or
scheduling them by batch processing.
Donor Management Provides a means for registering donors
and recording necessary medical and
personal donor data. All real-time donor
deferral and eligibility information is
used to determine current eligibility
status of the donor to be registered.
Laboratory Management Performs a number of data recording and
evaluation functions. Permits the
posting of tests either by interfacing
directly with testing equipment or
manually. Also performs inventory label
validation, which ensures that all blood
components are suitable for distribution
and have been properly tested, validated
and labeled.
Blood Inventory and Distribution Maintains current inventories of all
available blood products which have been
tested and labeled. Records the movement
of blood products from the blood or
plasma center to the customer and
between customers. Also maintains
records for imported products.
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<PAGE>
Special Procedures Registers patients and tracks blood
requirements for their surgeries. Also
provides the capabilities to define and
manage special requests for autologous,
designated and therapeutic donations.
Billing Implements the pricing and billing
practices associated with each blood
product for customers. Also provides
financial information for management
control.
SAFETRACE(TM) relies on its donor identification, laboratory component,
labeling and release site-based logic technology to assist blood banks in
complying with FDA regulations. SAFETRACE(TM) has an 85 % table driven structure
which permits it to easily adapt to each customer's individual and unique
operations. SAFETRACE(TM) has been developed using industry standards, common
operating systems and database managers to ensure portability. Since the
SAFETRACE(TM) database, operating systems and hardware are independent,
SAFETRACE(TM) allows Wyndgate's customers freedom and flexibility in selecting
computer hardware and software components. SAFETRACE(TM) permits customers to
preserve their application software and training investment as their systems
needs and technology change. Currently, management estimates the SAFETRACE(TM)
software consists of more than 1.5 million lines of code, 390 data tables, 59
labeling occurrences of component and release logic, 3,000 discrete programs and
over 1,000 screens and windows.
Services
Wyndgate believes that the high quality of the services component of the
business is the key to retaining current customers, enhancing Wyndgate's
reputation for quality and improving market penetration. Wyndgate's services
begin with initial customer contact and continue throughout the relationship.
Services include complete installation and implementation, training, consulting
and maintenance. The license agreements currently being used by Wyndgate
typically commit a customer to five years of maintenance service. The fees
associated with the maintenance service are typically invoiced monthly,
quarterly or annually in advance. The Company believes that service fees,
excluding maintenance, are typically about 30-50% of the initial software
license fee. Under the Company's current license agreements, only the software
license fee and the maintenance fee are required to be paid and the other fees
are optional. However, all customers that have licensed the SAFETRACE(TM) system
to date have contracted for additional services provided by the Company.
Installation and Implementation Services. Installation and implementation
services assist the customers with the selection of hardware and software
systems, if necessary, and the initial installation of the software on the
customer's system. Implementation services include assisting the customer in
analyzing work flow and standard operating procedures ("SOPs"), developing
tables, screen layouts, reports, and installation specific requirements.
Typically it takes from six to twelve months to implement a SAFETRACE (TM)
system and a portion of Wyndgate's resources are used for some portion of that
time. Installation and implementation services are not considered part of the
SAFETRACE(TM) license fee or usage fee, and are typically contracted for
separately.
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<PAGE>
Training Services. Training services are provided to customers either at
the customer site or at Wyndgate's offices. Training includes hands-on access to
the applications software and usually includes building initial tables and
screens. All customers to date have purchased initial training services which
range from five to fifteen days depending on the customer size and number of
people to be trained. Wyndgate also offers follow-up training services to assist
the customer in training new staff on new product functions.
Maintenance Services. Fees for maintenance services are required to be paid
under ten of the relevant SAFETRACE(TM) license agreements for the term of the
license. Maintenance services are optional under the other license agreements.
Maintenance services include "bug" fixing, enhancements and product upgrades.
Wyndgate provides an 800-Help Line number for customer service calls that permit
access to Wyndgate's technical resources directly during the working day and on
a paged call-back basis at all other times.
Consulting Services. Consulting services are provided to customers who want
special features, assistance with system configurations, database consulting,
systems management, networking or additional capability beyond that included in
the applications software. Wyndgate also performs special applications
development projects under consulting agreements. The Company has been
contracted to provide consulting services by some of its SAFETRACE(TM)
customers.
Product Development
SAFETRACE Tx(TM) - Transfusion Management Information System. Wyndgate has
begun the development of SAFETRACE Tx(TM), a transfusion management information
system that can be utilized by hospitals to help them ensure the safety of the
blood transfused into patients. If completely developed, it will provide
electronic cross-matching capabilities to help ensure blood compatibility with
the recipients and will track, inventory, bill and document all activities with
the blood product from the time it is received in inventory to the time the
blood product is used or sent back to the blood center. SAFETRACE Tx(TM) will
complement SAFETRACE(TM) as it will integrate the hospital with the blood center
that is supplying the blood products. The anticipated release date for the
SAFETRACE Tx(TM) software is in 1997. However, there can be no assurance that
the software will be released as scheduled, if at all.
EDEN-OA (R) Development Tool. EDEN-OA (R) is a software tool set and
methodology that the management of the Company believes enables programmers to
easily build and maintain information management systems. It runs on different
hardware, operating system and database management system products. The EDEN-OA
(R) tool set allows the programmer to focus on the business logic and rules (how
data relates and the formulas for calculations) and on the presentation (viewing
and printing) of the information to the user. Management believes that EDEN-OA
(R)(i) reduces application product development time and cost; (ii) reduces
application software project risk; (iii) focuses the software developer on the
user's concerns, not on the hardware, operating system or database management
system; and (iv) reduces the time and cost for modifying and maintaining a
software application. EDEN-OAR (R) is the basis for SAFETRACE(TM), and it is
planned that EDEN-OA (R) will be the basis for future products from Wyndgate.
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<PAGE>
The Company believes that a major advantage of EDEN-OA (R) is that it
allows local user modifications to the application. Additionally, it coordinates
and tracks user modifications with upgrades, "bug" fixes or enhancements made by
Wyndgate, a feature that assisted Wyndgate in documenting SAFETRACE (TM) for FDA
510(k) review. The entire maintenance process is integrated into the
application, thereby eliminating the common problem of user changes not
integrating with vendor supplied code, which often prevents upgrading
applications because of the high cost and risk. This maintenance feature permits
the customers to make changes dictated by business requirements as opposed to
the ability of the application to accommodate such changes. For example, adding
a data element such as a suffix for zip code, adding a new table to track
service information or adding new FDA mandated blood tests would be a very
difficult and time consuming task with most applications.
EDEN-OA (R) includes an On-Line User-System Repository Manager which
consists of the following: an Active Data Dictionary; a Database Maintenance
Manager for automatic generation of database structure and I/O procedures; a
Panel (Screen) System Manager providing a Screen Definition Language and GUI;
use of a Procedural Language; and Interactive Utility Programs and Procedures
including a software maintenance system manager and a systems development
procedures manager. This combination of capabilities makes EDEN-OA (R) portable
and easy to tailor and maintain.
EDEN-OA (R) facilitates application maintenance through the integrated
Active Data Dictionary, common applications functions and development and
maintenance tools. Each client organization has specific needs for tailoring
functions, screens, reports and processes. By making changes to the Active Data
Dictionary, the user invokes the Applications Manager tools which generate the
code. A single Active Data Dictionary entry modifies all application modules,
screens and reports impacted by that change. Since the Active Data Dictionary
separates the application from front-end (screen generators) and the back-end
(database manager and hardware systems), development and on-going maintenance
costs are often reduced. Traditionally, on-going maintenance has been the most
costly part of any applications development and implementation. EDEN-OA (R) is
modular and can be used to replace or extend existing application systems and
provides end-user flexibility.
EDEN-OA (R) will continue to be developed and refined. It is currently
planned that EDEN-OA (R) will be the foundation to any new medical applications
developed by Wyndgate in the future.
Development Agreements
Pursuant to the development agreement between Wyndgate and a group of eight
California blood centers (the "Royalty Group"), pursuant to which Wyndgate
developed SAFETRACE(TM), Wyndgate must make royalty payments to the Royalty
Group based on a percentage of Wyndgate's SAFETRACE(TM) software license sales,
measured by invoice amounts to purchasers of the software, net of certain fees
and charges. The time period under the royalty schedule is based upon the first
date of customer invoicing, which was September 14, 1995. The Wyndgate royalty
payment schedule is as follows:
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<PAGE>
Date Royalty Percentage
---- ------------------
September 1995 to September 1997 12%
September 1997 to September 1998 9%
September 1998 to September 1999 6%
After September 1999 3%
Pursuant to a Development Agreement ("Agreement") between the Company and
The Institute for Transfusion Medicine ("ItxM"), the Company has agreed to
develop Commercial Centralized Transfusion System Software ("Commercial CTS
Software"). This Agreement requires that the Commercial CTS Software be
completed by December 16, 1997. If not timely completed, the Company would be
subject to monetary penalties. The Agreement provides for a royalty payment to
ITxM for revenues received from the sale of the Commercial CTS Software, net of
certain fees and charges. The royalty period starts with the first commercial
transfer for value of the Commercial CTS Software. The royalty that would be
paid is as follows:
<TABLE>
<CAPTION>
Percentage of License Fee Percentage of License Fee
Revenue Upon Transfer Revenue Upon Transfer
Royalty Period Initiated by ITxM Initiated by Company
-------------- ------------------------- -------------------------
<S> <C> <C>
1 Year 10% 5%
2 Year 10% 5%
3 Year 6% 3%
4 Year 6% 3%
5 Year 4% 2%
6 Year 4% 2%
7 Year 4% 2%
8 Year 4% 2%
9 Year 4% 2%
Thereafter 2% 1%
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</TABLE>
<PAGE>
Customers
Wyndgate currently has SAFETRACE (TM) contracts with the following blood
centers:
Belle Bonfils Memorial Blood Center, Denver, CO
Blood Bank of Alameda-Contra Costa Medical Association, Oakland, CA
Blood Bank of San Bernardino and Riverside Counties, San Bernardino, CA
Blood Bank of the Redwoods, Santa Rosa,CA
Coffee Memorial Blood Center, Albuquerque, NM
Community Blood Bank of Erie County, Erie, PA
Community Blood Bank of Lancaster County Medical Society, Lincoln, NE
Community Blood Center of Appleton, Appleton, WI
Gulf Coast Regional Blood Center, Houston, TX
Institute For Transfusion Medicine, Pittsburgh, PA
Irwin Memorial Blood Center, San Francisco, CA
Peninsula Blood Bank, Inc., Burlingame, CA
Sacramento Blood Center, Sacramento, CA
Samuel W. Miller Memorial Blood Center, Bethlehem, PA
Siouxland Community Blood Bank, Sioux City, IA
Stanford Medical School Blood Center, Palo Alto, CA
The Blood Center for Southeast Louisiana, New Orleans, LA
Tri-Counties Blood Bank, Santa Barbara, CA
The Memorial Blood Centers of Minnesota, Inc., Minneapolis, MN
Oklahorma Blood Institute, Oklahoma City, OK
See Services, above, for a description of a typical license agreement.
SAFETRACE(TM) implementations take approximately 6 to 12 months depending
on the blood center's size and complexity of the SOPs. All of the above blood
centers are in various stages of implementation, with the exception of
Tri-Counties Blood Bank which is fully operational on the SAFETRACE (TM) system.
The potential customers for Wyndgate's products include community blood
centers ("CBC"), hospitals, plasma centers, out-patient centers, stand alone
transfusion sites and home healthcare providers. CBCs are able to utilize
SAFETRACE (TM) software to manage their business and comply with FDA regulations
to help ensure the safety of the blood supply. The SAFETRACE (TM) software
allows the CBCs to enter the FDA guidelines, consistent with the CBC's Standard
Operating Procedures, into SAFETRACE (TM) software tables which then provide
system control over the manufacture and processing of blood and blood products.
In the future, the Company plans to introduce a transfusion management
information system. All acute care hospitals and alternate transfusion sites
will be potential customers for the SAFETRACE TX (TM) product.
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<PAGE>
In the transfusion market the potential customer base is easily identified
but presents a challenge in reaching the volume of clients for product
demonstrations. Customers will require a product demonstration before making a
commitment to purchase. In addition, the transfusion product being developed
will face stiff competition from established vendors in this market. Wyndgate
believes that by penetrating blood centers with SAFETRACE(TM), hospitals that
receive blood from these centers may want to link their existing transfusion
product to the blood center. There can be no assurance that hospitals will
desire to establish this link.
Competition
Currently, Wyndgate is aware of five primary competitors in the blood bank
industry segment including MAK from France, Blood Trac Systems, Inc. from
Canada, Information Data Management ("IDM"), Blood Bank Computer Systems and
Systec from the United States. Some of these competitors are larger and have
greater resources than the Company. The Company believes it is able to compete
on the basis of the capabilities of the technology in its SAFETRACE (TM) system;
however, the Company can provide no assurances in this regard.
DataMed International Division
Founded in 1989, DataMed manages and markets a variety of services that are
designed to assist companies with administering substance abuse testing
programs. Due to federal regulations, employers involved in commercial
transportation must comply with requirements mandating substance abuse testing
of employees in safety sensitive positions and substance abuse awareness
education for supervisors and employees. Additionally, federal substance abuse
testing requirements mandate the use of a Medical Review Officer ("MRO") to
evaluate the quality and accuracy of a testing laboratory and determine legal
versus illegal use of substance abuse. DataMed provides customized substance
abuse testing management services to companies. DataMed coordinates and actively
manages the specimen collection process, the laboratory testing process, the MRO
review process, the process of random testing, the blind sample quality control
process, the substance abuse testing process and the data management process,
including compliance reporting and record keeping. DataMed arranges for
specimens to be tested by a qualified laboratory and appropriately monitors the
performance of: testing laboratory(ies); urine collection providers; the MRO;
and the overall quality of information that is received, stored and reported.
DataMed currently provides substance abuse testing management services to a
number of clients worldwide.
Industry Overview
In the Company's experience, most substance abuse testing programs for
Fortune 1000 companies are internally managed. Companies contract with
laboratory and collection sites and utilize internal resources to manage the
process. However, the Company believes that some companies appear to be shifting
to outsourced substance abuse program management in an attempt to reduce overall
costs as well as to increase overall quality.
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<PAGE>
The current market for the substance abuse testing industry consists of the
regulated markets and the unregulated markets. The regulated markets include all
employees that fall under federal regulations for commercial transportation,
with the largest concentration in the motor carrier industry. Additionally,
regulated employees are subject to random substance abuse testing, post-accident
testing and "reasonable suspicion" testing. The unregulated market primarily
consists of companies testing new employees.
Currently, the urine specimen substance abuse testing industry has several
large nationally known laboratories, such as Corning Clinical Laboratories, Lab
Corp. and SmithKline-Beecham, offering drug testing lab analysis.
The U.S. Department of Transportation ("DOT") has ruled that activities
involving the management of MRO services or activities that give the appearance
of any type of financial arrangement between an MRO and a laboratory are
prohibited from being conducted by the laboratory. The net effect of this ruling
is to limit the laboratory's ability to provide drug testing management
services. Therefore, with respect to testing performed under DOT regulations
(which is the standard by which all substance abuse testing programs are
measured), the laboratory cannot provide full service substance abuse testing
program management and meet DOT requirements.
Companies that manage their own substance abuse testing programs are
required to remain abreast of changing DOT regulations and their implications as
well as maintain significant amounts of data that must be processed, audited and
stored. A significant amount of work is required in administering substance
abuse testing programs, and these programs are complex to manage. The Company
believes that these factors have created a market opportunity for third-party
administrators or program management companies since it appears some companies
are moving to outsource substance abuse testing program management.
Strategy
The key elements of DataMed's strategy to address the market opportunity
include:
Expand sales and marketing efforts to increase its customer base nationally
and internationally. The Company will continue to market complete program
management services principally to Fortune 1000 companies. The Company's
complete program management services (ProScreen Plus (TM)) typically provide
higher profit margins for the Company. For the year ended December 31, 1995, the
Company's complete program management services accounted for 48% of DataMed's
revenues. For the six months ended June 30, 1996, the Company's complete program
management services accounted for 57% of DataMed's revenues.
Expand international markets within the transportation and healthcare
industries. The Company has customers in international markets outside the U.S.
Many international customers have some local requirements for substance abuse
testing, primarily in the shipping industry. The Company has dedicated personnel
to continue to pursue these opportunities.
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<PAGE>
Develop new healthcare management software products and services. With
federal regulations mandating substance abuse testing, the Company will continue
to provide additional products and services for complete substance abuse testing
management.
Maintain its technological advantages in developing regulatory compliance
tracking software and quality assurance software products. Since the substance
abuse testing management process is labor intensive due to the amount of data
that must be processed and audited, DataMed intends to use Wyndgate's technology
to attempt to develop an advanced system to reduce the costs and increase the
quality of its services. There can be no assurance that the Company will be
successful in developing an automated test tracking system or that it will
operate effectively.
Services
DataMed's service allows a company that no longer wants to micro-manage its
substance abuse program to outsource the administration of its entire substance
abuse program. DataMed's goal is to help a company increase total program
quality and decrease total program costs. DataMed can coordinate or actively
manage the specimen collection process, the laboratory testing process, the
medical review process, random testing process, the blind sample quality control
process, the substance abuse testing process and the data management process,
including compliance reporting and record keeping. DataMed's services can be
purchased independently or as a management package. DataMed has three basic
levels of management services: TransCon (TM), ProScreen(TM) and ProScreen
Plus(TM).
TransCon(TM) is an integrated management service that is designed to
provide smaller customers with a "turn-key" solution for substance abuse testing
requirements. TransCon(TM) provides a basic level of management service and is
not a highly customized program. TransCon(TM) provides the smaller customer,
with less resources and expertise, with a substance abuse testing program that
meets regulatory requirements.
ProScreen(TM) is DataMed's program coordination service and is designed
to attract the medium to large customer operating in either a regulated or
unregulated environment. ProScreen (TM) is a solution for clients that realize
their programs are large enough to have become a burden, but small enough not to
warrant a full time employee. DataMed, through its ProScreen(TM) service, offers
companies a limited range of "pro-active" management services designed to ease
the burden of an internally managed program. ProScreen(TM) can also be an entry
point for a client that wants to eventually move to a ProScreen Plus(TM) level
of service.
ProScreen Plus(TM) is a customized service designed to attract Fortune 1000
clients who have decided to outsource the management of their entire program.
Through its ProScreen Plus (TM) product, DataMed focuses its efforts on helping
the large organization concentrate on its core business, increase program
quality and reduce total program costs. ProScreen Plus (TM), in its truest form,
allows DataMed to function as a company's substance abuse department.
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<PAGE>
Customers
A customer may have programs that are federally regulated, unregulated or
both. Fortune 1000 customers tend to have both regulated and unregulated
programs. The Federal Highway Administration oversees the largest percentage of
regulated testing. Companies regulated by the Federal Aviation, Transit and
Railroad Administrations (and other federal organizations) are also subject to
federally mandated programs. Unregulated testing accounts for the largest market
segment and is driven by company policy, state and local laws.
International companies are also potential customers. DataMed currently
provides substance abuse testing management services to approximately 40
companies internationally. However, the management of the Company believes that
the international market is expected to grow at a slower rate due to lack of
governmental regulations. Canada, for example, may become more receptive to
substance abuse testing in the next few years. Department of Transportation
regulations adopted after the passage of The North American Free Trade Agreement
require Mexican and Canadian transportation companies using U.S. road systems in
cross-border trade to comply with U.S. Department of Transportation regulations,
including substance abuse testing.
DataMed believes it is ahead of its competition when it comes to offering
international substance abuse testing management services because the Company
has taken many years to develop an overseas collection network and has developed
procedures to usher specimens through customs for analysis.
Competition
When examining competitors it is important to distinguish between program
coordination and program management. There are hundreds of companies capable of
providing program coordination services. Some of these direct competitors are:
Substance Abuse Management, Inc. ("SAMI"); Concord, Inc.; National Safety
Alliance ("NSA"); Drug Intervention Services of America ("DISA"); First Lab; and
University Services. If any of these companies change their marketing and
operational approach, they could quickly become more of a presence in the
program management marketplace.
The Company believes that DataMed's primary competitive advantage is
quality. DataMed has established policies and procedures in an attempt to
achieve total quality management and continuous quality improvement goals.
The Company believes that corporate outsourcing trends and regulatory
burdens (e.g., substance abuse testing) will continue to increase and DataMed
will attempt to capitalize on these trends. Program management companies are
increasing in number. The Company believes that SAMI, DISA, NSA, University
Services, FirstLab and Concord, Inc. are the largest competitors present in the
marketplace.
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<PAGE>
LEGAL PROCEEDINGS
In April 1996 Michael I. Ruxin, M.D. was personally named as a defendant in
a suit filed in the U.S. District Court for the Northern District of New York by
an employee of a customer involving drug test results arising under a contract
between the Company and one of its customers. The customer was also named as a
defendant in the suit. Although, the Company was not named as a defendant, it
may in the future be named under agency principles or, if liability is imposed
on Dr. Ruxin, the Company may have liability under the indemnification
provisions of the Company's Articles and Bylaws, and applicable Colorado
corporate law. The employee seeks damages against Dr. Ruxin and other named
defendants for defamation in the amount of $250,000 and for punitive damages in
the amount of $200,000. Although there are no assurances, Dr. Ruxin and the
Company believe that the suit will be settled and that the outcome of the action
will not have a material adverse effect on the Company because the amount of the
potential damages is not material in comparison to the Company's revenues. Other
than this action, the Company currently is not involved in any legal
proceedings.
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<PAGE>
MANAGEMENT
The following table sets forth the names and positions of the director,
executive officers and key employees of the Company:
<TABLE>
<CAPTION>
Officer
Name Age Position or Director Since
---- --- -------- -----------------
<S> <C> <C> <C>
Michael I. Ruxin, M.D. 50 Chairman of the Board 1989
and CEO
Joseph F. Dudziak 58 President and COO 1995
William J. Collard 55 Secretary/Treasurer, 1995
Director and Wyndgate
President
John D. Gleason 37 Director 1994
Gerald F. Willman, Jr. 39 Director and Wyndgate 1995
Vice-President
Bart K. Valdez 33 Principal Financial Officer and 1995
Director of Finance and Operations
</TABLE>
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Company are elected annually by the Board
of Directors and hold office until their successors are elected and qualified.
The following sets forth biographical information concerning the Company's
directors and executive officers for at least the past five years. All of the
following persons who are executive officers of the Company are full-time
employees of the Company.
Michael I. Ruxin, M.D., the founder of the Company, has been an officer and
director of the Company since its incorporation in 1989 and is currently the
Chairman and Chief Executive Officer of the Company. From 1982 to 1994, Dr.
Ruxin was a director of GeriMed of America, Inc., a private company
administering senior health care centers. From 1985 to 1993, Dr. Ruxin was an
officer and director of CBL Medical, Inc. ("CBL"), a public company which
managed multiple medical groups, including Medcomp Medical Group which was a
group of small clinics owned by Dr. Ruxin. CBL focused on providing second
opinions on workers compensation claims. Dr. Ruxin left CBL management in 1988
to found the Company although he remained on the board of CBL due to his
continued ownership until 1993. Five years after Dr. Ruxin left CBL management,
in 1993, CBL filed a Petition under Chapter 7 of the Federal Bankruptcy Code
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<PAGE>
to liquidate due to a change in the workers compensation regulations in the
State of California. Dr. Ruxin received a B.A. degree from the University of
Pittsburgh and an M.D. degree from the University of Southern California. Dr.
Ruxin is a licensed physician in California and Colorado. He is a member of the
American Association of Medical Review Officers.
Joseph F. Dudziak has been President and Chief Operating Officer of the
Company since June 1995. From January 1993 to June 1995, he was employed as a
"site executive" with Analysts International Corporation, a contract consulting
firm engaged primarily in development and support of software. From August 1991
to December 1992, he was a self-employed executive consultant, during which time
he provided consulting services primarily to The Wyndgate Group, Ltd. in the
areas of product development and marketing and the development of a business
plan. For the 30 years prior to August 1991, Mr. Dudziak was employed in various
capacities (most recently as a group Vice President) by Control Data Corporation
("CDC"), which was involved in the computer systems, software and information
management businesses.
William J. Collard has been a director and the Secretary/Treasurer of the
Company and the President of the Wyndgate division since May 1995. From 1984 to
May 1995 he was president and a director of The Wyndgate Group, Ltd., and
responsible for directing the sales, operations and research and development
efforts of The Wyndgate Group, Ltd. From 1976 to 1984, Mr. Collard was the
executive director of Sigma Systems, Inc., a company that provides colleges and
other institutions with administrative computer applications. Mr. Collard
received a B.S. degree in Business Administration (Finance) and an M.S. degree
in Business Administration (Quantitative Methods) from California State
University.
John D. Gleason has been a director of the Company since 1994. Since
November, 1990 he has been employed with MDS Inc., formerly MDS Health Group
Limited ("MDS"), a publicly held Canadian company that is engaged in the
business of medical laboratory testing, currently as Vice President of Corporate
Strategic Initiatives and previously as Chief Financial Officer and Vice
President of Finance. Mr. Gleason received an Honors degree (the Canadian
equivalent of a bachelors degree) from Queens University in Ontario, Canada and
a masters degree from the University of Toronto. Mr. Gleason is a chartered
accountant.
Gerald F. Willman, Jr. has been a director of the Company and the Vice
President of the Wyndgate division since May 1995. Mr. Willman was director and
then a Vice President of The Wyndgate Group, Ltd., from 1984 to 1995 and was
responsible for the overall design and development of the products developed by
The Wyndgate Group, Ltd., including research of new technologies. Prior to his
employment at The Wyndgate Group, Ltd., he was employed as a development team
leader at Systems Research, Inc. Mr. Willman received a B.S. degree from Hampden
Sydney College and an M.B.A. degree from National University.
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<PAGE>
Bart K Valdez has been the Director of Finance and Operations for the
Company and Principal Financial Officer of the Company since June, 1995. Mr.
Valdez functions under the direct supervision of the President and is
accountable for the effective operations of the Account Management Team, Medical
Review, Data Management, Vendor Management and Information Systems departments
and Finance and Accounting. From 1989 to joining the Company in 1995, he was
employed by Baxter International, Inc., a medical supply and manufacturing
company, most recently as Regional Director of Operations for the Mountain
Region. Mr. Valdez received a B.S. degree in Management from Colorado State
University and a M.B.A. degree from the University of Colorado.
The Company's Audit/Systems Committee acts as the liaison between the
Company and its independent public accountants. Its members consist of Dr. Ruxin
and Mr. Gleason who were recently appointed in such capacity and have not yet
met as a committee. The Audit/Systems Committee is responsible for reviewing and
approving the scope of the annual audit undertaken by the Company's independent
accountants and will meet with the accountants to review the progress and
results of their work, as well as any recommendations the accountants may offer.
The Audit/Systems Committee will also review the fees of the independent
accountants and make recommendations to the Board of Directors as to the
appointment of the accountants. In connection with the Company's internal
accounting controls, the Audit/Systems Committee will review the internal audit
procedures and reporting systems in place at the Company and review their
accuracy and adequacy with management and with the Company's independent
accountants.
The Company's Compensation Committee, which will recommend compensation
levels to the Board of Directors, consists of Dr. Ruxin and Mr. Collard who were
recently appointed in such capacity and have not yet met as a committee. The
Compensation Committee will review salaries, bonuses, and other forms of
compensation for officers and key employees of the Company and its subsidiaries,
and will establish salaries, benefits, and other forms of compensation for new
employees. Included in the Compensation Committee's responsibility is the
issuance of stock bonuses and stock options under the Company's two stock
option/bonus plans. In addition, the Compensation Committee will review other
matters concerning compensation and personnel as the Board of Directors may
request. The Compensation Committee will design the Company's compensation to
enable the Company to attract, retain, and reward highly qualified executives,
while maintaining a strong and direct link between executive pay, the Company's
financial performance, and total stockholder return. The Compensation Committee
believes that officers and certain other key employees should have a significant
stake in the Company's stock price performance under programs which link
executive compensation to stockholder return.
Scientific Advisory Committee
The Board of Directors has established a Scientific Advisory Committee to
advise and consult with the Board of Directors as may be requested by the Board
from time-to-time. Currently, the Scientific Advisory Committee consists of
William C. Dickey, M.D., Cathy Bryan and Ronald O. Gilcher, M.D. It is not
presently contemplated that the Scientific Advisory Committee will have formal
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<PAGE>
meetings as a group. The members of the Scientific Advisory Committee will not
receive any cash compensation from the Company for serving in that capacity, but
each will be reimbursed for any expenditures incurred on behalf of the Company.
In connection with their appointment to the Scientific Advisory Committee, in
January, 1996, Dr. Dickey, Ms. Bryan and Dr. Gilcher were issued options to
purchase 2,500, 1,000 and 1,000 shares, respectively, of the Company's Common
Stock, exercisable at $3.75 per share, which options vest over a five year
period and are exercisable until January, 2006.
William C. Dickey, M.D., Chairman of the Scientific Advisory Committee, has
been the Medical Director, Chief Executive Officer and President of the Belle
Bonfils Memorial Blood Center, Denver, Colorado since July 1990. From 1972 to
1974, he was the Director of the Blood Bank for Irwin Army Hospital, located in
Texas, and from 1974 to 1991, he was the Director of the Blood Bank for St.
Anthony Hospital, Denver, Colorado. He graduated from the University of Denver
with a B.S. degree and received his M.D. degree from the University of Colorado
School of Medicine. He was certified by the American Board of Pathology for
Anatomic and Clinical Pathology in 1972, and is licensed to practice medicine in
Colorado and Kansas.
Cathy Bryan has been the Chief Executive Officer, Administrator and FDA
Responsible Head for the Blood Bank of the Redwoods, Santa Rosa, California,
since July 1987. She received a B.A. degree in social sciences from San Jose
State University. She was one of the founders of the Blood Centers of
California, of which she served as a Director (1987) and President (1994), and
is a member of the California Blood Bank Society, of which she served as
Chairman of the Administrator Program from 1992 - 1994, and the American
Association of Blood Banks.
Ronald 0. Gilcher, M.D. has been the President and Chief Executive Officer
of the Sylvan N. Goldman Center, Oklahoma Blood Institute, Oklahoma City,
Oklahoma, since 1990 and was the director thereof from 1979 to 1990. He served
in the U.S. Army Medical Corps at Walter Reed Army Institute of Research,
Washington, D.C. from 1968 - 1971, and from 1971 to the present, has been an
assistant or associate professor at the University of Pittsburgh School of
Medicine (1971-1979) and an adjunct professor and clinical associate professor
at the University of Oklahoma School of Medicine (1979 to present). Dr. Gilcher
graduated from the University of Pittsburgh with a B.S. degree in chemistry, and
received his M.D. degree from Jefferson Medical College. He was certified by the
American Board of Internal Medicine for Internal Medicine (1969 and 1977) and by
the American Board of Internal Medicine for Hematology (1972), and is licensed
to practice medicine in the states of Pennsylvania, Oklahoma and California.
Significant Employees
The following employees make a significant contribution to the business of
the Company:
L.E. "Gene" Mundt, age 57, has been the Senior Vice President for Wyndgate
since February, 1996, where he is responsible for medical applications. Prior to
joining Wyndgate, from 1967 to 1996, Mr. Mundt was employed by Control Data
Systems, Inc., a computer hardware and software manufacturer, most recently as
the Director, Integration and Consulting Services, Central Region, North and
South America Operations. Mr. Mundt received a Bachelors degree in Math from the
University of Iowa.
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<PAGE>
Benjamin R. Budraitis, age 38, has been the Director of Sales and Marketing
for the Company since 1992. Prior to joining the Company, Mr. Budraitis was with
Baxter International, a medical supply and manufacturing company, from 1980 to
1992, where he was most recently a regional manager. Mr. Budraitis received a
Bachelors degree in biology from Rockford College and a Masters degree in
Management from the University of Colorado.
Paul A. Thompson, age 28, has been the Controller of the Company since
November 1995. Prior to joining the Company, from 1992 to 1995, Mr. Thompson was
a senior auditor with Ernst & Young LLP, and from February 1991 to August 1991,
Mr. Thompson was a manager with Kila Systems, Inc., a computer hardware
supplier. Mr. Thompson holds a B.A. degree in economics from Pomona College and
an M.B.A. degree from the University of Colorado. Mr. Thompson is a certified
public accountant, and is a member of the American Institute of Certified Public
Accountants and of the Colorado Society of Certified Public Accountants.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding compensation paid to
the Company's CEO and the other executive officers of the Company who received
in excess of $100,000 of salary and bonus from the Company during the year ended
December 31, 1995:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
------
Restricted
Name and Stock Options Other
Position Year Salary Bonus Awards & SARs Compensation
-------- ---- ------ ----- ------ ------ ------------
($$) ($$) ($$) (##) ($$)
<S> <C> <C> <C> <C> <C> <C>
Michael I. Ruxin, 1995 $190,000 -0- -0- -0- $16,520 (1)
Chairman and CEO 1994 $180,000 -0- -0- -0- $ 8,216 (2)
1993 $180,000 -0- -0- -0- $ 8,216 (2)
Joseph F. Dudziak, 1995 $105,000 -0- -0- 100,000 (3) $ 4,800 (4)
President and COO 1994 -0- -0- -0- -0- $ -0-
1993 -0- -0- -0- -0- $ -0-
William Collard, 1995 $100,000 -0- -0- -0- $30,400 (5)
Wyndgate President 1994 $ 75,000 $ 100 (6) -0- -0- $ -O-
1993 $ 75,000 $2,000 (7) -0- -0- $ -0-
- ----------
(1) Dr. Ruxin receives $5,000 per annum in life insurance premiums and a $960 per month car allowance.
(2) Dr. Ruxin received a car allowance of $368 per month, and $3,800 in life insurance premiums.
(3) In June 1995, Mr. Dudziak received options to purchase 100,000 shares exercisable at $2.45 per share. These options vest at
the rate of 20% per year. No value has been attributed to these options since the exercise price was the fair value of the
Company's shares at the time of grant.
(4) Mr. Dudziak receives $400 per month car allowance.
(5) Mr. Collard receives a $450 per month car allowance. In 1995, Mr. Collard received $25,000 under his non-compete agreement.
(6) In 1994, Mr. Collard received a performance bonus of $100.
(7) In 1993, Mr. Collard received a performance bonus of $2,000.
</TABLE>
Employment Agreements
The Company has entered into an employment agreement with Dr. Ruxin for a
period of five years commencing May 24, 1995. The initial term of this agreement
can be extended at the close of the second year for an additional two years
beyond the initial term (creating a term of seven years from May 24, 1995).
Under the agreement, Dr. Ruxin receives a salary of $190,000 per year and
certain other fringe benefits. Dr. Ruxin's employment agreement includes a
cost-of-living increase at the rate of 2 1/2% per annum, plus any other increase
which may be determined from time to time at the discretion of the Company's
Board of Directors. Pursuant to the employment agreement, Dr. Ruxin is provided
with a car on such lease terms to be determined by the Company, provided that
the monthly operating costs (including lease payments) to be paid by the Company
will not exceed $960. The agreement also includes a covenant not to compete for
which Dr. Ruxin was to be paid a lump sum of $115,000 on January 1, 1996. No
payments have been made in connection with the covenant not to compete. Dr.
Ruxin has now agreed that such payment will have to be made only if and when the
Company has sufficient cash flow, as determined by the Board of Directors.
Proceeds from this offering will not be used to make any
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<PAGE>
payments in connection with the covenant not to compete. Dr. Ruxin's employment
under the employment agreement may be terminated by Dr. Ruxin upon the sale by
the Company of substantially all of its assets, the sale, exchange or other
disposition of at least 40% of the outstanding voting shares of the Company, a
decision by the Company to terminate its business and liquidate its assets, the
merger or consolidation of the Company with another entity or an agreement to
such a merger or consolidation or any other type of reorganization, or if the
Company makes a general assignment for the benefit of creditors, files for
voluntary bankruptcy or if a petition for the involuntary bankruptcy of the
Company is filed in which an order for relief is entered and remains in effect
for a period of thirty days or more, or if the Company seeks, consents to, or
acquiesces in the appointment of a trustee, receiver or liquidator of the
Company or any material part of its assets. Dr. Ruxin's employment under the
employment agreement also may be terminated by reason of Dr. Ruxin's death or
disability or for cause as set forth in the employment agreement. If the
agreement is terminated by the Company for any reason other than cause or
permanent disability, the Company must pay Dr. Ruxin a lump sum severance
payment of $2.5 million.
On May 24, l995, the Company also entered into a five year employment
agreement with William J. Collard which contains the same extension provision
and reasons for termination as does Dr. Ruxin's agreement, and provides for an
annual salary of $100,000. Mr. Collard's employment agreement includes a
cost-of-living increase at the rate of 2 1/2% per annum, plus any other increase
which may be determined from time to time at the discretion of the Company's
Board of Directors. Mr. Collard's agreement also contains a covenant not to
compete, with payments of $100,000 for the covenant to have been made on January
1, 1996 and May 24, 1996, respectively. Aggregate payments of $200,000 were made
as follows: $25,000 in December, 1995; $75,000 in January, 1996; and $100,000 in
May, 1996. If Mr. Collard's agreement is terminated by the Company for any
reason other than cause or permanent disability, the Company must pay him a lump
sum severance payment of $2.5 million. Mr. Collard also receives a car allowance
of $450 per month.
The Company also has an employment agreement with Gerald F. Willman, Jr.
which contains an extension provision for the term of the agreement and reasons
for termination similar to those of Dr. Ruxin and Mr. Collard with an annual
salary of $95,000, except the initial term is for three years commencing May 24,
1995 and the extension is for an additional two years. Mr. Willman's employment
agreement includes a cost-of-living increase at the rate of 2 1/2% per annum,
plus any other increase which may be determined from time to time in the
discretion of the Company's Board of Directors. The employment agreement
requires that if he is terminated by the Company for any reason other than cause
or permanent disability, the Company must pay Mr. Willman a lump sum severance
payment of $1.0 million.
On June 28, 1995, the Company entered into an employment agreement with
Joseph F. Dudziak for a two year term pursuant to which Mr. Dudziak earns a
salary of $105,000 per year. Mr. Dudziak's employment agreement contains the
same reasons for termination as the other employment agreements described above,
but does not include the same extension provision or an annual cost-of-living
increase. However, if increased, his salary may not be decreased
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<PAGE>
thereafter during the term of the agreement without Mr. Dudziak's consent. If
Mr. Dudziak's employment is terminated by the Company for any reason other than
for cause or permanent disability, the Company is required to pay Mr. Dudziak
his salary and benefits for the full two years. Mr. Dudziak is entitled to
certain incentive compensation based on the Company's pre-tax profits for 1996.
The agreement also grants Mr. Dudziak options to purchase an aggregate of
100,000 shares of the Company's common stock. Subject to early vesting in
certain circumstances, the options vest over a five year period at the rate of
20% per year and are exercisable at $2.45 per share, which was the estimated
fair value of the shares at the time of grant. Mr. Dudziak receives a car
allowance of $400 per month.
On February 8, 1996, the Company entered into an employment agreement with
L. E. "Gene" Mundt for a three year term pursuant to which Mr. Mundt earns a
salary of $95,000 per year. Mr. Mundt's employment agreement contains the same
reasons for termination as the other employment agreements described above, but
does not include an extension provision or an annual cost-of-living increase. If
Mr. Mundt's salary is increased, it may not be decreased thereafter during the
term of the agreement without Mr. Mundt's consent. If Mr. Mundt's employment is
terminated for any reasons other than for cause or permanent disability, the
Company is required to pay Mr. Mundt his salary and benefits for the full three
year period. Mr. Mundt is entitled to certain incentive compensation based on
the Company's pre-tax profits for 1996. The agreement also grants Mr. Mundt
options to purchase an aggregate of 75,000 shares of the Company's Common Stock
at an exercise price of $3.75 per share which was the estimated fair value of
the shares at the time of grant. Under the terms of the agreement, Mr. Mundt
receives non-qualified stock options to purchase 25,000 shares of Common Stock
which are exercisable for ten years from the date of the agreement and incentive
stock options to purchase 50,000 shares of common stock which, subject to early
vesting in certain circumstances, vest over a five year period at the rate of
20% per year. Mr. Mundt receives a car allowance of $400 per month.
The Company also has an employment agreement with Bradley V. Maberto which
contains an extension provision for the term of the agreement and reasons for
termination similar to those of Mr. Willman. The agreement provides for an
annual salary of $55,000. The initial term for the agreement is three years
commencing on May 24, 1995 and the extension is for an additional two years. Mr.
Maberto's employment agreement includes a cost-of-living increase at the rate of
2 1/2% per annum, plus any other increase which may be determined from time to
time in the discretion of the Company's Board of Directors. The agreement
requires that if Mr. Maberto is terminated by the Company for any reason other
than cause or permanent disability, the Company must pay Mr. Maberto a lump sum
severance payment of $1.0 million.
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<PAGE>
Compensation of Directors
Members of the Company's Board of Directors are not compensated in their
capacities as Board Members. However, the Company reimburses all of its
officers, directors and employees for accountable expenses incurred on behalf of
the Company.
Stock Option Plan
The Company has adopted its Amended and Restated Stock Option Plan (the
"Plan") which provides for the issuance of options or stock bonuses to purchase
up to 1,234,279 shares of Common Stock to employees, officers, directors and
consultants of the Company. The purposes of the Plan are to encourage stock
ownership by employees, officers, directors and consultants of the Company so
that they may acquire or increase their proprietary interest in the Company, to
(i) reward employees, officers, directors and consultants for past services to
the Company and (ii) encourage such persons to become employed by or remain in
the employ of or otherwise continue their association with the Company and to
put forth maximum efforts for the success of the business of the Company.
The Plan is administered by a Committee consisting of the Board of
Directors or Compensation Committee, if appointed. At its discretion, the
Committee may determine the persons to whom Options may be granted and the terms
thereof. As noted above, the Committee may issue options to the Board.
The terms of any Options granted under the Plan are not required to be
identical as long as they are not inconsistent with the express provisions of
the Plan. In addition, the Committee may interpret the Plan and may adopt, amend
and rescind rules and regulations for the administration of the Plan.
Options may be granted as incentive stock options ("Incentive Options")
intended to qualify for special treatment under the Internal Revenue Code of
1986, as amended (the "Code"), or as nonqualified stock options ("Non-Qualified
Options") which are not intended to so qualify. Only employees of the Company
are eligible to receive Incentive Options. The period during which Options may
be exercised may not exceed ten years. The exercise price for Incentive Options
may not be less than 100% of the fair market value of the Common Stock on the
date of grant; except that the exercise price for Incentive Options granted to
persons owning more than 10% of the total combined voting power of the Common
Stock may not be less than 110% of the fair market value of the Common Stock on
the date of grant and may not be exercisable for more than five years. The
exercise price for Non-Qualified Options may not be less than 80% of the fair
market value of the Common Stock on the date of grant. The Plan defines "fair
market value" as the last sale price of the Company's Common Stock as reported
on a national securities exchange or on the NASDAQ NMS or, if the quotation for
the last sale reported is not available for the Company's Common Stock, the
average of the closing bid and asked prices of the Company's Common Stock as
reported by NASDAQ or on the electronic bulletin board or, if none, the National
Quotation Bureau, Inc.'s "Pink Sheets" or, if such quotations are unavailable,
the value determined by the Committee in accordance with its discretion in
making a bona fide, good faith determination of fair market value.
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<PAGE>
The Plan contains provisions for proportionate adjustment of the number of
shares issuable upon the exercise of outstanding Options and the exercise price
per share in the event of stock dividends, recapitalizations resulting in stock
splits or combinations or exchanges of shares.
In the event of the proposed dissolution or liquidation of the Company, or
any corporate separation or division, including, but not limited to, split-up,
split-off or spin-off, merger or consolidation of the Company with another
company in which the Company is not the survivor, or any sale or transfer by the
Company of all or substantially all its assets or any tender offer or exchange
offer for or the acquisition, directly or indirectly, by any person or group for
more than 50% of the then outstanding voting securities of the Company, the
Committee may provide that the holder of each Option then exercisable will have
the right to exercise such Option (at its then current Option Price) solely for
the kind and amount of shares of stock and other securities, property, cash or
any combination thereof receivable upon such dissolution, liquidation, corporate
separation or division, merger or consolidation, sale or transfer of assets or
tender offer or exchange offer, by a holder of the number of shares of Common
Stock for which such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, merger or
consolidation, sale or transfer of assets or tender offer or exchange offer; or
in the alternative the Committee may provide that each Option granted under the
Plan will terminate as of a date fixed by the Committee; provided, however, that
not less than 30 days written notice of the date so fixed will be given to each
recipient, who will have the right, during the period of 30 days preceding such
termination, to exercise the Option to the extent then exercisable. To the
extent that Section 422(d) of the Code would not permit this provision to apply
to any outstanding Incentive Options, such Incentive Options will immediately
upon the occurrence of the dissolution or liquidation, etc., be treated for all
purposes of the Plan as Non-Qualified Options and shall be immediately
exercisable as such.
Except as otherwise provided under the Plan, an Option may not be exercised
unless the recipient then is an employee, officer or director of or consultant
to the Company or a subsidiary of or parent to the Company, and unless the
recipient has remained continuously as an employee, officer or director of or
consultant to the Company since the date of grant of the Option.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary or parent to the Company (other than
by reason of death, disability or retirement), other than for cause, all Options
theretofore granted to such recipient but not theretofore exercised will
terminate three months after the date the recipient ceased to be an employee,
officer or director of, or consultant to, the Company.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary or parent to the Company by reason of
termination for cause, all Options theretofore granted to such recipient but not
theretofore exercised will terminate thirty days after the date the recipient
ceases to be an employee, officer or director of, or consultant to the Company.
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<PAGE>
If a recipient dies while an employee, officer or director of or a
consultant to the Company, or if the recipient's employment, officer or director
status or consulting relationship, shall terminate by reason of disability or
retirement, all Options theretofore granted to such recipient, whether or not
otherwise exercisable, unless earlier terminated in accordance with their terms,
may be exercised by the recipient or by the recipient's estate or by a person
who acquired the right to exercise such Options by bequest or inheritance or
otherwise by reason of the death or disability of the recipient, at any time
within one year after the date of death, disability or retirement of the
recipient; provided, however, that in the case of Incentive Options such
one-year period will be limited to three months in the case of retirement.
Options granted under the Plan are not transferable other than by will or
by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Options may be exercised,
during the lifetime of the recipient, only by the recipient and thereafter only
by his legal representative.
The Committee may suspend, terminate, modify or amend the Plan, but without
shareholder approval the Board may not materially increase the number of shares
as to which Options may be granted, change the eligibility requirements for
persons entitled to participate in the Plan or materially increase the benefits
to be received by any participant under the Plan. The Board may not adversely
affect any Option previously granted without the consent of the participant.
Unless sooner terminated, the Plan will expire on May 31, 2000.
Option Grants
The following table sets forth certain information regarding options to
purchase shares of Common Stock issued to Executive Officers of the Company
during the fiscal year ended December 31, 1995:
Option Grants in 1995
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options/Warrants
Options Granted to
Name Granted Employees in 1995 Exercise Price Expiration Date
---- ------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Joseph F. Dudziak 100,000 (1) 48.5% $2.45 6/25/05
Bart K. Valdez 20,000 (2) 9.7% $2.45 6/5/05 and
9/21/05
</TABLE>
- ----------
(1) Options to purchase 20,000 shares vest each year Mr. Dudziak remains in the
employ of the Company, beginning June 28, 1996, and continuing each June 28
thereafter. Once vested, the options are exercisable for a ten year period.
(2) Options to purchase 4,000 shares vest each year Mr. Valdez remains in the
employ of the Company, beginning June 5, 1995 and September 21, 1995, and
continuing each anniversary therafter. Once vested, the options are
exercisable for a ten year period.
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<PAGE>
There were no options exercised during the last fiscal year by the
Company's executive officers, and no value has been ascribed to their
unexercised options at December 31, 1995 as there was and is no public market
for the Company's Common Stock.
Limitations on Directors' and Officers' Liability
The Company's Articles of Incorporation limit the liability of directors to
shareholders for monetary damages for breach of a fiduciary duty except in the
case of liability: (i) for any breach of their duty of loyalty to the Company or
its shareholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for unlawful
distributions as provided in Section 7-108-403 of the Colorado Business
Corporation Act; or (iv) for any transaction from which the director derived an
improper personal benefit.
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of directors and officers of the Company to the maximum extent
permitted by law, including Section 7-109-102 of the Colorado Business
Corporation Act, against all liability and expense (including attorneys' fees)
incurred by reason of the fact that the officer or director served in such
capacity for the Company, or in a certain capacity for another entity at the
request of the Company. Section 7-109-102 of the Colorado Business Corporation
Act provides generally for indemnification of directors against liability
incurred as a result of actions, suits or proceedings if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the Company. The Company has entered into employment
agreements with certain of its employees which provide for indemnification in
addition to the indemnification provided for above. These agreements, among
other things, indemnify and hold harmless the employees against all claims,
actions, costs, expenses, damages and liabilities arising out of or in
connection with activities of the Company or its employees or other agents
within the scope of the employment agreements or as a result of being an officer
or director of the Company. Excluded is indemnification for matters resulting
from gross negligence or willful misconduct of the employee. The Company
believes that these provisions and agreements are necessary to attract and
retain qualified persons as directors and officers. Insofar as indemnification
for liabilities arising under the Securities Act of 1933, as amended (the "Act")
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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Except as described under "Legal Proceedings," there is no pending
litigation or proceeding involving a director, officer, employee or other agent
of the Company as to which indemnification is being or may be sought, and the
Company is not aware of any other pending or threatened litigation that may
result in claims for indemnification by any director, officer, employee or other
agent.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of the date hereof, the ownership of the
Company's Common Stock by (i) each director and executive officer of the
Company, (ii) all executive officers and directors of the Company as a group,
and (iii) all persons known by the Company to beneficially own more than 5% of
the Company's Common Stock. The effect of conversion of $516,200 of principal
plus accrued interest of 10% Notes into 144,643 shares of Common Stock has been
included in the percentages shown below.
<TABLE>
<CAPTION>
Amount and Nature of Percent of Class
Name and Address of Shareholder Beneficial Ownership (1) Before Offering After Offering
------------------------------- ------------------------ --------------- --------------
<S> <C> <C> <C>
Michael I. Ruxin, M.D. (1) 952,917 (2) 18.6% 13.4%
12600 W. Colfax
Suite A-500
Lakewood, CO 80215
Joseph F. Dudziak (1) 45,833 (3) 0.9% 0.6%
12600 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
William J. Collard (1) 664,006 (4)(5) 13.0% 9.1%
11l21 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Gerald F. Willman, Jr. (1) 938,514 (6) 18.4% 13.2%
1l121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Bart K. Valdez (1) 5,786 (7) 0.1% 0.08%
12500 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
Lori J. Willman (1) 938,514 (8) 18.4% 13.2%
11121 Sun Center Dri
Suite C
Rancho Cordova, CA 95670
Timothy J. Pellegrini 363,480 (9) 7.1% 5.1%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
MDS, Inc. 325,000 6.8% 4.6%
100 International Blvd.
Etobicoke, Ontario
Canada M9W 6J6
Gordon Segal (1) 262,917 (10) 5.1% 3.7%
550 5th Ave
New York, NY 10019
John D. Gleason -0- -0-% -0-%
100 International Blvd.
Etobicoke, Ontario
Canada M9W 6J6
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<PAGE>
All Directors and Executive 2,607,056 50.5% 36%
Officers as a group (6 persons)
- ----------
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934. Unless otherwise stated below, each such person
has sole voting and investment power with respect to all such shares. Under Rule 13d-3(d), shares not outstanding which are
subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed.
(2) Includes 6,667 shares underlying 10% Notes purchased by Michael I. Ruxin, M.D. in the principal amount of $25,000 and
includes 6,250 shares underlying warrants issued in connection with the purchase of the 10% Notes. Dr. Ruxin has advised the
Company he does not intend to convert his 10% Notes into shares and therefore the principal and accrued interest will be paid
from the proceeds of this offering. See Use of Proceeds.
(3) Includes options exercisable from June 28, 1996 until June 27, 2006 to purchase 20,000 shares at $2.45 per share, 13,333
shares underlying 10% Notes purchased by Joseph F. Dudziak in the principal amount of $50,000 and 12,500 shares underlying
warrants issued in connection with the purchase of the 10% Notes. Does not include 80,000 shares underlying the unvested
portion of Mr. Dudziak's option.
(4) Includes 16,000 shares underlying 10% Notes purchased by William J. Collard in the principal sum of $60,000 and 15,000 shares
underlying warrants issued in connection with the purchase of the 10% Notes. Mr. Collard has advised the Company that he does
not intend to convert his 10% Notes into shares and therefore the principal and accrued interest will be paid from the
proceeds of this offering. See Use of Proceeds.
(5) William J. Collard has granted individual options to an employee of Wyndgate and certain unaffiliated persons to purchase all
or any part of 1,663 of his shares of the Company, exercisable until September 21, 2005, and to purchase all or any part of
49,654 of his shares of the Company, exercisable at $1 per share until May 19, 2020.
(6) Includes 368,481 shares owned by Lori J. Willman, the spouse of Gerald F. Willman, Jr. Gerald F. Willman, Jr. has granted
individual options to certain employees of Wyndgate to purchase all or any part of 109,434 of his shares of the Company,
exercisable until September 21, 2005.
(7) Includes 2,986 shares underlying 10% Notes purchased by Bart K. Valdez in the principal amount of $11,200 and 2,800 shares
underlying warrants issued in connection with the purchase of the 10% Notes. Does not include 20,000 shares underlying the
unvested portion of Mr. Valdez's options.
(8) Includes 570,033 shares owned by Gerald F. Willman, Jr., the spouse of Lori J. Willman.
(9) Includes 5,000 shares underlying an option owned by Mr. Pellegrini.
(10) Includes 6,667 shares underlying 10% Notes purchased by Gordon Segal in the principal amount $25,000 and 6,250 shares
underlying warrants issued in connection with the purchase of the 10% Notes.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 5, 1995, the shareholders of the Company approved a loan in the
amount of $161,500, with interest at 8% per annum, made by the Company to Sonya
M. Levine, the wife of Michael I. Ruxin, in 1994, which had not previously been
approved by the shareholders in accordance with Colorado corporate law.
Effective June 30, 1995, the Company forgave Ms. Levine's note in consideration
of the forgiveness of a note payable by the Company to Dr. Ruxin in the same
amount and at the same interest rate as Ms. Levine's note.
In May 1996, Gordon Segal, a beneficial owner of over 5% of the outstanding
Common Stock of the Company, and Michael I. Ruxin, William J. Collard, Joseph F.
Dudziak and Bart K. Valdez, officers and directors of the Company, purchased 10%
Notes in the principal amounts of $25,000, $25,000, $60,000, $50,000 and
$11,200, respectively, in the 10% Note offering by the Company. The notes are
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convertible into 6,667, 6,667, 16,000, 13,333 and 2,986 shares of the Company's
Common Stock, respectively, ($3.75 of principal amount per share). Drs. Segal
and Ruxin and Messrs. Collard, Dudziak and Valdez were also issued warrants to
purchase 6,250, 6,250, 15,000, 12,500 and 2,800 shares of the Company's Common
Stock, respectively, at $3.75 per share in connection with their purchase of the
10% Notes. The purchases of the 10% Notes were on the same terms and conditions
as purchases by non-affiliates.
The Board of Directors of the Company has adopted a resolution that all
future transactions between the Company and its officers, directors, or
principal shareholders, or any affiliate of any of such person, must be approved
or ratified by a majority of the disinterested directors of the Company, and the
terms of such transaction must be no less favorable to the Company than could
have been realized by the Company in an arms-length transaction with an
unaffiliated person.
The Board of Directors of the Company has also adopted a resolution that
provides that the areas of business in which the Company shall be interested for
the purpose of the doctrine of corporate opportunities shall be the business of
information management software products and services. Any business opportunity
which falls within such areas of interest must be brought to the attention of
the Company for acceptance or rejection prior to any officer or director of the
Company taking advantage of such opportunity. John D. Gleason has been excluded
from such requirement. Any business opportunity outside such areas of interest
may be entered into by any officer or director of the Company without the
officer or director first offering the business opportunity to the Company.
Dr. Ruxin has personally guaranteed the Company's $1 million line of credit
at Mountain Park Bank and various leases totaling approximately $1.2 million.
In June 1995, the Company agreed to pay approximately $20,000 in tax
liability incurred by the shareholders of The Wyndgate Group, Ltd. (an "S"
corporation) in connection with the merger between The Wyndgate Group, Ltd. and
the Company.
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<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue up to 40,000,000 shares of Common Stock,
$.01 par value. There are 4,966,626 shares presently outstanding. All shares of
Common Stock have equal voting rights and, when validly issued and outstanding,
have one vote per share in all matters to be voted upon by shareholders. There
are approximately 103 holders of record of the Company's Common Stock. The
shares of Common Stock have no preemptive, subscription, conversion or
redemption rights and may be issued only as fully paid and non-assessable
shares. Cumulative voting in the election of directors is not allowed, which
means that the holders of a majority of the outstanding shares represented at
any meeting at which a quorum is present will be able to elect all of the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. On liquidation of the
Company, each common shareholder is entitled to receive a pro rata share of the
Company's assets available for distribution to common stockholders.
The Company has outstanding options and warrants to purchase an aggregate
of 788,709 shares of Common Stock, excluding 137,646 shares (plus up to 6,997
shares issuable upon conversion of accrued interest) issuable upon conversion of
the 10% Notes, at exercise prices ranging from $1.00 to $3.75 per share and
expiration dates ranging from July 31, 1996 to May 24, 2006. The Company has no
stock option plan or similar plan which may result in the issuance of stock
options, stock purchase warrants or stock bonuses other than: (i) the Amended
and Restated Stock Option Plan adopted by the Company pursuant to which an
aggregate of 1,234,279 shares of Common Stock have been reserved for issuance
pursuant to options or warrants; and (ii) the right of shareholders of the
Company who purchased shares in the Company's May 1995 private placement to
receive a "share adjustment" to the extent the public offering price per share
of Common Stock is less than $4.90.
Preferred Stock
The Company is authorized to issue up to a total of 10,000,000 shares of
preferred stock, $.01 par value, with the shares to be issued in series by the
Board of Directors. The Company's Board of Directors has designated 100,000
shares of preferred stock as Series A Preferred Stock, of which 66,667 were
issued and subsequently converted into an equal number of shares of the
Company's Common Stock. The remaining shares of preferred stock may be issued in
one or more series from time to time with such designations, rights, preferences
and limitations as the Company's board of directors may determine without
approval of its shareholders. Series A Preferred Stock has the same voting
rights of Common Stock, except that the holders of Series A Preferred Stock are
entitled to elect as a class one director to the Company's Board of Directors.
The holders of the Series A Preferred Stock shall be entitled to dividends when,
as and if declared on the same basis as the holders of the Company's Common
Stock. The rights, preferences and limitations of separate series of serial
preferred stock may differ with respect to such matters as may be determined by
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<PAGE>
the Company's Board of Directors, including without limitation, the rate of
dividends, method or nature or prepayment of dividends, terms of redemption,
amounts payable on liquidation, sinking fund provisions, conversion rights and
voting rights. The ability of the Board to issue preferred stock could also be
used by it as a means for resisting a change of control of the Company and can
therefore be considered an "anti-takeover" device. The Company currently has no
plans to issue any shares of Preferred Stock.
10% 3-Year Convertible Notes
The $751,200 principal amount of outstanding 10% Notes accrue interest at
the rate of 10% per annum until maturity, which is 20 days after the date
hereof. See Use of Proceeds. The dates of the Notes vary from May 2, 1996 to
June 25, 1996, depending upon the date funds were received from subscribers. The
10% Notes may be prepaid in whole or in part from time to time without penalty.
The 10% Notes are convertible to Common Stock at the rate of one share per $3.75
of interest and principal due and payable. Holders of $516,200 in principal
amount of 10% Notes have advised the Company they wish to convert the principal
and interest on their 10% Notes into an aggregate of 137,646 shares and 6,997
shares, respectively, of Common Stock upon the date hereof. In addition, 187,800
shares of Common Stock are issuable upon exercise of warrants issued in
conjunction with the 10% Note offering.
Class A Warrants
Each Warrant entitles the holder hereof to purchase one share of Common
Stock at an exercise price of $ (120% of the initial public offering price of
the Common Stock) per share, with a credit of $.50 per Warrant surrendered on
exercise, subject to adjustment in certain events, at any time prior to , 1999.
The Warrants are subject to redemption by the Company at $.55 per Warrant,
at any time during the first or second years after the date of this Prospectus
and at $.75 per Warrant at any time during the third year after the date of this
Prospectus and prior to their expiration, on 30 days' prior written notice to
the holders of Warrants, provided that the daily trading price per share of
Common Stock has been as least $ (140% of the Warrant exercise price) for a
period of at least 20 consecutive trading days ending within 10 days prior to
the date upon which the notice of redemption is given. For purposes of
determining the daily trading price of the Company's Common Stock, if the Common
Stock is listed on a national securities exchange, is admitted to unlisted
trading privileges on national securities exchange, or is listed for trading on
a trading system of the NASD such as the NASDAQ Small Cap Market or the
NASDAQ/NMS, then the last reported sale price of the Common Stock on such
exchange or system each day shall be used or is the Common Stock is not so
listed on such exchange or system or admitted to unlisted trading privileges
then the average of the last reported high bid prices reported by the National
Quotation Bureau, Inc. each day shall be used to determine such daily trading
price. The Warrants will be exercisable until the close of the business day
preceding the date fixed for redemption, if any.
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<PAGE>
The Warrants will be issued in registered form pursuant to the terms of a
Warrant Agreement dated as of , 1996, (the "Warrant Agreement") between the
Company and American Securities Transfer and Trust Inc., as Warrant Agent.
Reference is made to said Warrant Agreement (which has been filed as an Exhibit
to the Registration Statement of which this Prospectus is a part) for a complete
description of the terms and conditions thereof. The description herein is
qualified in its entirety by reference to the warrant Agreement.
The exercise prices and number of shares of Common Stock or other
securities issuable on exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend, stock split,
recapitalization, reorganization, merger or consolidation of the Company.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
cashier's or certified check payable to the Company) to the Warrant Agent for
the number of warrants being exercised. The Warrant holders do not have the
rights or privileges of holders of Common Stock.
Dividend Policy
Dividends are payable on Common Stock when, as, and if declared by the
Board of Directors out of funds legally available to pay dividends, subject to
any preferences which may be given to holders of preferred stock. The Company
has paid no cash dividends to date and it does not anticipate payment of cash
dividends in the foreseeable future.
Stock Transfer Agent
The Company has designated American Securities Transfer and Trust, Inc. as
its transfer agent for the Common Stock and as its Warrant Agent.
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<PAGE>
Underwriting
The Underwriters named below, acting through the Representative, have
jointly and severally agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company and the Company has agreed
to sell to the Underwriters, the respective number of shares of Common Stock and
Warrants set forth opposite their names below at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus:
Underwriters Number of Shares Number of Warrants
R A F Financial Corporation
First of Michigan Corporation
----------------- -----------------
TOTAL 2,000,000 1,000,000
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the securities offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to purchase 2,000,000 shares of
Common Stock and 1,000,000 Warrants, if any are purchased.
The Underwriters propose to offer part of the shares of Common Stock and
Warrants offered hereby directly to the public at the offering price and part of
such shares of Common Stock and Warrants to certain dealers at a price that
represents a concession within the discretion of the Representative. The
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority. The Underwriters may allow, and such dealers may
re-allow, a concession within the discretion of the Representative. After the
initial offering, the offering price and the selling terms may be changed by the
Underwriters.
The Common Stock and Warrants offered by the Underwriters are subject to
prior sale. The Underwriters reserve the right to withdraw, cancel or modify
such offer (which may be done only by filing an amendment to the Registration
Statement) and to reject orders in whole or in part for the purchase of any of
the Common Stock and Warrants and to cancel any sale even after the purchase
price has been paid if such sale, in the opinion of the Underwriters, would
violate federal or state securities laws or a rule or policy of the NASD.
The Company and the Underwriters have agreed to indemnity each other and
related persons against certain liabilities, including liabilities under the
Securities Act, and, if such indemnifications are unavailable or are
insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements between them based upon the relative benefits received
from the Offering and the relative fault resulting in such damages. Such
relative benefits and relative fault would be determined in legal actions among
the parties. Under such contribution arrangements, the maximum amount payable by
any Underwriter would be the public offering price of the Common Stock and
Warrants underwritten and distributed by such Underwriter.
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<PAGE>
Except for the outstanding securities described herein and except upon the
exercise of the options and warrants described herein, the Company has agreed
not to sell any additional securities for six months after the date of this
Prospectus without the Representative's prior written consent. The officers and
directors of the Company (excluding William J. Collard and Gerald F. Willman,
Jr.)' holders of more than 5% of the Company's outstanding Common Stock prior to
the Offering, and their affiliates have entered into agreements which provide
that such persons, who own an aggregate of 2,241,961 shares of Common Stock, may
not sell any of such shares without the consent of the Representative during a
13 month period commencing on the date of this Prospectus. The agreements also
provide that any sales of Common Stock by such persons pursuant to Rule 144 will
be executed through the Representative. See Shares Eligible for Future Sale.
The Company has granted to the Underwriters an option exercisable for 30
days from the date of this Prospectus to purchase up to 300,000 additional
shares of Common Stock and 150,000 Warrants from the Company at the respective
Prices to Public less the Underwriting Discounts solely to cover
over-allotments, if any. In addition, the Company has agreed to pay to the
Representative at the closing of the Offering, a non-accountable expense
allowance of 3 % of the aggregate initial public offering price of the Common
Stock to cover expenses incurred by the Representative in connection with the
Offering, reduced by $40,000 previously advanced by the Company.
The Company has agreed to issue, for $50.00, warrants to the Representative
to purchase 200,000 shares of Common Stock. These warrants are exercisable at
any time during the five year period after the date of this Prospectus at
$...... per share (120% of the initial public offering price). These warrants
are not transferable for one year from the date of this Prospectus except (i) to
an Underwriter or a partner or officer of an Underwriter or (ii) by will or
operation of law. Any profit realized on the sale of these warrants or the
underlying shares may be deemed additional underwriting compensation. Commencing
one year from the date hereof, holders of these warrants and the shares
underlying these warrants will have demand and piggyback registration rights for
periods of five years and seven years, respectively, with respect to these
warrants and the underlying shares. These warrants and the shares of Common
Stock underlying these warrants have been registered under the Securities Act by
means of the Registration Statement of which this Prospectus is a part.
In addition to the aforementioned warrants, the Company has agreed upon
completion of the Offering to issue to the Representative, for $50.00,
additional warrants to purchase 100,000 shares of Common Stock. These warrants
contain the same terms and conditions as the Warrants except that (i) the
exercise price of these warrants will be 120% of the exercise price of the
Warrants, and (ii) these warrants will not be transferable for a period of one
year after the date of this Prospectus except (i) to an Underwriter or a partner
or officer of an Underwriter, or (ii) by will or operation of law.
If any warrants issued to the Representative are exercised during the first
year after the date of this Prospectus, then any Common Stock acquired as a
result of any such exercise may not be transferred or assigned until after the
expiration of such one year period.
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<PAGE>
For a period of three years from the date hereof, the Representative has a
preferential right to purchase for its account or to sell for the account of the
Company, or any parent or subsidiaries of the Company, any securities with
respect to which any of them may seek to sell, publicly or privately, for cash.
The Prices to Public of the Common Stock and Warrants have been determined
by negotiations between the Company and the Representative, with consideration
being given to the current status of the Company's business, its financial
condition, its present and prospective operations, the general status of the
securities market, and the market conditions for new offerings of securities.
The price bears no relationship to the assets, net worth, book value, sales
price of securities issued to shareholders of the Company, or any other criteria
of value.
The Company has agreed to give the Representative notice of meetings of its
Board of Directors and to grant access to such meetings to a representative of
the Representative. Any such representative will have no official status or
voting rights at any such meeting.
For a period of five years after the date of this Prospectus, the Company
has agreed to pay the Representative a consulting fee in connection with any
merger, consolidation, stock exchange or acquisition or sale of all or a
material part of the assets or business of any entity, if such transaction
involves the Company, its parent company, or any of its subsidiaries, if such
transaction was initiated by the Representative. The total fee will be from 1%
to 5 % of the value of the transaction. In connection with any such transaction,
the Representative has agreed to provide consulting services which are customary
in the industry. If the Company, its parent company, or any of its subsidiaries,
proposes to engage in any such type of transaction which is not initiated by the
Representative, but in connection with which the Company, its parent company, or
any of its subsidiaries, proposes to obtain services from an investment banker,
the Company has agreed that the Representative will have the first opportunity
to provide consulting services which are customary in the industry, in
connection therewith. In such event, the fee to be paid to the Representative
will be 50 % of the total fee described above.
If the Representative, at its election, at any time one year after the date
of this Prospectus, solicits the exercise of the Warrants, the Company will be
obligated, subject to certain conditions, to pay the Representative a
solicitation fee equal to 10% of the aggregate proceeds received by the Company
as a result of the solicitation. No warrant solicitation fees will be paid
within one year after the date of this Prospectus. The Representative may
reallow a porion of the fee to soliciting broker-dealers. Because the
Representative is a member of the NASD, any such solicitation by the
Representative must comply with the requirements of Section 2710(c)(6)(B)(xi) of
the NASD Corporate Financing Rules.
LEGAL MATTERS
Legal matters in connection with the shares of Common Stock and Warrants
being offered hereby have been passed on for the Company by the law firm of
Brenman Key & Bromberg, P.C., Denver, Colorado. Members of the firm of Brenman
Key & Bromberg, P.C. own 50,000 shares of the Company's Common Stock. The law
firm of Smith, McCullough & Ferguson, P.C., Denver, Colorado has acted as legal
counsel to the Representative in connection with certain legal matters relating
to the Offering.
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<PAGE>
EXPERTS
The consolidated financial statements of Global Med Technologies, Inc. as
of December 31, 1995 and 1994 and for the years then ended and the six months
ended June 30, 1995 included in this Prospectus and Registration Statement have
been audited by Ernst & Young, LLP, independent auditors, as set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,111,269 shares of Common Stock, which includes 137,646 shares (plus an
estimated additional 6,997 shares issuable upon conversion of accrued interest)
which are to be issued upon conversion of $516,200 principal amount of 10%
Notes. The shares of Common Stock offered hereby (other than those which may be
acquired by affiliates of the Company) will be freely tradeable, without
restrictions, under the Securities Act of 1933, as amended (the "Act").
Approximately 1,659,221 shares are "restricted securities" within the meaning of
Rule 144 under the Act, have been held in excess of two years, and, as a result,
will be able to be publicly sold 90 days after the date hereof in the event a
public market for the Company's Common Stock develops. Holders of shares have
entered into a lock up agreement with the Representative. See Underwriting.
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least two years
from the later of the date of payment therefor to the Company or acquisition
thereof from an affiliate, may sell such securities in brokers' transactions or
directly to market makers, provided that the number of shares sold in any three
month period may not exceed the greater of 1 % of the then outstanding Common
Stock or the average weekly trading volume of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain notice requirements and the availability of current public information
about the Company. After three years have elapsed from the later of the issuance
of restricted securities by the Company or their acquisition from an affiliate,
such securities may be sold without limitation by persons who are not affiliates
under Rule 144.
Sales of substantial amounts of Common Stock by shareholders of the Company
under Rule 144 or otherwise, or even the potential for such sales, are likely to
have a depressive effect on the market price of the Common Stock and Warrants
and could impair the Company's ability to raise capital through the sale of its
equity securities.
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Registered Securities
The Company has registered under the Registration Statement of which this
Prospectus is a part, 1,132,443 shares of Common Stock which includes (i)
800,000 shares which the Company has agreed to register on behalf of purchasers
in the Company's Private Placement completed in September, 1996, (ii) 137,646
shares to be issued to holders of the 10% Notes who have elected to convert
their 10% Notes to shares of Common Stock, plus 6,997 shares to be issued in
exchange for interest on such 10% Notes and (iii) 187,800 shares of Common Stock
underlying warrants issued in connection with the sale of the 10% Notes. The
shares of Common Stock and warrants are held by 87 persons. Included in the
persons who hold securities to be sold under the Registration Statement are
Joseph F. Dudziak, President of the Company, Bart K. Valdez, Director of Finance
and Operations and Principal Financial Officer of the Company, Benjamin R.
Budraitis, Director of Sales and Marketing of the Company and LMU & Company, a
consultant to the Company. After the completion of this offering, the Company
will amend its Registration Statement and this Prospectus to permit such persons
to publicly offer and sell all such shares of Common Stock. After the sale of
such shares of Common Stock, none of such persons is expected to own more than 1
% of the outstanding Common Stock of the Company.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities Act of
1933, as amended with respect to the securities offered hereby with the United
States Securities and Exchange Commission ("SEC"), 450 Fifth Street, N.W.,
Washington, D.C. 20549. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information contained in the Registration
Statement and the exhibits and schedules thereto, certain items of which are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement, including all exhibits and
schedules therein, which may be examined at the SEC's Washington, D.C. office,
450 Fifth Street, N.W., Washington, D.C. 20549 without charge, or copies of
which may be obtained from the SEC upon request and payment of the prescribed
fee. Statements made in this Prospectus as to the contents of any contract,
agreement or document are not necessarily complete, and in each instance
reference is made to the copy of such contract, agreement or other document
filed as an exhibit to the Registration Statement, and each such statement is
qualified in its entirety by such reference. As of the date of this Prospectus,
the Company became a reporting company under the Securities Exchange Act of
1934, as amended, and in accordance therewith in the future will file reports
and other information with the SEC. All of such reports and other information
may be inspected and copied at the public reference facilities maintained by the
SEC at the address set forth above in Washington, D.C. and at regional offices
of the SEC located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. In
addition, the Company intends to provide its shareholders with annual reports,
including audited financial statements, unaudited semi-annual reports and such
other reports as the Company may determine. The SEC maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC at http://www.secgov.
-66-
<PAGE>
GLOSSARY
Application Manager - Application Manager refers to those parts of EDEN-OA (R)
which support the common application functions, maintenance and configuration
management, Active Data Dictionary and provide the automatic generation of the
computer instructions necessary to perform user functions.
Community Blood Centers - Community Blood Centers or CBCs are the not for profit
blood centers usually affiliated with the local city or community. These are
different from the American Red Cross Blood Centers that maintain national
affiliation.
Donor Identification and Laboratory Component Labeling and Release Site-Based
Logic - Multiple- occurring program logic that is designed to help control and
help manage those areas of a blood center's operation in which the hazard
potential of the purity, potency and safety of the blood and blood products
effects a recognized level of concern.
EDEN-OA (R) - EDEN-OA (R) (OA is for Open Architecture) is the proprietary
Wyndgate application development product and environment used as a basis for the
SAFETRACE (TM) application. It provides basic functions common to applications
plus maintenance management features and processes.
FDA 510(k) - FDA 510(k) refers to the Federal Drug Administration process number
510(k) which governs an award letter distributed by the FDA. Software such as
the SAFETRACE (TM) is classified as a medical device. The 510(k) process is a
stringent set of testing, verification and review of products like SAFETRACE
(TM).
GUI- GUI refers to the Graphical User Interface, most commonly seen as the icon
driven windows on PC's. Special tools are needed to develop GUI windows.
Help Line - Help Line refers to the service line number provided by Wyndgate for
use of its customers to receive assistance regarding Wyndgate products. Wyndgate
provides a 1-800 number for its customers who have a maintenance contract.
Module - Refers to pieces of applications computer code used to perform a
certain set of tasks or functions. Generally, modules have a name commensurate
with the major function of that set of computer code, e.g., Billing Module
refers to handling the processing of invoices.
MRO - Medical Review Officer
-67-
<PAGE>
SAFETRACE (TM) - SAFETRACE (TM) is the blood bank information management system
developed by Wyndgate using EDEN-OA (R) in conjunction with eight California
blood centers. SAFETRACE (TM) contains the following application modules: Donor
Recruitment; Donor Management; Laboratory Management; Special Procedures;
Inventory-Distribution; and Billing.
SAFETRACE TX (TM)- Refers to the transfusion management software system under
development. This transfusion system, if fully developed, will service hospitals
and those blood centers that not only supply blood or blood components to a
hospital but also manage the transfusion process.
Substance Abuse - Substance abuse refers to the use of chemical products which
may have an adverse effect on humans. Classified under substance abuse are drugs
such as cocaine and heroin and chemicals such as alcohol.
-68-
<PAGE>
Consolidated Financial Statements
Global Med Technologies, Inc.
(formerly Global Data Technologies, Inc.)
Six months ended June 30, 1996
(unaudited) and 1995 and years
ended December 31, 1995 and 1994
with Report of Independent Auditors'
<PAGE>
Global Med Technologies, Inc.
Consolidated Financial Statements
Six months ended June 30, 1996 (unaudited) and 1995
and years ended December 31, 1995 and 1994
Contents
Report of Independent Auditors ....................................... 1
Consolidated Financial Statements
Consolidated Balance Sheets........................................... 2
Consolidated Statements of Operations................................. 4
Consolidated Statements of Stockholders' Equity (Deficit) ............ 5
Consolidated Statements of Cash Flows................................. 6
Notes to Consolidated Financial Statements............................ 8
<PAGE>
Report of Independent Auditors
Board of Directors
Global Med Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Global Med
Technologies, Inc. (formerly Global Data Technologies, Inc.) and divisions as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended and the six months ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Global Med
Technologies, Inc. and divisions at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
May 15, 1996
1
<PAGE>
<TABLE>
<CAPTION>
Global Med Technologies, Inc.
Consolidated Balance Sheets
December 31 June 30
1995 1994 1996
------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 421,743 $ 309,851 $ 280,618
Accounts receivable--trade, net of allowance for
uncollectible accounts of $200,000, $56,000
and $200,000 at December 31, 1995 and 1994
and June 30, 1996, respectively 607,987 671,218 1,397,531
Unbilled receivables, net 306,975 257,677 1,279,646
Prepaid expenses and other assets 23,316 47,020 119,306
Note receivable - - 250,000
Deferred income taxes - 36,229 -
------------------------------------------------
Total current assets 1,360,021 1,321,995 3,327,101
Equipment and fixtures, at cost:
Furniture and fixtures 206,471 70,000 188,065
Machinery and equipment 432,162 259,435 366,106
Computer and software 723,536 133,042 970,137
-------------------------------------------------
1,362,169 462,477 1,524,308
Less accumulated depreciation and amortization (404,556) (311,105) (306,223)
-------------------------------------------------
957,613 151,372 1,218,085
Capitalized software development costs, less
accumulated amortization of $65,852, $15,502
and $95,001 at December 31, 1995 and 1994 and
June 30, 1996, respectively 403,228 294,627 414,079
------------------------------------------------
Total assets $2,720,862 $1,767,994 $4,959,265
================================================
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
Equity at
June 30, 1996
December 31 June 30 (Unaudited)
1995 1994 1996 (Note 10)
----------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $1,457,263 $ 586,215 $1,456,596 $ -
Accrued expenses 296,293 151,445 733,241 -
Accrued payroll and other 187,661 53,050 259,822 -
Accrued vacation 261,100 90,342 290,000 -
Noncompete accrual 325,000 - 150,000 -
Unearned revenue 271,188 304,408 493,084 -
Short-term debt 500,100 250,100 820,100 -
Notes payable - - 751,200 -
Current portion of capital lease obligations 232,813 24,151 356,708 -
------------------------------------------------------------------
Total current liabilities 3,531,418 1,459,711 5,310,751 -
Capital lease obligations, less current portion 647,929 23,059 807,479 -
Deferred income taxes - 7,498 - -
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares - 3,949,629,
3,619,221 and 4,166,296 at December 31,
1995 and 1994 and June 30, 1996, respectively
and 4,966,626 shares issued and outstanding
pro forma at June 30, 1996 39,496 36,192 41,663 49,666
Preferred stock, $.01 par value:
Authorized shares - 10,000,000
None issued or outstanding - - - -
Additional paid-in capital 1,701,629 719,386 2,399,462 4,131,967
Accumulated deficit (3,199,610) (477,852) (3,600,090) (3,600,090)
---------------------------------------------------------------------
Total stockholders' equity (deficit) (1,458,485) 277,726 (1,158,965) $ 581,543
-------------------------------------------------- ==========
Total liabilities and stockholders' equity (deficit) $2,720,862 $1,767,994 $4,959,265
==================================================
See accompanying notes.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Global Med Technologies, Inc.
Consolidated Statements of Operations
Six months ended
Year ended December 31 June 30
1995 1994 1996 1995
------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Drug testing and other $ 5,740,487 $3,836,136 $3,116,265 $2,380,790
Software sales and consulting 933,631 1,140,119 2,862,225 883,578
------------------------------------------------------------------------
6,674,118 4,976,255 5,978,490 3,264,368
Cost of sales and product development 2,662,271 2,071,902 1,919,772 1,180,165
------------------------------------------------------------------------
Gross profit 4,011,847 2,904,353 4,058,718 2,084,203
Operating expenses:
Payroll and other 3,355,893 1,122,285 2,105,207 806,753
General and administrative 1,537,798 691,317 1,300,806 478,809
Marketing 870,284 516,450 444,492 235,492
Research and development 654,500 403,714 270,260 309,760
Depreciation and amortization 116,979 51,504 214,205 39,232
------------------------------------------------------------------------
Income (loss) from operations (2,523,607) 119,083 (276,252) 214,157
Other income (expense):
Interest income (expense), net (61,112) 6,339 (109,620) (301)
Other (70,608) - (14,608) -
------------------------------------------------------------------------
Income (loss) before provision for
(benefit from)income taxes (2,655,327) 125,422 (400,480) 213,856
Provision for (benefit from) income taxes 29,531 (46,825) - 230,934
------------------------------------------------------------------------
Net income (loss) $(2,684,858) $ 172,247 $ (400,480) $ (17,078)
========================================================================
Net income (loss) per common share $ (.70) $ .05 $ (.10) $ (.01)
Weighted average common shares outstanding: 3,826,823 3,619,221 4,144,722 3,719,221
See accompanying notes.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Global Med Technologies, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
Common Stock Additional
-------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 3,619,221 $36,192 $ 719,386 $ (650,099) $ 105,479
Net income - - - 172,247 172,247
------------------------------------------------------------------------
Balance, December 31, 1994 3,619,221 36,192 719,386 (477,852) 277,726
Issuance of common stock 300,000 3,000 732,000 - 735,000
Issuance of common stock--
finder's fee 30,408 304 74,196 - 74,500
Issuance of common stock
warrants - - 15,000 - 15,000
Compensation related to
issuance of common stock
options by principal
stockholders - - 161,047 - 161,047
Distribution to stockholders
(Wyndgate) - - - (36,900) (36,900)
Net loss - - - (2,684,858) (2,684,858)
------------------------------------------------------------------------
Balance, December 31, 1995 3,949,629 39,496 1,701,629 (3,199,610) (1,458,485)
Issuance of common
stock--exercise of common
stock warrants (unaudited) 150,000 1,500 448,500 - 450,000
Issuance of preferred stock
converted to common stock
(unaudited) 66,667 667 249,333 - 250,000
Net loss (unaudited) - - - (400,480) (400,480)
-----------------------------------------------------------------------
Balance, June 30, 1996
(unaudited) 4,166,296 $41,663 $2,399,462 $(3,600,090) $(1,158,965)
========================================================================
See accompanying notes.
5
</TABLE>
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
Year ended December 31 June 30
1995 1994 1996 1995
-------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net income (loss) $(2,684,858) $172,247 $ (400,480) $ (17,078)
Adjustments to reconcile net income (loss)
to
net cash provided by (used in)
operating activities:
Depreciation and amortization 167,329 51,504 243,354 60,232
Loss on disposal of assets 49,857 - 14,608 -
Issuance of common stock options by
principal stockholders 161,047 - - -
Issuance of common stock--finder's fee 74,500 - - -
Changes in operating assets and
liabilities:
Accounts receivable--trade, net 63,231 (29,479) (839,544) 89,790
Unbilled receivables, net (49,298) (14,744) (922,671) (174,382)
Note receivable - - (250,000) -
Short-term investments - 98,450 - -
Prepaid expenses and other assets 23,704 (18,572) (95,990) 1,129
Deferred income taxes 28,731 (47,625) - 230,134
Accounts payable 871,048 191,099 (667) 46,986
Accrued payroll and other 134,611 17,294 72,161 14,973
Accrued expenses 144,848 49,369 436,948 48,921
Accrued vacation 170,758 29,451 28,900 57,101
Noncompete accrual 325,000 - (175,000) -
Unearned revenue (33,220) (160,236) 221,896 (273,460)
-------------------------------------------------------------------------
Net cash provided by (used in) operating (552,712) 338,758 (1,666,485) 84,346
activities
Investing activities
Purchases of equipment and fixtures (31,653) (26,990) (51,009) (122,653)
Increase in software development costs (158,951) (271,058) (40,000) (158,951)
-------------------------------------------------------------------------
Net cash used in investing activities (190,604) (298,048) (91,009) (281,604)
Financing activities
Borrowings on short-term debt 1,354,500 820,000 425,000 354,500
Principal payments on short-term debt (1,104,500) (731,150) (105,000) (604,590)
Principal payments under capital lease (107,892) (30,391) (154,831) (16,894)
obligations
Issuance of notes payable - - 751,200 -
Issuance of common stock 735,000 - 700,000 735,000
Issuance of common stock warrants 15,000 - - 15,000
Distribution to stockholders (Wyndgate) (36,900) - - (36,900)
-------------------------------------------------------------------------
Net cash provided by financing activities 855,208 58,459 1,616,369 446,116
-------------------------------------------------------------------------
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows (continued)
Six months ended
Year ended December 31 June 30
1995 1994 1996 1995
-------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net increase (decrease) in cash and cash $ 111,892 $ 99,169 $ (141,125) $248,858
equivalents
Cash and cash equivalents at beginning of 309,851 210,682 421,743 309,851
period
=========================================================================
Cash and cash equivalents at end of period $ 421,743 $309,851 $ 280,618 $558,709
=========================================================================
Supplemental disclosures:
The Company entered into capital lease obligations of $941,424 and $51,653 in 1995 and 1994, respectively, and
entered into capital lease obligations of $438,276 and $66,002 during the six months ended June 30, 1996 and 1995,
respectively. The Company paid income taxes of $800 in both 1995 and 1994. Interest expense approximates interest
paid.
See accompanying notes.
7
</TABLE>
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies
Organization
On May 23, 1995, The Wyndgate Group, Limited (Wyndgate) merged with National
MRO, Inc. (National MRO) in accordance with the terms and provisions of an
Agreement of Merger and National MRO changed its name to Global Data
Technologies, Inc., which subsequently changed its name to Global Med
Technologies, Inc. (the Company). Also, the National MRO and Wyndgate divisions
are now referred to as DataMed International (DataMed) and Wyndgate
Technologies, respectively. All shares of Wyndgate common stock were exchanged
for a total of 1,960,000 common shares of the Company. This merger transaction
was accounted for as a pooling of interests; therefore, the Company's financial
statements include the results of operations as if the merger had been
consummated at the beginning of all periods presented. Subsequent to the merger,
the businesses of both Wyndgate and DataMed have been operated as divisions of
the Company. The Company incurred expenses related to the merger of $164,500,
which included a $130,000 finder's fee, which consisted of $74,500 in common
stock of the Company and $55,500 in cash, and $34,500 related to legal and other
fees. The related merger costs are included in general and administrative
expenses in the accompanying consolidated statement of operations.
Separate results of operations for the periods up to the date of the merger are
as follows (operating results for the period ended May 23, 1995 approximate the
results for the period ended June 30, 1995, as shown):
January 1, 1995 to January 1, 1994 to
June 30, 1995 December 31, 1994
---------------------------------------------
Net sales:
National MRO $2,380,790 $3,836,136
Wyndgate 883,578 1,140,119
---------------------------------------------
Combined $3,264,368 $4,976,255
=============================================
Net income (loss):
National MRO $ (93,344) $ (140,141)
Wyndgate 76,266 312,388
---------------------------------------------
Combined $ (17,078) $ 172,247
=============================================
8
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies (continued)
Liquidity and Management's Plans
The Company is involved in the development of certain software products for the
blood bank industry as well as in the operation of drug testing and medical
surveillance management services, including medical review functions, data
management, record storage and coordination of all drug testing program
elements.
The development of the businesses has resulted in the accumulation of losses,
which aggregated $3,199,610 and $3,600,090 at December 31, 1995 and June 30,
1996, respectively. In addition, the Company had a working capital deficit of
$2,171,397 and $1,983,650 at December 31, 1995 and June 30, 1996, respectively.
Management has continued its development of its businesses by arranging for
financing subsequent to year end totaling approximately $1,372,000 of which
$701,200 relates to note subscriptions received to date for a note offering in
process. Additionally, the Company has entered into software license fee
agreements with a value in excess of $1,000,000. Management believes the cash on
hand at December 31, 1995, together with the cash from its recent financings and
current sales, will finance operations for the foreseeable future.
Description of Business
The Company and its two divisions are in the business of providing information
management software products and drug testing and medical surveillance
management services, including medical review functions, data management, record
storage and coordination of all drug testing program elements. The Company
serves international, national and regional clients in a variety of industries.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its divisions. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition
Revenue from drug and alcohol management services is recognized as services are
provided.
9
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies (continued)
The Company recognizes revenue from sales of software licenses upon delivery of
the software product to the customer, unless the Company has significant related
vendor obligations remaining. When significant obligations remain after the
software product has been delivered, revenue is not recognized until such
obligations have been completed or are no longer significant. The costs of any
insignificant obligations are accrued when the related revenue is recognized.
Revenue from postcontract customer support is recognized over the period the
customer support services are provided, and software services revenue is
recognized as services are performed.
Revenue from software development contracts is recognized on a
percentage-of-completion method with progress to completion measured based upon
labor costs incurred or achievement of contract milestones.
Revenue from the sale of hardware and software, obtained from vendors, is
recognized at the time the hardware and software are shipped from the Company to
the end user.
Unbilled amounts at December 31, 1995 and 1994 and June 30, 1996 have been
reduced by an allowance for doubtful accounts of $100,000, $0 and $100,000,
respectively.
Included in unearned revenue at December 31, 1995 is approximately $200,000 of
unperformed professional services related to an agreement between The Royalty
Group and Wyndgate (see Note 9).
Certain members of the Company's Scientific Advisory Committee serve as officers
and directors of certain of the Company's significant customers. In addition,
these members also are beneficial owners of the Company through grants of stock
options and through the Company's ten percent note offering (see Note 10).
Equipment and Fixtures
Equipment and fixtures are stated at cost. Depreciation and amortization are
recorded on a straight-line method over the following estimated useful lives:
Furniture and fixtures 3 - 5 years
Machinery and equipment 3 - 5 years
Computer and software 3 - 5 years
10
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies (continued)
Financial Instruments
The carrying amounts of the Company's financial instruments approximate fair
value due to the short maturity of these items.
Long-Lived Assets
In March 1995, the FASB issued Statement of Financial Accounting Standard No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (SFAS No. 121), which requires impairment losses to be
recorded on long-lived assets used in operations when indications of impairment
are present. The Company is required to adopt SFAS No. 121 in the first quarter
of 1996 and, based on current circumstances, does not believe the effect of
adoption will be material.
Software Development Costs
Certain software development costs incurred after the technological feasibility
of the related software development product has been established are capitalized
and amortized on a straight-line basis over the life of the related software
product. Costs incurred prior to the establishment of the technological
feasibility of the related software product are expensed as incurred as research
and development. Costs of maintenance and customer support are expensed as
incurred. Amortization of capitalized costs commences when the product is
available for general release to the public or when software development revenue
has begun to be recognized. Amortization of capitalized software development
costs was $50,350 and $15,282 for the years ended December 31, 1995 and 1994,
respectively, and is included in cost of sales in the accompanying consolidated
statements of operations.
Malpractice Insurance
The Company maintains its malpractice insurance coverage on a claims made basis
through a commercial insurance carrier. Should the current claims made policy
not be renewed or replaced with equivalent insurance at a future date, claims
based on occurrences during its term but subsequently reported will be
uninsured. Based upon historical experience, the Company's management believes
the Company has adequately provided for the ultimate liability, if any, from the
settlement of such potential claims.
11
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies (continued)
Stock-Based Compensation
In October 1995, the FASB issued Statement of Financial Accounting Standard No.
123, Accounting and Disclosure of Stock-Based Compensation (SFAS No. 123). SFAS
No. 123 is applicable for fiscal years beginning after December 15, 1995 and
gives the option to follow either fair value accounting or Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), and
related Interpretations.
The Company has elected to continue to follow APB No. 25 and related
Interpretations in accounting for outstanding stock options. Under APB No. 25,
because the exercise price of the Company's stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation is
recognized.
Statements of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less when
purchased to be cash equivalents.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes (SFAS No.
109), which requires that the Company account for income taxes using the
liability method. Under SFAS No. 109, deferred income taxes are provided for
temporary differences in recognizing certain income and expense items for
financial reporting and tax reporting purposes. Upon completion of the merger in
May 1995, Wyndgate terminated its S corporation status and began providing for
current and deferred income taxes as a C corporation as part of the Company.
Accordingly, Wyndgate adopted SFAS No. 109 in May 1995, and the statement of
operations for the year ended December 31, 1995 includes a one-time charge
(included in the provision for income taxes) of approximately $150,000 to record
the related deferred tax liability. The following supplemental net income (loss)
eliminates the one-time charge and reflects income tax expense in all periods
presented. Supplemental net income (loss) is ($2,834,771) and $46,979 for the
years ended December 31, 1995 and 1994, respectively.
12
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. Summary of Significant Accounting Policies (continued)
Concentration of Credit Risk
Credit is extended based on an evaluation of the customer's financial condition,
and collateral is generally not required. Losses as the result of not requiring
collateral are within management's expectations. Revenues from the sale of
software licenses and other postcontract support are derived entirely from sales
to blood banks and universities.
Significant Customers
During 1995, three of the Company's customers--Laidlaw Transit, Inc., Chevron
Corporation, and The Royalty Group (see Note 9)--each accounted for more than
10% of the Company's revenues. During 1994, two of the Company's
customers--Chevron Corporation and The Royalty Group--each accounted for more
than 10% of the Company's revenues.
During the six months ended June 30, 1996, two of the Company's
customers--Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center--each
accounted for more than 10% of the Company's revenues.
Accounting Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification
Prior year amounts have been reclassified to conform with the current year
presentation.
2. Noncompete Agreements
During 1995, the Company entered into noncompete agreements with certain key
employees for $350,000. The terms of the agreements are for the greater of five
years or the term of the related employee's employment contract. Of the
$325,000, $175,000 is payable in 1996, with the remaining $150,000 payable in
1996 or whenever cash is available. The entire amount of $350,000 was expensed
in the second half of 1995 and is included in general and administrative
expenses in the accompanying consolidated statement of operations.
13
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
3. Income Taxes
The components of income tax expense for the years ended December 31, 1995 and
1994 are as follows:
1995 1994
---------------------------------
---------------------------------
Provision for (benefit from) income taxes:
Current:
State $ 800 $ 800
Deferred:
Federal 25,048 (42,612)
State 3,683 (5,013)
---------------------------------
Total deferred 28,731 (47,625)
---------------------------------
=================================
Provision for (benefit from) income taxes $29,531 $(46,825)
=================================
The Company has net operating loss carryforwards of approximately $1,253,000
which expire in the years 2006 to 2010. Such net operating loss carryforwards
may be subject to separate return limitation laws.
The components of the deferred tax provision (benefit), which arise from timing
differences between financial and tax reporting, are presented below:
1995 1994
-------------------------------
-------------------------------
Cash to accrual adjustment $ (250,208) $(48,534)
Allowance for uncollectible
accounts receivable (96,380) (1,900)
Accelerated depreciation 12,141 3,800
Noncompete accrual (128,375) -
Accrued vacation (67,450) (991)
Net operating loss carryforward (449,872) (27,101)
Valuation allowance 1,008,875 27,101
===============================
Total deferred provision (benefit) $ 28,731 $(47,625)
===============================
14
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
3. Income Taxes (continued)
Variations from the federal statutory rate are as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------------
<S> <C> <C>
Expected provision for (benefit from)
federal income taxes at statutory rate of 34% $ (902,811) $ 42,643
Termination of S corporation election by Wyndgate 149,913 -
Wyndgate income nontaxable due to S corporation
status (77,199) (119,011)
Valuation allowance 1,008,875 27,101
State tax expense (benefit), net of federal
expense (benefit) (146,043) 6,898
Other (3,204) (4,456)
------------------------------------
$ 29,531 $ (46,825)
====================================
Income (loss) before provision for
(benefit from) income taxes $ (2,655,327) $ 125,422
===================================
Effective rate (1.1)% (37)%
===================================
15
</TABLE>
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
3. Income Taxes (continued)
The components of the net accumulated deferred income tax asset as of December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustment $ 873,899 $ 254,542
Excess of capital losses over capital gains 79,000 79,000
Net operating loss carryforward 495,031 45,159
Allowance for uncollectible accounts receivable 118,500 22,120
Noncompete accrual 128,375 -
Accrued vacation 103,135 35,685
Valuation allowance (1,130,034) (121,159)
-----------------------------------
667,906 315,347
Deferred tax liabilities:
Cash to accrual adjustment 648,395 279,246
Accelerated depreciation 19,511 7,370
-----------------------------------
667,906 286,616
-----------------------------------
Deferred tax asset, net $ - $ 28,731
===================================
</TABLE>
4. Leases
The Company primarily leases equipment and office space. An operating lease
expiring in 2000 is personally guaranteed by a principal stockholder. Rental
expense under operating leases for the years ended December 31, 1995 and 1994
was $216,795 and $139,000, respectively. Certain leases for furniture and
fixtures and machinery and equipment are classified as capital leases. A
principal stockholder of the Company has personally guaranteed repayment of
substantially all capital lease obligations. Included in
16
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
4. Leases (continued)
equipment and fixtures in the accompanying consolidated balance sheets are the
following assets held under capital leases:
December 31
1995 1994
----------------------------------------
Furniture and fixtures $143,658 $10,433
Machinery and equipment 294,530 28,323
Computer and software 549,891 54,201
----------------------------------------
Assets under capital lease 988,079 92,957
Less accumulated amortization (92,926) (26,873)
----------------------------------------
Assets under capital lease, net $895,153 $66,084
========================================
The following represents the minimum lease payments remaining under capital
leases and the future minimum lease payments for all noncancelable operating
leases at December 31, 1995:
Capital Operating
Leases Leases
-----------------------------------
1996 $ 345,690 $ 275,725
1997 329,662 275,725
1998 318,577 247,353
1999 69,592 203,117
2000 67,903 203,117
-----------------------------------
Total minimum lease payments 1,131,424 $1,205,037
==================
Less amount representing interest (250,682)
---------------
Present value of minimum
lease payments 880,742
Less current portion of obligations
under capital lease (232,813)
---------------
Obligations under capital lease,
less current portion $ 647,929
===============
5. Short-Term Debt
The Company maintains an unsecured revolving credit line of $25,000 which bears
interest at prime (8.5% at December 31, 1995) plus one percent and matures on
July 5, 1996. Amounts outstanding under this revolving line of credit were $100
at December 31, 1995 and 1994.
17
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
5. Short-Term Debt (continued)
In addition, the Company maintains a $1,000,000 line of credit with a bank
secured by substantially all of the Company's assets except for those assets
under lease agreements (see Note 4), which bears interest at prime (8.5% at
December 31, 1995) plus two percent and matures on November 14, 1996. Amounts
outstanding under this line of credit were $820,000, $500,000 and $250,000 at
June 30, 1996 and December 31, 1995 and 1994, respectively. A principal
stockholder of the Company has personally guaranteed the repayment of any
amounts outstanding under the line of credit. At December 31, 1995, the Company
was in violation of a certain bank covenant, which requires the Company to
maintain equity of at least $1,000,000. Under the terms of the agreement, upon
violation of this covenant, amounts outstanding may become due and payable in
full at the bank's request.
During the six-month period ended June 30, 1996, the Company obtained covenant
relief through an amendment to the original borrowing agreement. The covenant,
which requires the Company to maintain a positive net worth of $1,000,000, has
been waived effective June 1, 1996 through September 1, 1996.
The Company incurred interest expense on outstanding borrowings of approximately
$43,000 and $13,400 for the years ended December 31, 1995 and 1994,
respectively.
6. Stock Option Plans
During 1990, the Company adopted an incentive stock option plan and a
nonqualified stock option plan, and in 1995 consolidated these plans by adopting
the Company's Amended and Restated Stock Option Plan (the Plan). The Plan
provides for the issuance of options to purchase up to 1,234,279 shares of
common stock to employees, officers, directors and consultants of the Company.
The terms of any options granted under the Plan are not required to be identical
as long as they are not inconsistent with the express provisions of the Plan.
Options may be granted as incentive options or as nonqualified options; however,
only employees of the Company are eligible to receive incentive options. The
period during which options vest may not exceed ten years; however, the majority
of the options granted under the Plan vest over five years at the rate of twenty
percent per year. The exercise price for incentive options may not be less than
100% of the fair market value of the common stock on the grant date, except that
the exercise price for incentive options granted to persons owning more than ten
percent of the total combined voting power of the common stock may not be less
than 110% of the fair market value of the common stock on the grant date and may
not be exercisable for more than five years. The exercise price for
18
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
6. Stock Option Plans (continued)
nonqualified options may not be less than eighty percent of the fair market
value of the common stock on the grant date.
Activity and price information regarding the Plan are as follows:
<TABLE>
<CAPTION>
Incentive Stock Option Plan Nonqualified Stock Option Plan
-----------------------------------------------------------------------
Stock Stock
Number of Option Number of Option
Stock Price Stock Price
Options Range Options Range
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1993 81,300 $1.00 - $1.54 38,029 $1.54
Granted 15,400 1.54 - -
-----------------------------------------------------------------------
Outstanding, December 31, 1994 96,700 1.00 - 1.54 38,029 1.54
Granted 206,050 1.54 - 3.75 - -
Forfeited - - (6,000) 1.54
-----------------------------------------------------------------------
Outstanding, December 31, 1995 302,750 1.00 - 3.75 32,029 1.54
Granted 67,000 3.75 31,500 3.75
Forfeited (720) - - -
-----------------------------------------------------------------------
=======================================================================
Outstanding, June 30, 1996 369,030 $1.00 - $3.75 63,529 $1.54 - $3.75
=======================================================================
</TABLE>
During 1995, certain of the Company's principal stockholders granted personal
stock options to certain employees for the right to buy shares from the
principal stockholders at an exercise price of $1.00 per share. This transaction
has been accounted for as if the options were issued to the employees directly
from the Company. The Company recorded compensation expense related to this
transaction of $161,047, as such options were issued for prior service and are
fully vested. The related compensation expense is included in general and
administrative expenses in the accompanying consolidated statement of
operations.
During the second quarter of 1996, the Company entered into an agreement with a
business advisory enterprise. As part of the agreement, the Company granted
160,000 stock options at an exercise price of $2.50 per share. To date, no
options have been exercised as a result of this agreement.
7. Common Stock Warrants
In May 1995, the Company completed a private placement of 150,000 units at $5
per unit. Each unit consisted of two shares of common stock ($2.45 each) and one
common stock warrant ($.10 each), exercisable at $3.00 per share for a period of
three years from
19
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
7. Common Stock Warrants (continued)
the closing date of the offering. The Company has the right to call the common
stock warrants at $.12 per warrant at any time during the period commencing six
months from the date of issuance and terminating on the expiration date of such
warrants. In addition, the Company has outstanding an additional 12,000 warrants
to a nonrelated investor which are convertible into common stock at an exercise
price of $1.54 per share. Of these warrants, 2,000 expire in July 1996 with the
remaining 10,000 warrants expiring in October 1997.
During the first quarter of 1996, 150,000 common stock warrants issued in
conjunction with the May 1995 private placement were exercised for $450,000.
8. Contributions to Retirement Plan
During April 1992, the Company established a 401(k) retirement plan which covers
eligible employees, as defined, of the Company. Employees may defer up to
sixteen percent of their annual compensation up to the maximum amount as
determined by the Internal Revenue Service. Under the retirement plan agreement,
the Company, at its discretion, may make contributions to the plan. No
contributions were made to the plan in 1995 or 1994. Retirement plan
administrative expense was approximately $8,000 and $3,000 for the years ended
December 31, 1995 and 1994, respectively.
9. Commitments and Contingencies
The Company has entered into nine employment agreements with certain management
employees; the initial terms are for three to five years. Certain of the
agreements may be extended for two additional years. Such agreements, which can
be revised from time to time, provide for minimum salary levels as adjusted for
cost-of-living changes, as well as for incentive bonuses which are payable when
specified management goals are attained. At December 31, 1995, the aggregate
commitment for future salaries payable through May 2000, excluding bonuses, is
approximately $2,600,000. If all agreements are extended, the additional
commitment for future salaries will be approximately $1,400,000.
The Company is in process of obtaining product liability insurance for
Wyndgate's software-related products. To date, no claims have been filed against
the Company related to its Wyndgate software products. In addition, the Company
applied for certain regulatory approval of its blood bank software. The Company
has not received regulatory approval to date; however, management expects to
receive regulatory approval
20
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
9. Commitments and Contingencies (continued)
and has been in communication with certain regulatory agencies during the
approval process.
In January 1993, Wyndgate entered into an agreement with the EDEN-OA Blood Bank
Users Group (The Royalty Group) to develop Blood Bank Management Information
System Software (BBMIS). As part of the consideration for funding the
development of the BBMIS, Wyndgate agreed to pay to The Royalty Group certain
royalty payments on future software license fees. All payments are due 30 days
after each quarter and are based on software license fees collected. The Company
did not incur any royalty expenses related to this agreement in 1995. The time
period under the royalty schedule is based upon the first date of customer
invoicing, which was September 14, 1995. The royalty payment schedule is as
follows:
From September:
1995 - 1997 12 percent
1997 - 1998 9 percent
1998 - 1999 6 percent
1999 - thereafter 3 percent
10. Unaudited Interim Financial Information
The Company, in its opinion, has included all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of its financial position
at June 30, 1996 and the results of its operations for the six months then
ended. The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results for a full year.
During the first quarter of 1996, the Company completed a private placement
whereby it issued 66,667 shares of Series A convertible preferred stock at $3.75
per share. During 1996, the preferred shares were converted into 66,667 shares
of common stock.
21
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
10. Unaudited Interim Financial Information (continued)
During the second quarter of 1996, the Company conducted an offering consisting
of convertible notes with detachable common stock warrants. The notes accrue
interest at ten percent per annum, mature in three years from the date of
issuance and are convertible into common stock of the Company at $3.75 per
share. In addition, each investor received one common stock warrant for the
right to purchase one share of common stock at $3.75 per share for each $4
invested. The warrants are exercisable over a period of three years. Total
proceeds from the note offering amounted to $751,200. Common stock issuable upon
conversion of the notes amounts to 200,320 shares. Common stock issuable related
to the warrants provided in conjunction with the note offering amounts to
187,800 shares.
The pro forma stockholders' equity at June 30, 1996 represents the stockholders'
equity balance as adjusted for the net proceeds from the sale of 800,000 shares
of the Company's common stock at $2.50 per share from the July 1996 Private
Placement and the exercise of 330 options to purchase common stock at $1.54 per
share by two of the Company's employees.
22
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
2,000,000 Share of Common Stock
1,000,000 Class A Warrants
----------------------------
PROSPECTUS
-----------------------------
RAF FINANCIAL CORPORATION
FIRST OF MICHIGAN CORPORATION
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
A. The Colorado Business Corporation Act (the "Act") allows indemnification of
directors, officers, employees and agents of the Company against liabilities
incurred in any proceeding in which an individual is made a party because he was
a director, officer, employee or agent of the Company if such person conducted
himself in good faith and reasonable believed his actions were in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. A person must be found to be entitled to indemnification under this
statutory standard by procedures designed to assure that disinterested members
of the Board of Directors have approved indemnification or that, absent the
ability to obtain sufficient numbers of disinterested directors, independent
counsel or shareholders have approved the indemnification based on a finding
that the person has met the standard. Indemnification is limited to reasonable
expenses. In addition, the Company's By-Laws provide that the Company shall have
the power to indemnify its officers, directors, employees and agents to the
extent permitted by the Act.
Specifically, the Act provides as follows:
"7-109-102. Authority to indemnify directors
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding because the
person is or was a director against liability incurred in the proceeding
if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's
best interests; and
(II) In all other cases, that his or her conduct was at
least not opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries
II-1
<PAGE>
of the plan is conduct that satisfies the requirement of subparagraph (II)
of paragraph (b) of subsection (1) of this section. A director's conduct
with respect to an employee benefit plan for a purpose that the director
did not reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirements
of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors
Unless limited by its articles of incorporation, a corporation shall
indemnify a person who was wholly successful, on the merits or otherwise,
in the defense of any proceeding to which the person was a party because
the person is or was a director, against reasonable expenses incurred by
him or her in connection with the proceeding.
7-109-105 Court-ordered indemnification of directors
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification
in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
II-2
<PAGE>
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109-102(1) or was adjudged liable in the circumstances
described in section 7-109-102(4), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section
7-109- 102(4) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
7-109-106. Determination and authorization of indemnification of directors
(1) A corporation may not indemnify a director under section 7-109-102
unless authorized in the specific case after a determination has been made
that indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section
7-109-102. A corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after the written
affirmation and undertaking required by section 7-109-104(1)(a) and (1)(b)
are received and the determination required by section 7-109-104(1)(c) has
been made.
(2) The determinations required by subsection (1) of this section
shall be made:
(a) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for the
committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by subsection (1)of this section shall be made:
(a) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in paragraph (a)
or (b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full
board of directors; or
(b) By the shareholders.
II-3
<PAGE>
(4) Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or
advance of expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
7-109-107. Indemnification of officers, employees, fiduciaries, and agents
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the same
extent as to a director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a
greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board of
directors or shareholders, or contract.
7-109-109. Limitation of indemnification of directors
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles of
incorporation or bylaws, in a resolution of its shareholders or board of
directors, or in a contract, except an insurance policy, or otherwise, is
valid only to the extent the provision is not inconsistent with sections
7-109-101 to 7-109-108. If the articles of incorporation limit
indemnification or advance of expenses, indemnification and advance of
expenses are valid only to the extent not inconsistent with the articles of
incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power
to pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7-109-108. Insurance
A corporation may purchase and maintain insurance on behalf of a
person who is or was a director, officer, employee, fiduciary, or agent of
the corporation, or who, while a director, officer, employee, fiduciary, or
agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary,
II-4
<PAGE>
or agent of another domestic or foreign corporation or other person or of
an employee benefit plan, against liability asserted against or incurred by
the person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the laws
of this state or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity or
any other interest through stock ownership or otherwise.
7-109-110. Notice to shareholders of indemnification of director
If a corporation indemnifies or advances expenses to a director under
this article in connection with a proceeding by or in the right of the
corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the notice of
the next shareholders' meeting. If the next shareholder action is taken
without a meeting at the instigation of the board of directors, such notice
shall be given to the shareholders at or before the time the first
shareholder signs a writing consenting to such action."
B. Article VI of the Registrant's Amended and Restated Articles of Incorporation
provides for the elimination of personal liability for monetary damages for the
breach of fiduciary duty as a director except for liability (i) resulting from a
breach of the director's duty of loyalty to the Registrant or its shareholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law; (iii) for approving payment of
distributions to shareholders to the extent that any such actions are illegal
under the Act; or (iv) for any transaction from which a director derives an
improper personal benefit. This Article further provides that the personal
liability of the Registrant's directors shall be eliminated or limited to the
fullest extent permitted by the Act.
C. The Underwriting Agreement between the Registrant and the Underwriters
provides that the Underwriters will indemnify and hold harmless the Registrant,
the directors of the Registrant, and each person, if any, who controls the
Registrant within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act"), against any and all losses, claims, demands,
liabilities and expenses (including reasonable legal or other expenses) to which
it may become subject, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or in any Blue Sky Application or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, resulting from the use of written
information furnished to the Registrant by the Underwriters or any participating
dealer for use in the preparation of the Registration Statement or in any Blue
Sky Application.
II-5
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the issuance and distribution of the securities being offered. All expenses are
estimated except the registration fee.
Registration and filing fee ...................... $ 11,303
NASD filing fee .................................. 3,777
Printing ......................................... 25,000*
Accounting fees and expenses ..................... 25,000*
Representative's expense allowance ............... 300,000*
Legal fees and expenses .......................... 100,000*
Blue Sky fees and filing fees .................... 65,000*
Transfer and Warrant Agent fees .................. 5,000*
Miscellaneous .................................... 4,920*
---------
Total ............................................ $540,000
========
-----------
* Estimated
Item 26. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued its securities to
the following persons for the cash or other consideration indicated in
transactions that were not registered under the 1933 Act.
II-6
<PAGE>
I.
May 1995 Private Placement
--------------------------
Name No. of Units* Consideration
- ---- ------------- -------------
Ms. Elizabeth Kitchen & 10,000 $ 50,000.00
Guy B. Nutter
I. Stephen Davis, MD 10,000 50,000.00
William C. Dickey, MD 1,000 5,000.00
Metropolitan Pathologists 5,000 25,000.00
Profit Sharing Trust
FBO Gary D. Dickey, MD
Metropolitan Pathologists 19,000 95,000.00
Profit Sharing Trust
FBO William C. Dickey, MD
Herbert H. Maruyama, MD 10,000 50,000.00
Wilshire Center Geriatrics 10,000 50,000.00
Medical Group, Inc. DBPP
FBO Eugene Seymour, MD
Resources Trust Company 10,000 50,000.00
FBO Nancy S. Rogers
IRA dtd 3/22/84 # I ###-##-####
Robert L. Messenbaugh, MD 10,000 50,000.00
Herbert L. Jacobs, MD 15,000 75,000.00
Stewart Weinerman, MD 10,000 50,000.00
Patrick A. Zoellner, MD 5,000 25,000.00
Hal Cohn, MD 5,000 25,000.00
Susan H. Sipf 10,000 50,000.00
Kenneth Manfre, MD 20,000 100,000.00
------- ----------
TOTAL 150,000 $750,000.00
======= ===========
- -------------
* Each unit consisted of two shares of Common Stock and one Common Stock
Purchase Warrant exercisable at $3.00 per share until June 1, 1998.
II-7
<PAGE>
The offers and sales set forth in I above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act and/or
Regulation D and Rule 506 adopted thereunder. No broker/dealers were involved in
the sale and no commissions were paid. All purchasers represented that they
purchased the securities for investment, and all certificates issued to the
purchasers were impressed with a restrictive legend advising that the shares
represented by the certificates may not be sold, transferred, pledged or
hypothecated without having first been registered or the availability of an
exemption from registration established. The Registrant's transfer agent will be
advised to place "stop transfer" instructions against the transfer of these
certificates.
II.
May 1995 Wyndgate Merger
------------------------
Consideration
Name No. of Shares* (No. of Wyndgate Shares)
William J. Collard 653,006 1,999
Gerald F. Willman 570,033 1,745
Lori J. Willman 368,481 1,128
Timothy J. Pellegrini 368,480 1,128
------- -----
TOTAL 1,960,000 6,000
========= =====
- -------------
* Based upon the conversion factor of 326.6667 multiplied by the number
of Wyndgate shares.
The offers and sales set forth in II above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act. No
broker/dealers were involved in the sale and no commissions were paid. All such
persons represented that they acquired the securities for investment, and all
certificates issued to the persons were impressed with a restrictive legend
advising that the shares represented by the certificates may not be sold,
transferred, pledged or hypothecated without having first been registered or the
availability of an exemption from registration established. The Registrant's
transfer agent will be advised to place "stop transfer" instructions against the
transfer of these certificates.
III.
In June, 1995, in connection with Joseph F. Dudziak being employed as the
president of the Registrant, the Registrant issued Mr. Dudziak an Incentive
Stock Option to purchase 100,000 shares exercisable at $2.45 per share until
June 2005. The Registrant relied on Section 4(2) of the Securities Act of 1933,
as amended, in connection with the issuance of the option to Mr. Dudziak.
II-8
<PAGE>
IV.
January 1996 Warrant Exercises
------------------------------
Name No. of Shares Consideration*
William C. Dickey, MD 1,000 $ 3,000
& Karen N. Dickey
Metropolitan Pathologists 19,000 57,000
Profit Sharing Trust
Robert L. Messenbaugh, MD 10,000 30,000
Metropolitan Pathologists 5,000 15,000
Profit Sharing Trust
FBO Gary D. Dickey, MD
Resources Trust Company 10,000 30,000
FBO Nancy S. Rogers
IRA dtd 3/22/84 #I ###-##-####
Patrick A. Zoellner, MD 5,000 15,000
Eric D. Sipf 10,000 30,000
Herbert H. Maruyama, MD 10,000 30,000
Stewart Weinerman, MD 10,000 30,000
Eugene Seymour, MD 3,333 9,999
Wilshire Center Geriatrics 6,667 20,001
Medical Group DBPP, Inc.FBO
Eugene Seymour, M.D.
Herbert L. Jacobs, MD 15,000 $ 45,000
Kenneth Manfre, MD 20,000 60,000
Hal Cohn, MD 15,000 45,000
Charles Citrin 10,000 30,000
------ ------
TOTAL 150,000 $450,000
======= ========
- -------------
* Based upon an exercise price of $3.00 per share.
II-9
<PAGE>
The offers and sales set forth in IV above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act and/or
Regulation D and Rule 506 adopted thereunder. No broker/dealers were involved in
the sale and no commissions were paid. All purchasers represented that they
purchased the securities for investment, and all certificates issued to the
purchasers were impressed with a restrictive legend advising that the shares
represented by the certificates may not be sold, transferred, pledged or
hypothecated without having first been registered or the availability of an
exemption from registration established. The Registrant's transfer agent will be
advised to place "stop transfer" instructions against the transfer of these
certificates.
V.
January 1996 Series A Preferred Stock Offering
----------------------------------------------
Name No. of Shares* Consideration
- ---- -------------- -------------
Ronald O. Gilcher, MD 66,667 $250,000
- -------------
* Initially issued as Series A Preferred Stock, but converted into a like
number of shares of Common Stock in May, 1996.
The offer and sale to Dr. Gilcher was made in reliance upon the exemption
from registration provided by Section 4(2) of the 1933 Act. No broker/dealers
were involved in the sale and no commissions were paid. Dr. Gilcher represented
that he purchased the securities for investment, and the certificate issued to
him was impressed with a restrictive legend advising that the shares represented
by the certificate may not be sold, transferred, pledged or hypothecated without
having first been registered or the availability of an exemption from
registration established. The Registrant's transfer agent will be advised to
place "stop transfer" instructions against the transfer of his stock
certificate.
VI.
Shares issued pursuant to Settlement Agreements
-----------------------------------------------
Name No. of Shares Consideration
- ---- ------------- -------------
Frontline Marketing, Inc. 20,408 Release of Claims
(shares issued Oct. 1995)
Robert S. Verhey 10,000 Release of Claims (shares
------ issued May 1996)
TOTAL 30,408
======
II-10
<PAGE>
The issuances set forth in VI above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act. No
broker/dealers were involved in the sale and no commissions were paid. The
persons represented that they acquired the securities for investment, and the
certificates issued to the persons were impressed with a restrictive legend
advising that the shares represented by the certificates may not be sold,
transferred, pledged or hypothecated without having first been registered or the
availability of an exemption from registration established. The Registrant's
transfer agent will be advised to place "stop transfer" instructions against the
transfer of these certificates.
VII.
Options issued to Scientific Advisory Committee
-----------------------------------------------
Name Number of Options Expiration Date
- ---- ----------------- ---------------
William C. Dickey, MD 2,500 January, 2006
Cathy Bryan 1,000 January, 2006
Ronald O. Gilcher, MD 1,000 January, 2006
The options issued to the members of the Registrant's Scientific Advisory
Committee were made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The consideration for the issuance of the options
was the agreement by the named individuals to serve on the Registrant's
Scientific Advisory Committee. The options were issued pursuant to the
Registrant's nonqualified stock option plan and are exercisable at $3.75 per
share, and vest over a five year period. No broker/dealers were involved in the
sale and no commissions were paid. All option certificates were impressed with a
restrictive legend advising that the options represented by the certificates may
not be sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration established.
VIII.
In April, 1996, the Registrant entered into an agreement with LMU & Company
("LMU"). As partial consideration for LMU's services under the agreement, the
Registrant issued LMU an option to purchase 160,000 shares of the Registrant's
common stock, exercisable at $2.50 per share. The option becomes exercisable in
the event that the average bid price for the Registrant's common stock is at
least $5.00 for five consecutive trading days prior to December 1, 1996 as
quoted on NASDAQ. The issuance of the option to LMU was made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act. No
broker/dealers were involved in the sale and no commissions were paid. LMU
represented that LMU acquired the option for investment and not with a view to
distribution.
II-11
<PAGE>
IX.
1996 10% 3-Year Convertible Notes*
----------------------------------
Name Consideration No. of Warrants**
- ---- ------------- -----------------
Arnold E. Prince $25,000 6,250
Richard Sher 50,000 12,500
Bart Valdez 11,200 2,800
Wilshire Center Geriatrics 50,000 12,500
Medical Group, Inc.
Eugene Seymour, M.D. Trustee
Eugene H. Seymour, M.D. 50,000 12,500
Underwood Family Partners 100,000 25,000
Jeffrey Appel 25,000 6,250
Benjamin R. Budraitis 10,000 2,500
Joseph F. Dudziak 50,000 12,500
Neill and Nita Freeman 25,000 6,250
Thomas R. Sakaguchi 20,000 5,000
James Sakaguchi 27,500 6,875
Ellen Sakaguchi 12,500 3,125
Michael Lipkin 35,000 8,750
Thomas R. Ulie 50,000 12,500
William J. Collard 60,000 15,000
Michael I. Ruxin, M.D. 25,000 6,250
Ralph Grills, Jr. 50,000 12,500
Gordon Segal, MD 25,000 6,250
Harris A. Cahn 25,000 6,250
Joel C. Newman, MD 25,000 6,250
-------- ---------
Total $751,200 187,800
======== =========
II-12
<PAGE>
* Convertible at $3.75 per share.
** One warrant for each $4 purchase exercisable over a three year
period commencing June 26, 1996 at $3.75 per share.
The offers and sales set forth in IX above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act and/or
Regulation D and Rule 506 adopted thereunder. No broker/dealers were involved in
the sale and no commissions were paid. All of such purchasers represented that
they purchased the securities for investment, and all Notes issued to the
purchasers were impressed with a restrictive legend advising that the Notes may
not be sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration established.
X.
July 1996 Private Placement
---------------------------
Number of Consideration
Name Shares Paid
- ---- ------ ----
Hugo Brooks 10,000 $ 25,000
Lawrence M. Underwood 5,000 12,500
Paul R. Hoover & Janet F. Hoover, 10,000 25,000
JTWROS
Battersea Capital, Inc. 10,000 25,000
ESN Financial, LP 20,000 50,000
Anil & Bina Patel, JTWROS 10,000 25,000
Michal & Renata Pivonka, JTWROS 50,000 125,000
William B. & Cheryl A. Bacon, JTWROS 10,000 25,000
Vannette F. Poole 20,000 50,000
John L. Moran 20,000 50,000
William R. Teele 10,000 25,000
Alan David Cohen 10,000 25,000
Peter & Luba Bondra, JTWROS 40,000 100,000
Harvey D. Rhoads 2,500 6,250
E. Pat Manuel 25,000 62,500
Allen E. Hoyt 10,000 25,000
Richard Kay 20,000 50,000
II-13
<PAGE>
Mildred J. Geiss 7,000 17,500
Clyde William & Valerie J. Pray, 10,000 25,000
JTWROS
Barry Slosberg 10,000 25,000
Bradley Subler 2,000 5,000
Andrew E. Kauders 6,000 15,000
Richard J. N. Leonard 6,000 15,000
David Hickey 10,000 25,000
Georgia M. Dunston 10,000 25,000
TradeLink, L.L.C. 10,000 25,000
Robert M. Kassenbrock 40,000 100,000
Laurence P. Emrie 4,000 10,000
Larry & Michelle Weinstein, JTWROS 5,000 12,500
Underwood Family Partners, LTD 20,000 50,000
Amar & Vangie Romero, JTWROS 6,000 15,000
Consulting on Government Procurement- 10,000 25,000
FBO J.S. Sansome
Lawrence E. & Jeanne R. Keith, 10,000 25,000
JTWROS
Riley Wilson - dba RW Enterprises 20,000 50,000
John Solomita 10,000 25,000
William Vasey 10,000 25,000
Tadahiko Nakamura 30,000 75,000
Robert W. & Rhonda W. Braun, 4,000 10,000
JTWROS
Donald H. & Mary Lou Wilbois, 2,000 5,000
JTWROS
Jon and Laurie Lindvall 4,000 10,000
Maurice S. Cohen 10,000 25,000
Wilbert D. Pearson 10,000 25,000
Georgina S. Caslavka 10,000 25,000
II-14
<PAGE>
Lynne D. Caslavka 6,000 15,000
Voss Boreta 10,000 25,000
Keith D. & Carolyn P. McDonald, 10,000 25,000
JTWROS
Howard I. Saiontz 10,000 25,000
James A. Newsham III & Vivian M. 5,000 12,500
Newsham, JTWROS
William C. & Mary Claire McCormick, 10,000 25,000
JTWROS
Patrick M. Sheridan 4,000 10,000
Thomas D. Fiorino 20,000 50,000
Richard G. Belcher 10,000 25,000
Scot C. Irwin 5,000 12,500
Alan Goldstein 10,000 25,000
Maurice and Stacy Gozlan, JTWROS 10,000 25,000
Howard Wall 20,000 50,000
William C. Meyer 4,000 10,000
Jeffrey M. Savell 7,000 17,500
James A. & Joann Wiedenhoeft, 15,000 37,500
JTWROS
A. Thomas Tenenbaum 6,000 15,000
Brenman Key & Bromberg 401K Profit 10,000 25,000
Sharing Plan FBO Thomas R. Bromberg
Brenman Key & Bromberg 401K Profit 20,000 50,000
Sharing Plan FBO Albert Brenman
Stuart McNab 1,000 2,500
George Thompson 9,500 23,750
Brenman Key & Bromberg 401K Profit 14,000 35,000
Sharing Plan FBO A. Thomas Tenenbaum
Kenneth Higgins 5,000 12,500
Richard T. Baldwin 20,000 50,000
------- ----------
Total 800,000 $2,000,000
======= ==========
II-15
<PAGE>
The offers and sales set forth in X above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act and/or
Regulation D and Rule 506 adopted thereunder. RAF Financial Corporation acted as
the Placement Agent for the offering for which it received a commission of 10%
of the amount of securities sold in the offering and a 3% expense allowance. All
of such purchasers represented that they purchased the securities for
investment, and all certificates issued to purchasers were impressed with a
restrictive legend advising that the shares represented by the certificates may
not be sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration established.
The Registrant's transfer agent will be advised to place "stop transfer"
instructions against the transfer of these certificates.
XI.
Employee Stock Options
----------------------
During the past three years, the Registrant has granted 292,800 incentive
stock options and 27,000 non-qualified stock options to 46 employees and others
of the Registrant pursuant to the Registrant's Amended and Restated Stock Option
Plan not shown elsewhere within Item 26. The options are exercisable at prices
ranging from $1.54 to $3.75 over a ten year period. No consideration was paid by
the employees in connection with the issuance of the options. Only two employees
have exercised their options, for 180 and 150 shares. The issuance of the
options and sales of the shares were made in reliance upon the exemption from
registration provided by Section 3(b) of the Securities Act of 1933, as amended,
and Rule 701 adopted thereunder. No broker/dealers were involved in the sale and
no commissions were paid. All purchasers purchased the securities for
investment, and all option certificates issued to purchasers were impressed with
a restrictive legend advising that the shares represented by the certificates
may not be sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration established.
Item 27. Exhibits and Financial Schedules
The following is a complete list of exhibits filed as part of this
Registration Statement, which Exhibits are incorporated herein.
Exhibit
Number Description
- ------ -----------
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation, filed June 2, 1995
3.2 Articles of Amendment to the Articles of Incorporation, filed March 5,
1995
3.3 Articles of Amendment to the Articles of Incorporation, filed May 30,
1996
3.4 Bylaws, as amended
II-16
<PAGE>
4.1 Form of Representative's Warrants to Purchase Common Shares
4.2 Form of Class A Stock Purchase Warrant Certificate*
5.1 Form of Opinion of Brenman Key & Bromberg, P.C.
10.1 Lease Agreement, dated April 15, 1992, and Lease Addendums, dated
April 8, 1992 and October 21, 1994
10.2 Lease Agreement, dated July 19, 1995, and Lease Addendum
10.3 Employment Agreement, dated May 24, 1995. between the Registrant and
Michael I. Ruxin, as amended July 8, 1995, August 1, 1995,
September 21, 1995 and July 15, 1996
10.4 Employment Agreement, dated May 24, 1995, between the Registrant and
William J. Collard, as amended July 22, 1996
10.5 Employment Agreement, dated June 28, 1995, between the Registrant and
Joseph F. Dudziak
10.6 Employment Agreement, dated February 8, 1996, between the Registrant
and L.E. "Gene" Mundt
10.7 Amended and Restated Stock Option Plan, as amended on May 5, 1995
and May 29, 1996
10.8 Voting Agreement, dated May 23, 1995
10.9 Shareholders' Agreement dated August 16, 1991, as amended on
May 5, 1995 September 1996, June 24, 1996, July 25, 1996,
Consent and Waiver, dated July 12, 1996, and Rescission of
Shareholder's Agreement, dated June 22, 1996
10.10 Agreement dated April 8, 1996, between the Registrant and LMU &
Company, and Stock Purchase Option, dated April 8, 1996
10.11 Form of Drug Testing Service Contract
10.12 Form of License Agreements
10.13 Warrant Agreement, dated _____, 1996, between Global Med Technologies,
Inc. and American Securities Transfer and Trust, Inc.*
10.14 Form of Escrow Agreement between Global Med Technologies, Inc. and
Tri-State Bank*
24.1 Consent of Brenman Key & Bromberg, P.C. (included in Exhibit 5)
II-17
<PAGE>
24.2 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
- -------------
* To be filed by amendment.
Item 28. Undertakings
The undersigned Registrant will:
(a)(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement; and (iii)
include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The undersigned Registrant will provide to the Underwriters at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-18
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and County of Denver, State of Colorado on September 6,
1996.
GLOBAL MED TECHNOLOGIES, INC.
By: /s/ Michael I. Ruxin
--------------------------
Michael I. Ruxin, Chairman
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Michael I. Ruxin Chairman of the Board September 6, 1996
- --------------------------- of Directors, Principal
Michael I. Ruxin Executive Officer and
Director
/s/ Joseph F. Dudziak President and Chief September 6, 1996
- --------------------------- Operating Officer
Joseph F. Dudziak
/s/ Bart K. Valdez Principal Financial September 6, 1996
- ----------------------------- Officer
Bart K. Valdez
/s/ William J. Collard Secretary/Treasurer September 6, 1996
- ---------------------------- and Director
William J. Collard
/s/ John D. Gleason Director September 6, 1996
- ----------------------------
John D. Gleason
/s/ Gerald F. Willman Director September 6, 1996
- --------------------------
Gerald F. Willman
II-19
EXHIBIT 1.1
GLOBAL MED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
<PAGE>
EXHIBIT 1.1
8/30/96
GLOBAL MED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
_______________, 1996
RAF Financial Corporation
One Norwest Center
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
Gentlemen:
GLOBAL MED TECHNOLOGIES, INC. ("Company"), a Colorado corporation, hereby
confirms its agreement with you, as Representative, and with the other members
of the Underwriting Group as follows:
SECTION 1
---------
Description of Offering and Securities
--------------------------------------
The Underwriting Group proposes to purchase from the Company a total of
_____ shares of Common Stock of the Company ("Shares") and ____ Class A Common
Stock Purchase Warrants. The Class A Common Stock Purchase Warrants will be
referred to as "Class A Warrants" in this Agreement and in the Agreement Among
Underwriters. Such Shares and Class A Warrants are collectively referred to
herein as the "Firm Securities." The Representative, either on its own behalf or
on behalf of the members of the Underwriting Group, will have an overallotment
option to purchase up to an additional ___ shares of Common Stock of the Company
("Overallotment Shares") and/or ____ Class A Warrants ("Overallotment Class A
Warrants") to cover overallotments. Such Overallotment Shares and Overallotment
Class A Warrants are collectively referred to herein as the "Overallotment
Securities." Except as otherwise stated, the Firm Securities and the
Overallotment Securities are collectively referred to herein as the
"Securities." The Company agrees to sell to the Underwriting Group all of the
Firm Securities, and the Company agrees to sell to the Representative all of the
Overallotment Securities. The Shares will be offered and sold to the public at a
price of $_____ per Share and the Class A Warrants will be offered and sold to
the public at a price of $.50 per Warrant. Such prices are referred to herein as
the "Public Offering Price." The Company's authorized and outstanding
capitalization when the offering of the Firm Securities is permitted to commence
-2-
<PAGE>
and at the Closing Date (hereinafter defined) and at the Option Closing Date
(hereinafter defined) will be as set forth in the Registration Statement
(hereinafter defined) and the Prospectus (hereinafter defined) included therein.
One Class A Warrant entitles the holder to purchase one share of the
Company's Common Stock ("Warrant Share") at $_____ per share ("Exercise Price")
at any time after the effective date and until ___________, 1999. At the time of
exercise of a Class A Warrant the Exercise Price of $_____ will be reduced by
$.50 to reflect a credit of the original purchase price of the Class A Warrant.
The Company has the right to call all of the Class A Warrants for redemption at
a price $.55 per Class A Warrant at any time during the first or second years
after the effective date and at a price of $.75 per Class A Warrant at any time
during the third year after the effective date and prior to the expiration of
the Class A Warrants. The Class A Warrants may be redeemed upon 30 days prior
written notice given at any time after the Common Stock of the Company has
traded for at least $______ for at least 20 consecutive trading days ending
within 10 days prior to the date of the notice of redemption. For purposes of
determining the daily trading price of the Company's Common Stock: (i) if the
Common Stock is listed on a national stock exchange or admitted to unlisted
trading privileges on any such exchange or quoted on a trading system of the
National Association of Securities Dealers, Inc. ("NASD") such as the NASDAQ
Small Cap Market or the NASDAQ National Market System ("NASDAQ/NMS"), then the
last reported sale price of the Common Stock each day shall be used, but if no
such sale has occurred on any of such days or if the last sale price is not
reported, then the average of the closing bid prices for the Common Stock for
such day on such exchange or system shall be used; or (ii) if the Common Stock
is not then traded on any such exchange or system then the average of the daily
bid prices for the Company's Common Stock reported by the National Quotation
Bureau, Inc. shall be used if the Company's Common Stock is included in the
National Quotation System.
The entire proceeds from sale of the Class A Warrants will be placed in an
interest bearing escrow account established with Tri-State Bank, Denver,
Colorado, during the three year term of the Class A Warrants. The escrow
proceeds, together with accrued interest, will be released to the Company or to
the Warrantholders, as follows: (i) upon exercise of each Class A Warrant, $.50
will be credited to the $_____ Class A Warrant Exercise Price and, together with
accrued interest thereon, will be released to the Company; (ii) upon redemption
of the Class A Warrants, the escrow proceeds relating to such redemption will be
released to the Company; and (iii) to the extent that the Class A Warrants are
not exercised or redeemed within the three year Class A Warrant period, then the
remaining escrow proceeds, plus accrued interest thereon, will be returned to
those Warrantholders owning unexercised or unredeemed Class A Warrants. The
Company may amend the terms of the Class A Warrants but only by extending the
expiration date or lowering the Exercise Price.
The Class A Warrants contain provisions protecting the holders thereof
against dilution of their interests represented by the Warrant Shares upon the
occurrence of certain events. Holders of the Class A Warrants have no voting
power and are not entitled to dividends. In the event of liquidation,
dissolution, or winding up of the Company, holders of the Class A
- 3 -
<PAGE>
Warrants are not be entitled to participate in the Company's assets. The Company
agrees to take whatever actions are necessary so that during the period that the
Class A Warrants are exercisable a registration statement relating to the
Warrant Shares will be effective and current with the Securities and Exchange
Commission ("Commission") and the Company agrees to use its best efforts so that
during such period the Class A Warrants may be exercised by the holders thereof
under the securities laws in those states in which any of the Securities are
sold in the public offering under the Registration Statement and in those states
in which registered holders reside who in the aggregate own at least 2% of the
Class A Warrants outstanding during the period that such Class A Warrants are
exercisable. The Company agrees that its obligations set forth in the preceding
sentence shall remain in full force and effect regardless of whether or not the
"market price" of the Company's Common Stock is less than the Exercise Price
under the Class A Warrants. The Company agrees not to call the Class A Warrants
for redemption at any time that such registration statement is not effective and
current with the Commission and the states described in the previous sentence.
SECTION 2
---------
Representations and Warranties of the Company
---------------------------------------------
In order to induce the members of the Underwriting Group to enter into this
Agreement, the Company hereby represents and warrants to and agrees with the
members of the Underwriting Group as follows:
2.01. Registration Statement and Prospectus. A registration statement on
Form SB-2 (File No. 333-_______) ("Registration Statement") with respect to the
Securities, the Warrant Shares, and the Representative's Warrants and
Representative's Class A Warrants (hereinafter defined), including the related
Prospectus, copies of which have heretofore been delivered by the Company to the
Representative, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended ("Act"), and the rules
and regulations ("Rules and Regulations") of the Commission thereunder, and said
Registration Statement has been filed with the Commission under the Act; one or
more amendments to said Registration Statement, copies of which have heretofore
been delivered to the Representative, has or have heretofore been filed with the
Commission; and the Company may file with the Commission on or prior to the
effective date additional amendments to said Registration Statement, including
the final Prospectus. As used in this Agreement, the term "Registration
Statement" refers to and means said Registration Statement and all amendments
thereto, including the Prospectus, all exhibits and all financial statements, as
it becomes effective; the term "Prospectus" refers to and means the Prospectus
included in the Registration Statement when it becomes effective; and the term
"Preliminary Prospectus" refers to and means any Prospectus included in said
Registration Statement before it becomes effective. The terms "effective date"
and "effective" refer to the date the Commission declares effective, pursuant to
Section 8 of the Act, the Registration Statement relating to the offering
described in this Agreement.
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2.02. Accuracy of Registration Statement and Prospectus. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and to the best of
the Company's knowledge has not included at the time of filing any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading. When the Registration Statement
becomes effective and on the Closing Date and on the Option Closing Date, the
Registration Statement and Prospectus and any further amendments or supplements
thereto will contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations thereunder for the
purposes of the proposed public offering of the Securities, all statements of
material fact contained in the Registration Statement and Prospectus will be
true and correct and neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, the Company does not make any representations
or warranties as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon written information furnished on
behalf of the members of the Underwriting Group specifically for use therein.
2.03. Financial Statements. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the Company
and the results of its operations and the changes in its financial position at
the respective dates and for the respective periods for which they apply. Such
financial statements have been prepared in accordance with generally accepted
principles of accounting consistently applied throughout the periods concerned
except as otherwise stated therein.
2.04. Independent Public Accountants. The accountants which have audited
the financial statements filed or to be filed with the Commission as part of the
Registration Statement and Prospectus, are independent certified public
accountants with respect to the Company within the meaning of the Act and the
Rules and Regulations thereunder.
2.05. No Contingent Liabilities and No Material Adverse Change. Except as
disclosed in the Registration Statement and Prospectus, neither the Company nor
any of its subsidiaries, if any, have any contingent liabilities, obligations or
claims nor have they received threats of claims or regulatory action. Except as
may be reflected in or contemplated by the Registration Statement or the
Prospectus, subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Date and the
Option Closing Date, (i) there shall not have been any material adverse change
in the condition, financial or otherwise, of the Company or its subsidiaries, if
any, or in the business of the Company or its subsidiaries; (ii) there shall not
have been any material adverse transaction entered into by the Company or any of
its subsidiaries, if any; (iii) neither the Company nor any of its subsidiaries,
if any, shall have incurred any material obligations, contingent or otherwise,
which are not disclosed in the Prospectus; (iv) there shall not have been any
change in the
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outstanding securities or long term debt (except current payments) of the
Company or any of its subsidiaries, if any; (v) the Company has not and will not
have paid or declared any dividends or other distributions on its Common Stock
or other securities; and (vi) there shall not have been any change in the
officers or directors of the Company.
2.06. No Defaults. Neither the Company nor any of its subsidiaries, if any,
is in default under any of the contracts, leases, subleases, licenses or
agreements to which they are a party. Except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries, if any, is in default, which
has not been waived, in the performance of any obligation, agreement or
condition contained in any debenture, note or other evidence of indebtedness or
any indenture or loan agreement. The execution and delivery of this Agreement,
the consummation of the transactions herein contemplated and the compliance with
the terms of this Agreement will not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or bylaws of the Company or any of its
subsidiaries, if any, any note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries, if any,
is a party or by which it, its subsidiaries, if any, or any of their property is
bound, or any existing law, order, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality, agency or body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the Company,
its subsidiaries, if any, or their property. The consent, approval,
authorization or order of any court or governmental instrumentality, agency or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act or under the blue sky
or securities laws of any state or jurisdiction.
2.07. Incorporation and Standing. The Company is and at the Closing Date
and at the Option Closing Date will be duly incorporated and validly existing in
good standing as a corporation under the state law of the Company's state of
incorporation with authorized and outstanding capital stock as set forth in the
Registration Statement and the Prospectus and with full power and authority
(corporate and other) to own its property and conduct its business, present and
proposed, as described in the Registration Statement and Prospectus; the Company
has full power and authority to enter into this Agreement; and the Company is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which it owns or leases real property or transacts business
requiring such qualification. All of the Company's subsidiaries, if any, are
identified and described in the Registration Statement. Each of the Company's
subsidiaries, if any, is and at the Closing Date and at the Option Closing Date
will be duly incorporated and validly existing in good standing as a corporation
under the state law of their respective state of incorporation with authorized
and outstanding capital stock as set forth in the Registration Statement and the
Prospectus and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus, and is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases real property or transacts business requiring such qualification, except
where the failure to so qualify would not be materially adverse to the Company's
business taken as a whole.
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2.08. Legality of Outstanding Securities. The outstanding shares of Common
Stock of the Company and each of its subsidiaries, if any, have been duly and
validly authorized and issued, are fully paid and nonassessable and conform to
all statements with regard thereto contained in the Registration Statement and
Prospectus. No sales of securities have been made by the Company in violation of
the registration provisions of the Act or in violation of any other federal or
state laws.
2.09. Legality of Securities. The Securities, the Warrant Shares, the
Representative's Warrants (described in Section 3.04 hereof) and the
Representative's Class A Warrants (described in Section 3.04 hereof) have been
duly and validly authorized and, when issued and delivered against payment as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. The Securities, the Warrant Shares, the Representative's Warrants
and the Representative's Class A Warrants, upon issuance, will not be subject to
the preemptive rights of any shareholders of the Company. The Class A Warrants,
the Representative's Warrants, and the Representative's Class A Warrants, when
sold and delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms. A sufficient number of shares of
Common Stock have been reserved for issuance upon exercise of the Class A
Warrants, the Representative's Warrants, and the Representative's Class A
Warrants. The Securities, the Warrant Shares, the Representative's Warrants and
the Representative's Class A Warrants will conform to all statements in the
Registration Statement and Prospectus made with respect thereto. Upon delivery
of and payment for the Securities, the Representative's Warrants and the
Representative's Class A Warrants to be sold by the Company as set forth in this
Agreement, the persons paying therefor will receive good and marketable title
thereto, free and clear of all liens, encumbrances, charges and claims. The
Company will have on the effective date of the Registration Statement and at the
time of delivery of the Securities, the Representative's Warrants and the
Representative's Class A Warrants full legal right and power and all
authorizations and approvals required by law to sell and deliver the Securities,
Representative's Warrants and Representative's Class A Warrants in the manner
provided hereunder.
2.10. Outstanding Securities and Long Term Debt on Effective Date.
Immediately prior to the effective date, the only shares of capital stock,
warrants, options, or other convertible securities which have been issued by the
Company and which will be outstanding on the effective date will be as described
in the Prospectus, and the Company will not be obligated on any long term debt,
whether or not recorded on the books, records, or accounts of the Company and
will not be obligated to issue any capital stock, warrants, options, or other
convertible securities except as described in the Prospectus. Unless the
Representative has approved in writing a different maximum number of fully
diluted shares, immediately prior to the effective date of the Registration
Statement the number of shares of Common Stock of the Company outstanding on a
fully diluted basis will not exceed 5,955,655 shares plus the number of shares
underlying options which were issued after May 28, 1996, under the Company's
Amended and Restated Stock Option Plan the last amendment to which was approved
by the Company's shareholders on May 29, 1996 ("Plan"). For purposes of this
Underwriting Agreement, the term "fully diluted basis" shall mean the number of
shares of Common Stock actually issued and outstanding plus the number of shares
of Common Stock underlying all issued and outstanding convertible or excisable
securities.
2.11. CUSIP Number. The Company has obtained a CUSIP number for its Common
Stock and Class A Warrants.
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2.12. Options and Treasury Shares. There are no outstanding options,
warrants or other rights to purchase securities of the Company, however
characterized, except as described in the Registration Statement. Except as
described in the Registration Statement, there are no securities of the Company,
however characterized, held in its treasury. Except as described in the
Registration Statement, the Company has not offered or agreed to purchase or
issue any shares of Common Stock or any convertible securities in the future.
2.13. Subsidiaries. Except as described herein and in the Registration
Statement, the Company has no subsidiaries and does not currently intend to
acquire any subsidiaries or engage in mergers with or the acquisition of any
entity.
2.14. Prior Sales. No securities of the Company, or of a predecessor of the
Company, have been sold except as described in the Registration Statement.
2.15. Litigation. Except as set forth in the Registration Statement and
except for nonmaterial actions, suits, or proceedings disclosed in writing to
the Representative, there is and at the Closing Date and at the Option Closing
Date there will be no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened against the Company or any of its subsidiaries.
2.16. Finder. Except as set forth in the Registration Statement, the
Company knows of no outstanding claims against it for compensation for services
in the nature of a finder's fee, origination fee, or financial consulting fee
with respect to the offer and sale of the Securities and Warrant Shares
hereunder.
2.17. Exhibits. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations thereunder, which have not been so filed and each
contract to which the Company or any of its subsidiaries is a party and to which
reference is made in the Prospectus has been duly and validly executed, is in
full force and effect in all material respects in accordance with its terms, and
none of such contracts has been assigned and the Company knows of no present
situation or condition or fact which would prevent compliance with the terms of
such contracts. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has not been advised that any party to
any such contract intends to exercise any right which it may have to cancel any
of its obligations under any of such contracts and has no knowledge that any
other party to any such contracts has any intention not to render full
performance under such contracts.
2.18. Tax Returns. The Company has filed all tax returns which are required
to be filed by it and has paid all taxes shown on such returns and on all
assessments received by it to the extent such taxes have become due. All taxes
with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any such unpaid taxes.
2.19. No Preemptive Rights. The Company's securities, however
characterized, are not subject to preemptive rights.
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2.20. Use of Form SB-2. The Company is eligible to use Form SB-2 for the
offering of the Securities, the Representative's Warrants, the Representative's
Class A Warrants and the Warrant Shares.
2.21. No Securities Being Offered. Except as described in the Registration
Statement, neither the Company nor any of its subsidiaries, if any, is currently
offering any securities of which it is the issuer.
2.22. Certificates, Permits, Licenses, Approvals, Patents and Trademarks.
The Company and each of its subsidiaries, if any, possess adequate certificates,
permits, licenses, or approvals, issued by the appropriate federal, state and
local regulatory authorities necessary to conduct its business and to retain
possession of its properties. The Company and its subsidiaries, if any, have not
received any notice of any proceeding relating to the revocation or modification
of any of these certificates, permits, licenses, or approvals. The Company and
each of its subsidiaries, if any, has sufficient trademarks, patent rights and
copyright protection to conduct its business as now being conducted; and except
as described in the Prospectus, the Company has no knowledge of any use by it or
any of its subsidiaries, if any, of the trade secrets of others, of infringement
by it or them of trademarks, patent rights or copyrights of others, or of any
claim being made against the Company or any of its subsidiaries, if any,
regarding trademark, patent or copyright infringement or use of trade secrets of
others.
2.23. Title to Properties. The Company and each of its subsidiaries, if
any, has marketable title to all properties, including patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, equipment, and technology, described in the
Registration Statement as owned by it or them. The properties are free and clear
of all liens, charges, encumbrances or restrictions, however characterized,
except as described in the Registration Statement. All of the contracts, leases,
subleases, patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, licenses and agreements,
however characterized, under which the Company and each of its subsidiaries, if
any, holds its properties, as described in the Registration Statement, are in
full force and effect.
2.24. No Directed Sales. The Company has not made any representation,
whether oral or in writing, to any person, whether an existing shareholder or
not, that any of the Securities will be reserved or directed to such person
during the proposed public offering.
2.25. Restricted Securities. The Company has caused each of its current
shareholders who holds "restricted securities" as such term is defined in Rule
144 under the Act to acknowledge that they hold "restricted securities" as
defined in Rule 144.
2.26. Negotiations. During the period from the effective date to the
Closing Date or the Option Closing Date, the Company will notify the
Representative in writing from time to time of the status of any negotiations
involving the Company or any of its subsidiaries, if any, relating to any
transaction which would, if consummated, have a material effect upon the Company
or any of its subsidiaries, if any. Also, the Company will consult with its
legal counsel concerning the need to disclose any such negotiations.
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2.27. Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.28. 1940 Act. The Company has been advised of the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company"
within the meaning of the 1940 Act and such rules and regulations.
2.29. Campaign Contributions. The Company has not at any time during the
last five years made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of law, or
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasipublic duties, other than
payments required or permitted by the laws of the United States of any
jurisdiction thereof.
2.30. Securities Activities. The Company has not taken and will not take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
any security to facilitate the sale or resale of the Securities.
2.31. Environmental. Except as specifically described in the Prospectus,
the Company is in compliance with all federal, state, and local rules,
regulations, and policies relating to the use, treatment, storage,
transportation, discharge, emission, or disposal of, or exposure of others to,
toxic substances and protection of health, safety or the environment
("Environmental Laws") which are applicable to its business; there is no pending
or asserted claim, liability, or investigation by any third party or
governmental authority against the Company under Environmental Laws; no
substances which are prohibited or regulated by any Environmental Law or
designated to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment by any governmental agency ("Hazardous Material") are present
or likely to become present on any property which is owned, leased, or occupied
by the Company and no such property has been designated as a SuperFund site,
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended, or otherwise designated as a contaminated site under applicable
federal, state or local law; and the Company has received all permits, licenses,
or other approvals required of it under Environmental Laws to conduct its
business as presently conducted and is in compliance with all terms and
conditions of such permits, licenses, or approvals.
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2.32. FDA and DOT Compliance. The Company's business and the business of
each of the Company's subsidiaries, if any, is being conducted in compliance
with the applicable rules and regulations of the United States Food & Drug
Administration ("FDA") and the United States Department of Transportation
("DOT"). Neither the Company, nor any subsidiary of the Company, if any,
received any notice of any claim by the FDA or DOT or any other governmental
agency that its business is not being conducted in compliance with all
applicable rules and regulations of the FDA or DOT or any other governmental
agency.
If the Company has any subsidiaries, the parties agree that the
representations and warranties contained in subsections 2.05, 2.06, 2.07, 2.08,
2.15, 2.22, 2.23, 2.26, 2.31, and 2.32, hereof shall be deemed to have been made
by the Company on its own behalf and on behalf of each of its subsidiaries.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 3
---------
Purchase and Sale of the Securities
-----------------------------------
3.01. Purchase of Securities. The Company hereby agrees to sell to the
members of the Underwriting Group named in Schedule I hereto (for all of whom
the Representative is acting), severally and not jointly, and each member of the
Underwriting Group, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase
from the Company, severally and not jointly, the number of Firm Securities set
forth opposite the name of each member of the Underwriting Group as set forth in
Schedule I hereto at a purchase price of $_____ per Share and $.50 per Class A
Warrant. The Company hereby grants to the Representative and the members of the
Underwriting Group an option for a period of 30 days after the effective date to
purchase at a purchase price of $_____ per Share and $.50 per Class A Warrant up
to ____ Shares and/or up to ____ Class A Warrants in order to cover
overallotments. Any Overallotment Securities purchased shall be purchased for
the account of the Representative and/or for the accounts of the members of the
Underwriting Group as determined by the Representative.
3.01.01. Default by Member of Underwriting Group. If for any reason
one or more of the Underwriters shall fail or refuse (otherwise than for a
reason sufficient to justify the termination of this Agreement under the
provisions of Section 9 hereof) to purchase and pay for the number of Firm
Securities agreed to be purchased by such Underwriter, the Company shall
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immediately give notice thereof to the Representative, and the
nondefaulting Underwriters shall have the right within 24 hours after the
receipt by the Representative of such notice, to purchase or procure one or
more other Underwriters to purchase, in such proportions as may be agreed
upon among the Representative and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, the Firm Securities which
such defaulting Underwriter or Underwriters agreed to purchase. If the
nondefaulting Underwriters fail so to make such arrangements with respect
to all such Firm Securities, the number of Firm Securities which each
nondefaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased pro rata to absorb the remaining
Firm Securities which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the nondefaulting Underwriters shall not
be obligated to purchase any of the Firm Securities if the aggregate Public
Offering Price of the Firm Securities which the defaulting Underwriter or
Underwriters agreed to purchase exceeds 10% of the Public Offering Price of
the total Firm Securities which all Underwriters agreed to purchase
hereunder. If the total number of Firm Securities which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with this subsection 3.01.01, then the Company shall
have the right, within 24 hours next succeeding the 24 hour period above
referred to, to make arrangements with other underwriters or purchasers
satisfactory to the Representative for the purchase of all of the Firm
Securities which the defaulting Underwriter or Underwriters agreed to
purchase hereunder on the terms herein set forth. In any such case, either
the Representative or the Company shall have the right to postpone the
Closing Date determined as provided in subsection 3.02.02. hereof for not
more than seven business days after the date originally fixed as the
Closing Date pursuant to said subsection 3.02.02. in order that any
necessary changes in the Registration Statement, the Prospectus or any
other documents or arrangements may be made. If neither the nondefaulting
Underwriters nor the Company shall make arrangements within the 24 hour
periods stated above for the purchase of all the Firm Securities which the
defaulting Underwriter or Underwriters agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any nondefaulting Underwriter and
without any liability on the part of any nondefaulting Underwriter to the
Company.
3.01.02. Liability of Defaulting Members of the Underwriting Group.
Nothing contained in this Section 3.01 shall relieve any defaulting member
of the Underwriting Group of its liability, if any, to the Company or to
the remaining members of the Underwriting Group for damages occasioned by
its default hereunder.
3.02. Public Offering Price. After the Commission notifies the Company that
the Registration Statement has become effective and after this Agreement becomes
effective, the members of the Underwriting Group propose to offer the Shares to
the public at a Public Offering Price of $_____ per Share and to offer the Class
A Warrants to the public at a Public Offering Price of $.50 per Class A Warrant
as set forth in the Prospectus. The members of the Underwriting Group may allow
such concessions and discounts upon sales to selected dealers as may be
determined from time to time by the Representative.
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3.02.01. Payment for Firm Securities. Payment for the Firm Securities
shall be made to the Company by regular check or checks at the offices of
the Representative set forth above in Denver, Colorado, upon delivery to
the Representative of certificates for the Firm Securities in definitive
form in such numbers and registered in such names as the Representative
requests in writing at least two full business days prior to such delivery.
The Company agrees not to seek to obtain (i) certification of the
Representa- tive's closing check or checks from the Representative's bank
or banks or (ii) a cashier's check or checks from the Representative's bank
or banks in substitution for the Representative's closing check or checks.
The Company agrees to deposit the Representative's closing check or checks
into the Company's bank account and to allow such check or checks to clear
through the banking system on a "regular way" basis. Nothing contained in
this Section 3.02.01 shall be construed to relieve the Representative from
its obligations created as a result of the issuance of the Representative's
regular check or checks at the Closing.
3.02.02. Closing. The time and date of delivery and payment hereunder
for the Firm Securities is herein called the "Closing Date" and shall take
place at the office of the Representative at the address set forth above in
Denver, Colorado, at 10:00 A.M. on the third business day following the
effective date of this Agreement; provided, however, the Company and the
Representative may agree, on the date that this Agreement becomes legally
effective, to an alternative Closing Date and such alternative Closing Date
shall become the Closing Date under this Agreement. Should the
Representative elect to exercise any part of the overallotment option
pursuant to Section 3.01 hereof, the time, date of delivery and payment for
the Overallotment Securities being purchased shall be as mutually agreed
between the Company and the Representative, but not later than the
thirtieth calendar day after the effective date. Said date is hereinafter
referred to as the "Option Closing Date."
3.02.03. Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for the Common Stock and Class A
Warrants, the Company agrees to make the certificates available for
inspection by the Representative at the place designated by the
Representative at least one full business day prior to the proposed
delivery date.
3.03. Representative's Nonaccountable Expense Allowance. It is understood
that the Company shall reimburse the Representative for its expenses on a
nonaccountable basis in the amount of 3% of the Public Offering Price of the
Shares and Overallotment Shares purchased by the Underwriters. The
Representative acknowledges that it has received $40,000 of the nonaccountable
expense allowance, which amount will be credited against the unpaid balance of
such nonaccountable expense allowance. On the Closing Date and the Option
Closing Date, the Company shall pay to the Representative the unpaid balance of
such nonaccountable expense allowance then due.
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3.04. Representative's Warrants and Representative's Class A Warrants. On
the Closing Date, the Company will sell warrants to the Representative and its
designees ("Representative's Warrants") entitling the Representative to purchase
a total of ______ shares of the Company's Common Stock. The Representative's
Warrants will be in the form of the Representative's Warrants to Purchase Common
Stock filed as an exhibit to the Registration Statement. In addition, on the
Closing Date, the Company will sell to the Representative a total of ________
Representative's Class A Common Stock Purchase Warrants ("Representative's Class
A Warrants") which shall be exactly the same as the Class A Warrants except that
the exercise price for the Representative's Class A Warrants will be 120% of the
exercise price of the Class A Warrants and except as otherwise specified in this
Section 3.04. The total amount that the Representative shall pay the Company for
the Representative's Warrants and the Representative's Class A Warrants is $100.
The Company and the Representative agree that the Representative's Warrants and
the Representative's Class A Warrants may not be sold, transferred, assigned,
pledged, or hypothecated for a period of one year after the effective date of
the Registration Statement except to officers of the Representative, to members
of the Underwriting Group, and to officers of members of the Underwriting Group
and except by will or operation of law. After such one year period, the
Representative's Warrants and the Representative's Class A Warrants may be sold,
transferred, assigned, pledged, or hypothecated provided that any such
transaction is in accordance with the registration or exemption from
registration provisions of the Act and any applicable state securities laws. If
the Representative's Warrants or the Representative's Class A Warrants are
exercised during the first year after the effective date of the Registration
Statement, then any shares of Common Stock of the Company acquired as a result
of any such exercise may not be sold, transferred, assigned, pledged, or
hypothecated until after expiration of such one year period. The
Representative's Class A Warrants shall not be subject to redemption.
3.05. Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date and as of the Option Closing Date the
representations herein contained and the statements contained in all the
certificates theretofore or simultaneously delivered by any party to another,
pursuant to this Agreement, shall in all material respects be true and correct.
3.06. Postclosing Information. The Representative covenants that reasonably
promptly after the Closing Date and after the Option Closing date, the
Representative will supply the Company with all information that the Company may
reasonably request which must be supplied to the Commission or securities
authorities of states in which the Securities have been qualified for sale.
3.07. Reoffers by Selected Dealers. On each sale by the members of the
Underwriting Group of any of the Securities to selected dealers, the members of
the Underwriting Group shall require the selected dealers purchasing any such
Securities to agree to reoffer such Securities on the terms and conditions of
the offering set forth in the Registration Statement and Prospectus.
SECTION 4
---------
Registration Statement and Prospectus
-------------------------------------
4.01. Delivery of Registration Statement. The Company shall deliver to the
Representative without charge two signed printed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
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Representative such number of conformed printed copies of the Registration
Statement as the Representative shall request, including all financial
statements and exhibits filed therewith and any amendments or supplements
thereto. The signed copies of the Registration Statement so furnished to the
Representative will include signed copies of any and all opinions and consents
of the independent public accountants certifying to the financial statements
included in the Registration Statement and Prospectus and signed copies of any
and all opinions, consents and certificates of any other persons whose
profession gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified or reviewed
any part thereof.
4.02. Delivery of Preliminary Prospectus and Agreements. The Company will
have caused to be delivered, at its expense, to the members of the Underwriting
Group and to other broker dealers specified by the Representative prior to the
effective date of the Registration Statement as many printed copies of (i) each
Preliminary Prospectus filed with the Commission bearing in red ink the
statements required by Item 501 of Regulation S-B, and (ii) each Agreement Among
Underwriters, Underwriting Agreement, and Selected Dealer Agreement, all as may
have been requested by the Representative. The Company consents to the use of
such documents by the members of the Underwriting Group and by prospective
dealers prior to the effective date of the Registration Statement, so long as
such use is in accordance with the applicable provisions of the Act, the
applicable Rules and Regulations thereunder and the applicable state blue sky or
securities laws.
4.03. Delivery of Prospectus. The Company will deliver, at its expense, to
the members of the Underwriting Group and to other broker dealers specified by
the Representative, as many printed copies of the Prospectus as the
Representative may request and will deliver said printed copies of the
Prospectus to the members of the Underwriting Group and such other persons on
the effective date and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection with sales of the Securities.
4.04. Further Amendments and Supplements. If during the period of time that
the Company's Prospectus is required to be delivered under the Act, any event
occurs or any event known to the Company relating to or affecting the Company
shall occur, as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading or if it is necessary
at any time after the effective date to amend or supplement the Prospectus to
comply with the Act, the Company agrees to immediately notify the Representative
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thereof and prepare and file with the Commission such further amendment to the
Registration Statement or supplemental or amended Prospectus as may be required
and furnish and deliver to the Representative and to others designated by the
Representative, all at the Company's expense, a reasonable number of copies of
the amended or supplemented Prospectus which as so amended or supplemented will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading when it is delivered to
a purchaser or prospective purchaser, and which will comply in all respects with
the Act; and in the event the Representative is required to deliver a Prospectus
after the date specified in Rule 174 of the Rules and Regulations, the Company
upon request will prepare promptly such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10 of the Act.
4.05. Use of Prospectus. The Company authorizes the members of the
Underwriting Group in connection with the distribution of the Securities and all
dealers who may distribute any of the Securities to use the Prospectus, as from
time to time amended or supplemented, in connection with the offering and sale
of the Securities so long as such use is in accordance with the applicable
provisions of the Act, the applicable Rules and Regulations thereunder and
applicable state blue sky or securities laws.
SECTION 5
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Covenants of the Company
------------------------
The Company covenants and agrees with the members of the Underwriting Group
that:
5.01. Objection of Representative to Amendments or Supplements. After the
date hereof, the Company will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus (i) unless and until a copy of such
amendment or supplement has been previously furnished to the Representative
within a reasonable time period prior to the proposed filing thereof or (ii) to
which the Representative or legal counsel to the Representative has reasonably
objected, in writing, on the ground that such amendment or supplement is not in
compliance with the Act or the Rules and Regulations.
5.02. Company's Best Efforts to Cause Registration Statement to Become
Effective. The Company agrees to use its best efforts to cause the Registration
Statement and any amendment thereto to become effective as promptly as
reasonably practicable and will promptly advise the Representative and will
confirm such advice in writing (i) when the Registration Statement shall have
become effective and when any amendment thereto shall have become effective and
when any amendment of or supplement to the Prospectus shall be filed with the
Commission, (ii) when the Commission shall make, either orally or in writing, a
request or suggestion for any amendment to the Registration Statement or the
Prospectus or for any additional information and the nature and substance
thereof, (iii) of the issuance by the Commission of an order suspending the
effectiveness of the Registration Statement pursuant to Section 8 of the Act or
of the initiation of any proceedings for that purpose, (iv) of the happening of
any event which in the judgment of the Company makes any material statement in
the Registration Statement or Prospectus untrue or which requires the making of
any changes in the Registration Statement or Prospectus in order to make the
statements therein not misleading, and (v) of the refusal to qualify or the
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suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the institution of any proceedings for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any such
refusal to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the termination
of any such suspension.
5.03. Preparation and Filing of Amendments and Supplements. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to legal counsel to the Representative, as in
the opinion of the Representative and of legal counsel to the Company, may be
necessary in connection with the offering or distribution of the Securities and
will use its best efforts to cause the same to become effective as promptly as
possible.
5.04. Blue Sky Qualification. The Company agrees to use its best efforts to
register or qualify the Securities or such part thereof as the Representative
may determine for sale under the blue sky laws of such states as are requested
by the Representative. The Company will be assisted by legal counsel for the
Company in registering or qualifying the Securities for sale under such blue sky
laws. The Company will pay all of the filing fees and legal fees, costs and
expenses incurred by such legal counsel in so registering or qualifying such
Securities. The Company's legal counsel will forward to legal counsel for the
Representative copies of all documents and correspondence sent to or received
from such states in connection with such registrations and qualifications at the
time such documents and correspondence are sent or received by legal counsel for
the Company. On the effective date of the Registration Statement, legal counsel
for the Company will issue to the Company and the Underwriting Group a Blue Sky
Legal Opinion in form and content satisfactory to the Representative. The
Company understands that one of the factors which will be considered by the
Representative or the Underwriting Group in deciding whether to execute the
Underwriting Agreement will be the particular states in which the Securities
have been registered or qualified for resale.
5.05. Financial Statements. The Company at its own expense agrees to
prepare and give and will continue to give such financial statements and other
information and reports to and as may be required by the Commission or the
proper public bodies of the states in which the Securities may be registered or
qualified.
5.06. Reports and Financial Statements to the Representative. For a period
of five years from the Closing Date, the Company agrees to deliver to the
Representative copies of each annual report of the Company and copies of all
reports it is required to file or make available pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and will deliver to the
Representative: (i) within 90 days (plus any extensions of time that the
Commission grants to the Company to file its annual report on the appropriate
Form) after the close of each fiscal year of the Company, a financial report of
the Company and its subsidiaries, if any, on a consolidated basis, and a similar
financial report of all of the Company's unconsolidated subsidiaries, if any,
all such reports to include a balance sheet as of the end of the preceding
fiscal year, a statement of operations, a statement of stockholders' equity and
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statement of cash flows covering such fiscal year, and all to be in reasonable
detail and certified by independent public accountants for the Company; (ii)
within 45 days (plus any extensions of time that the Commission grants to the
Company to file its quarterly report on the appropriate Form) after the end of
each quarterly fiscal period of the Company other than the last quarterly fiscal
period in any fiscal year, copies of the consolidated statements of operations,
stockholders' equity and cash flows for the quarterly fiscal period and the
fiscal year to the end of such quarterly fiscal period, and the balance sheet as
of the end of that period of the Company and its subsidiaries, if any, and the
equivalent financial statements of all of the Company's unconsolidated
subsidiaries, if any, for that period, all subject to year end adjustment,
certified by the principal financial or accounting officer of the Company; (iii)
copies of all other statements, documents or other information which the Company
mails or otherwise makes available to any class of its security holders or files
with the Commission; (vi) copies of all news, press or public information
releases when made; (v) copies of all letters to the Company from its
independent certified public accountants concerning actual or potential
deficiencies in the Company's accounting procedures or internal control of
funds; and (vi) upon request in writing from the Representative, such other
information as may reasonably be requested and which may be properly disclosed
to the Representative with reference to the property, business and affairs of
the Company and its subsidiaries, if any. If the Company fails to furnish the
Representative with financial statements as herein provided, within the times
specified herein, the Representative shall have the right to have such financial
statements prepared by independent public accountants of such Representative's
own choosing and the Company agrees to furnish such independent public
accountants such data and assistance and access to such records as they may
reasonably require to enable them to prepare such statements and to pay their
reasonable fees and expenses in preparing the same; provided, however, the
Company shall have the right to furnish the financial statements to the
Representative at any time after the Representative retains independent public
accountants to prepare the financial statements in which event the amount of
fees that the Company shall be obligated to pay to the independent public
accountants selected by the Representative will be limited to those fees
(including any retainer paid) actually incurred to the point in time that the
Company furnishes the required financial statements.
5.07. Expenses Paid by the Company. The Company agrees to pay, whether or
not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization, issuance, and delivery of the
Securities, Representative's Warrants, and the Representative's Class A
Warrants, any original issue taxes in connection therewith, all transfer taxes,
if any, incident to the initial sale of the Securities to the public, the fees
and expenses of the Company's personnel in connection with the offering, the
costs, fees, and expenses incident to the preparation, printing and filing under
the Act and with the NASD of the Registration Statement, or supplements thereto,
the cost of printing, reproducing and filing all exhibits to the Registration
Statement, the Agreement Among Underwriters, this Agreement, the Selected Dealer
Agreement and any other underwriting documents, the cost of printing and
delivering to the Representative, the members of the Underwriting Group, and
selected dealers copies of the Registration Statement and copies of the
Agreement Among Underwriters, this Agreement and the Selected Dealer Agreement,
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and any other underwriting documents, the Preliminary Prospectus and the
Prospectus as herein provided, the costs and legal counsel fees of qualifying
the Securities and Warrant Shares under the state securities or blue sky laws as
provided in Section 5.04 herein, the cost of providing the Representative with
two bound volumes of the Registration Statement, as amended, all exhibits
thereto, all state filings and all correspondence relating to the Registration
Statement and all state filings, the expenses of Company representatives in
attending a reasonable number of "due diligence" meetings (which shall include
all presentations specified by the Representative) held by the Representative
and the cost, not to exceed $3,000, of tombstone advertising relating to the
proposed Public Offering, and any other expenses customarily paid by an issuer.
5.08. Reports to Shareholders. For so long as the Company's Common Stock is
registered under the Exchange Act, the Company agrees to hold an annual meeting
of shareholders for the election of directors within 180 days after the end of
each of the Company's fiscal years and, within 180 days after the end of each of
the Company's fiscal years to send to each of the Company's shareholders the
audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the Exchange Act and shall be included in an annual report
meeting the requirements of such Rule. Further, the Company agrees, so long as
such Common Stock is so registered, to send to each of the Company's
shareholders in printed form within 60 days after the end of each fiscal
quarter, reasonably itemized financial statements of the Company for the quarter
just ended and a narrative discussion of such financial statements and the
business conducted by the Company during such quarter.
5.09. Section 11(a) Financials. The Company agrees to send to each of its
security holders and agrees to deliver to the Representative, as soon as
practicable, but in no event later than the first day of the sixteenth full
calendar month following the effective date, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
effective date.
5.10. Posteffective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company
agrees to comply, at its own expense, with all requirements imposed upon it by
the Act, as now or hereafter amended, by the Rules and Regulations, as from time
to time may be in force, and by any order of the Commission, so far as necessary
to permit the continuance of sales of the Securities.
5.11. Application of Proceeds. The Company agrees to apply the net proceeds
from the sale of the Securities substantially in the manner set forth in the
Registration Statement. Except for cumulative changes of less than 10% in each
specific item set forth in the "Use of Proceeds" section of the definitive
Prospectus, the Company will not deviate from such use without giving written
notice of such proposed deviation to the Representative at least 10 business
days prior to any such deviation. Pending utilization of the net proceeds by the
Company for business purposes, all of the unused net proceeds from the sale of
the Securities will be invested in short term United States government
securities purchased through a bank or in a nondiscretionary account of the
Company with the Representative.
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5.12. Delivery of Documents. Prior to the Closing Date, the Company agrees
to deliver to the Representative true and correct copies of the articles of
incorporation and certificate of incorporation of the Company and all amendments
thereto, all such copies to be certified by the secretary of state of the state
of incorporation of the Company; true and correct copies of the bylaws of the
Company and of the minutes of all meetings of the directors and shareholders of
the Company held prior to the Closing Date; and true and correct copies of all
material contracts to which the Company or any of its subsidiaries, if any, is a
party.
5.13. Cooperation with Representative's Due Diligence. At all times prior
to the Closing Date, the Company agrees to cooperate with the Representative,
legal counsel to the Representative, and the Representative's consultants in
such investigation as the Representative may make or cause to be made of the
Company and its affiliates and the Company agrees to make available to the
Representative in connection therewith such information and documents relating
to the Company and its affiliates as the Representative may reasonably request.
5.14. Annual Meetings. The Company will, at its expense, so long as its
Common Stock is registered under the Exchange Act, hold an annual meeting of
shareholders for the election of directors within 180 days after the end of each
of the Company's fiscal years.
5.15. Limitations on Company. Except with the Representative's prior
written consent, the Company agrees that the Company will not do the following
until (a) the completion of the offering of the Securities, or (b) the
termination of this Agreement, or (c) the number of days after the effective
date for which the Prospectus is required to be used pursuant to Rule 174 of the
Rules and Regulations, whichever occurs later:
(i) Undertake or authorize any change in its capital structure;
(ii) Borrow any funds other than in the ordinary course of business and
as contemplated by the Prospectus;
(iii) Consolidate or merge with or into any other corporation; or
(iv) Create any mortgage or any lien upon any of its properties or assets
other than in the ordinary course of business and as contemplated by
the Prospectus.
5.16. Appointment of Transfer Agent and Warrant Agent. Prior to the
effective date, the Company will have appointed American Securities Transfer &
Trust, Inc., Denver, Colorado, as transfer agent for the Company's Common Stock
and as warrant agent for the Company's Class A Warrants.
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5.17. Common Stock and Class A Warrant Certificates. The Company agrees to
make arrangements to have available at the office of the transfer agent
sufficient quantities of the Company's Common Stock certificates as may be
needed for the quick and efficient transfer of the Common Stock. The Company
agrees to make arrangements to have available at the office of the warrant agent
sufficient quantities of the Company's Class A Warrant Certificates has may be
needed for quick and efficient transfer of Class A Warrants.
5.18. Compliance with Conditions Precedent. The Company agrees to use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the obligations of the members of the Underwriting Group in Section
8 hereof.
5.19. Filings of Forms. The Company agrees to file with the Commission all
required reports on Form SR in accordance with the provisions of Rule 463 of the
Rules and Regulations and will file with the appropriate state securities
authorities any sales and other reports required by the rules and regulations of
such agencies and will provide copies of such reports to the Representative and
to the legal counsel to the members of the Underwriting Group.
5.20. Registration Under the Exchange Act. Prior to the effective date of
the Registration Statement, the Company will have made a filing under Section
12(g) of the Exchange Act with respect to the Company's Common Stock and Class A
Warrants. The Company agrees to deliver a copy of such filing to the
Representative and to legal counsel for the Representative when filed. On the
effective date of the Registration Statement, the Company will cause the
Company's filing under Section 12(g) of the Exchange Act to become effective
with the Commission.
5.21. Listing in Manuals. As soon as possible prior to the effective date,
the Company agrees to use its best efforts to have the Company listed in Moody's
Over-the- Counter Manual and Standard & Poor's Standard Corporation Records and
such other Manuals as are reasonably requested by the Representative.
5.22. NASDAQ/NMS. The Company agrees to have its Common Stock and Class A
Warrants listed and available for quotation on the NASDAQ National Market System
(NASDAQ/NMS) on the effective date of the Registration Statement. The trading
symbols shall be mutually agreeable to the Company and the Representative. If
the Company is unable to qualify for NASDAQ/NMS, then the Securities will be
listed and available for quotation on the NASDAQ Small Cap Market on the
effective date of the Company's Registration Statement. In such event, as soon
as the Company meets the qualifications required with respect thereto, the
Company will designate its Common Stock and Class A Warrants for inclusion on
the NASDAQ/NMS or, in the alternative, such national stock exchange as is agreed
to between the Company and the Representative.
5.23. Secondary Trading Qualification. The Company agrees to qualify its
Common Stock and Class A Warrants for secondary trading, as soon as legally
possible, in California and such other states as are reasonably requested by the
Representative from time to time.
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5.24. Legends on Stock Certificates. The Company agrees to cause the stock
certificates of its current shareholders that represent "restricted securities,"
and the stock and warrant certificates held by officers, directors, or
controlling persons of the Company to be clearly legended as being restricted
against transfer without compliance with the Act and to cause the Company's
transfer agent and warrant agent to put stop transfer instructions against such
certificates.
5.25. Stockholders and Class A Warrantholders Lists and Transfer Summary.
Within 10 business days after the Closing Date and within 10 business days after
the Option Closing Date, the Company will deliver to the Representative complete
lists of all holders of the Common Stock and Class A Warrants of the Company as
of the Closing Date and as of the Option Closing Date. Each such list shall
include the name and address of each such holder and the number of shares of
Common Stock or Class A Warrants owned by each such person as of such date.
Within 10 business days after the end of each of the first 24 calendar months
after the Closing Date, the Company will provide the Representative with a new
list containing the information described above as the end of each such month
and a list which shows each transaction involving a transfer of a Common Stock
certificate or Class A Warrant certificate during such month. This transfer list
shall include the name and address of the transferor and the transferee and the
number of shares of Common Stock or Class A Warrants transferred.
5.26. Directors, Officers and Committees. The Company agrees that the
persons comprising the board of directors and officers of the Company on the
effective date must be acceptable to the Representative. Such acceptance will
only be withheld by the Representative if material adverse information is
discovered by the Representative. The Company agrees that for a period of three
years after the effective date, at the request of the Representative, the
Company will permit a representative of the Representative to be present at all
meetings of the board of directors of the Company. The Representative shall be
provided with the same notice of each meeting of the board of directors as is
provided to the board of directors. No compensation shall be paid to such
observer. However, the Company will reimburse out of pocket expenses incurred by
such observer to attend meetings. Such observer shall have no vote at such
meetings; such observer shall be required, prior to attending any such meeting,
to represent in writing to the Company that such observer is familiar with and
will comply with all requirements of the federal securities laws applicable to a
person who comes into possession of material nonpublic information concerning
the Company; and such observer may be excluded from attendance at any such
meeting during the discussion of information which is subject to the attorney
client or accountant client privilege. The board of directors of the Company
will establish an audit and a management compensation committee and will
maintain such committees so long as the Common Stock of the Company is
registered under the Exchange Act.
5.27. Right of Inspection. The Company agrees that for a period of five
years after the effective date, the Representative, at the Representative's
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expense, will have the right to have a person or persons selected by the
Representative review the books and records of the Company if at any time the
audited or unaudited financial statements of the Company indicate that the
Company has realized a net loss after taxes or if a material adverse change
occurs in the Company, provided that the Representative may cause such review no
more than once in any 12 month period.
5.28. Public Relations Firm. For a period of at least 36 months after the
effective date, the Company will continue to use a public relations firm which
is mutually acceptable to the Company and the Representative. The Company shall
have sole authority to determine the compensation and the utilization of such
public relations firm. Such public relations firm shall not be a member of the
Underwriting Group or a "related person" of any such member of the Underwriting
Group. The term "related person" is described in Section 5.30 of this Agreement.
5.29. Management Referrals. Persons whom management of the Company believe
may be interested in purchasing Securities in the public offering will be
referred only to Representative and management of the Company will purchase
Securities in the public offering only through the Representative. The
Representative will have complete control of the distribution of the Securities
in the public offering.
5.30. No NASD Member Payments. For purposes of this Section and Section
5.28 hereof, a related person of an NASD member is a person who has any of the
following relationships with any NASD member: legal counsel, financial
consultant or advisor, finder, associated person, or member of the immediate
family of any such person. The Company represents to the Representative that the
Company has not paid and will not pay, except as described in the Registration
Statement or the next sentence, or agreed to pay or deliver any item of value,
including securities, to any member of the NASD or to any person associated with
a member of the NASD or to any related person of an NASD member during the
period beginning on the 366th day prior to the filing of the Registration
Statement with the Commission and ending on the 45th day after the effective
date of the Registration Statement. The representation contained in the
foregoing sentence shall not include cash discounts or commissions paid by the
Company in connection with a distribution of the Company's securities which
occurs prior to the filing of the Registration Statement with the Commission and
shall not include payments made to Brenner Securities Corporation pursuant to
the letter dated September 22, 1995, as amended by letters dated February 7 and
March 7, 1996.
5.31. Future Sales.
5.31.01. Company Sales to Others. During the period of six months
after the effective date of the Registration Statement, the Company will
not sell any securities (other than debt securities issued to financial
institutions) not covered by the Registration Statement without the
Representative's prior written consent. Excepted from this provision shall
be sales of Excluded Securities. The term "Excluded Securities" shall mean
options and warrants which are issued and outstanding on the effective date
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of the Registration Statement or which are issued pursuant to a plan
("Plan") which has been approved in writing by the board of directors of
the Company and the Representative prior to the effective date of the
Registration Statement.
5.31.02. Covered Persons. Prior to the effective date of the
Registration Statement, the Company will cause each of its officers,
directors, 5% or more shareholders, and their affiliates ("Covered Persons)
to agree in writing with the Representative that, without the prior written
consent of the Representative, each such Covered Person will not sell for a
period of 13 months after the effective date of the Registration Statement
any of the Company's shares of Common Stock owned by him or it prior to
such effective date. Such agreement will also provide that if a Covered
Person who is an officer or director of the Company on the effective date
of the Registration Statement ceases to be an officer or director of the
Company during the period of 13 months after the effective date of the
Registration Statement, then such Covered Person and the affiliates of such
Covered Person will agree not to sell any of the Company's shares of Common
Stock owned by such Covered Person and such Covered Person's affiliates
prior to the effective date of such Registration Statement until the
expiration of 13 months after the effective date of the Registration
Statement. The agreements with Covered Persons William J. Collard and
Gerald F. Willman, Jr. will exclude from such restriction on future sales
the sale by such persons collectively of a maximum of 111,067 shares of
Common Stock pursuant to the exercise of options granted by such persons to
nine persons. For purposes of this Agreement, the term "affiliate" shall
have the meaning ascribed to it in rule 405 of the Securities Act of 1933,
as amended ("Act"). Such agreements between the Representative and the
Covered Persons will also provide that any sales of shares of Common Stock
of the Company by such persons during the three year period after the
effective date of the Registration Statement under Rule 144 promulgated by
the SEC under the Act ("Rule 144 Sales"), will be executed only through the
Representative acting as a broker or dealer. In such agreement the
Representative will agree to execute such Rule 144 Sales on a competitive
basis. If any person required to execute an agreement under this subsection
5.31.02. has pledged, or during the applicable period pledges, any of the
Company's shares of Common Stock which are covered by such agreement; such
person shall cause his pledgee to also agree in writing to comply with the
pledgor's agreement with the Representative. A copy of any such written
agreement from the pledgee shall be promptly delivered by the pledgor to
the Representative after execution thereof by the pledgee.
SECTION 6
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Indemnification
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6.01. Indemnification by Company. The Company agrees to indemnify and hold
harmless the members of the Underwriting Group and each person who controls any
member of the Underwriting Group within the meaning of Section 15 of the Act
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against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse the persons indemnified for any legal or other
expenses (including the cost of any investigation and preparation) incurred by
them in connection with any litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Securities under the blue sky or securities laws of the states where filings
were made, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, all as of the date when the Registration Statement or such
amendment, as the case may be, becomes effective, or any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreement contained in this
subsection 6.01 shall not apply to the members of the Underwriting Group or any
person controlling a member of the Underwriting Group in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon any
such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information peculiarly within the knowledge of a member of the Underwriting
Group and furnished in writing to the Company by a member of the Underwriting
Group specifically for use in connection with the preparation of the
Registration Statement and Prospectus or any such amendment or supplement
thereto. This indemnity agreement is in addition to any other liability which
the Company may otherwise have to the members of the Underwriting Group or to
any person controlling a member of the Underwriting Group. Each member of the
Underwriting Group agrees within 10 days after the receipt by it of written
notice of the commencement of any action against it or against any person
controlling it as aforesaid, in respect of which indemnity may be sought from
the Company on account of the indemnity agreement contained in this subsection
6.01 to notify the Company in writing of the commencement thereof. The failure
of such a member of the Underwriting Group so to notify the Company of any such
action shall relieve the person who did not receive notice from any liability
which it may have to that member of the Underwriting Group or any person
controlling it as aforesaid on account of the indemnity agreement contained in
this subsection 6.01, but shall not relieve the Company from any other liability
which it may have to that member of the Underwriting Group or such controlling
person. In case any such action shall be brought against a member of the
Underwriting Group or any such controlling person and the member of the
Underwriting Group shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but such defense shall
be conducted by legal counsel of recognized standing and reasonably satisfactory
to such member of the Underwriting Group or such controlling person or persons,
which is a defendant or which are defendants in such litigation. If the Company
elects to direct such defense, the Company agrees to furnish to the involved
member of the Underwriting Group at its request, copies of all pleadings therein
and to apprise the involved member of the Underwriting Group of all developments
therein, all at the Company's expense, and to permit the member of the
Underwriting Group to be an observer therein.
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6.02. Indemnification by the Members of the Underwriting Group. The members
of the Underwriting Group agree, in the same manner as set forth in subsection
6.01. above, to indemnify and hold harmless the Company, the directors and
officers of the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the Act, with respect to any statement in or
omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Securities under the blue sky or securities
laws thereof, or any information furnished pursuant to subsection 3.06 hereof,
if such statement or omission was made in reliance upon information peculiarly
within the knowledge of a member of the Underwriting Group and furnished in
writing to the Company by a member of the Underwriting Group or on its behalf
specifically for use in connection with the preparation thereof or supplement
thereto. No member of the Underwriting Group shall be liable for amounts paid in
settlement of any such litigation if such settlement was effected without the
written consent of the member of the Underwriting Group. In case of commencement
of any action in respect of which indemnity may be sought from a member of the
Underwriting Group on account of the indemnity agreement contained in this
subsection 6.02., each person to be indemnified by the member of the
Underwriting Group shall have the same obligation to notify the member of the
Underwriting Group as the members of the Underwriting Group have toward the
Company in subsection 6.01. above, subject to the same loss of indemnity in the
event such notice is not given, and the member of the Underwriting Group shall
have the same right to participate in (and, to the extent that the member of the
Underwriting Group shall wish, to direct) the defense of such action at the
expense of the member of the Underwriting Group, but such defense shall be
conducted by legal counsel of recognized standing and satisfactory to the
Company. If the member of the Underwriting Group elects to direct such defense,
the member of the Underwriting Group agrees to furnish to the Company at its
request copies of all pleadings therein and apprise it of all the developments
therein, all at the expense of the member of the Underwriting Group, and permit
the Company to be an observer therein.
6.03. Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an indemnified party under
subsections 6.01. and 6.02. above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect not only (i) the relative
benefits received by the Company on the one hand and the member of the
Underwriting Group on the other from the offering of the Securities, but also
(ii) the relative fault of the Company and the member of the Underwriting Group
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof), as well as any
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other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the member of the Underwriting Group on the other
shall be deemed to be in the same proportion as the total net proceeds from the
public offering of the Securities (before deducting expenses) received by the
Company bears to the total underwriting discount received by the members of the
Underwriting Group, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the member of the Underwriting Group and
the person's relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the members of
the Underwriting Group agree that it would not be just and equitable if
contribution pursuant to this subsection 6.03. were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection 6.03. shall be deemed to include any legal or other expenses to which
such indemnified party would be entitled if subsections 6.01. and 6.02. hereof
were applied. Notwithstanding the provisions of this subsection 6.03., no member
of the Underwriting Group shall be required to contribute any amount in excess
of the amount equal to the total price of the Securities underwritten and
distributed by it to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
6.04. Threat of Regulatory Action. The Company and the Representative agree
to advise each other immediately and confirm in writing the receipt of any
threat of or the initiation of any steps or procedures which would impair or
prevent the right to offer the Securities or the issuance of any "suspension
orders" or other prohibitions preventing or impairing the proposed offering of
the Securities. In the case of the happening of any such event, neither the
Company nor the members of the Underwriting Group will acquiesce in such steps,
procedures or suspension orders and each party agrees to actively defend any
such actions or orders unless all parties agree in writing to acquiesce in such
actions or orders.
SECTION 7
---------
Effectiveness of Agreement
--------------------------
After this Agreement has been executed by the Company and the
Representative, this Agreement shall become effective (i) at 10:00 A.M., Denver,
Colorado Time, on the first full business day after the effective date of the
Registration Statement or (ii) upon release by the Representative of the
Securities for offering after the effective date, whichever shall first occur.
The time of the release by the Representative of the Securities for offering,
for the purposes of this Section 7, shall mean the time of release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities or the time of the first
mailing of copies of the Prospectus relating to the Securities in connection
with a confirmation of a sale of Securities by an Underwriter or Dealer
whichever shall first occur.
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SECTION 8
---------
Conditions of the Obligations of the
------------------------------------
Members of the Underwriting Group
---------------------------------
After execution of this Agreement by the Company and the Representative,
the obligations of the members of the Underwriting Group to purchase the
Securities and to make payment therefor on the Closing Date and on the Option
Closing Date shall be subject to the accuracy, as of the Closing Date and as of
the Option Closing Date, of the representations and warranties on the part of
the Company herein contained, to the performance by the Company of all of its
agreements and obligations herein contained, to the fulfillment of or compliance
by the Company with all covenants and conditions hereof, and to the following
additional conditions, any of which may be waived or modified by the
Representative:
8.01. Effectiveness of Registration Statement. The Registration Statement
shall have become effective and no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement nor the Prospectus nor any amendment thereto shall have
been filed to which legal counsel to the members of the Underwriting Group shall
have reasonably objected in writing or have not given its consent.
8.02. Accuracy of Registration Statement. The Representative shall not have
disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of legal counsel to the members of the
Underwriting Group is material, or omits to state a fact which, in the opinion
of such legal counsel, is material and is required to be stated therein, or is
necessary to make the statements therein not misleading.
8.03. No Material Adverse Changes. No changes shall have occurred in or
with respect to the officers or directors of the Company. No material adverse
changes shall have occurred in or with respect to the business, properties,
financial condition or credit of the Company or in or with respect to any
conditions affecting the prospects of its business.
8.04. Casualty and Other Calamity. The Company shall not have sustained any
loss on account of fire, explosion, flood, accident, calamity or any other
cause, of such character as materially adversely affects its business or
property considered as an entire entity, whether or not such loss is covered by
insurance, and no officer or director of the Company shall have suffered any
injury, sickness or disability of a nature which would materially adversely
affect his or her ability to properly function as an officer or director of the
Company.
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<PAGE>
8.05. Litigation and Other Proceedings. Except as disclosed in the
Prospectus, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign.
8.06. Lack of Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the date of the last audited balance sheet included in the Registration
Statement, the Company (i) shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the date of the last audited
balance sheet included in the Registration Statement, and (ii) except in the
ordinary course of its business, the Company shall not have incurred any
liabilities or obligations (direct or contingent) or disposed of any of its
assets, or entered into any material transaction or suffered or experienced any
materially adverse change in its condition, financial or otherwise. The capital
stock and surplus accounts of the Company shall be substantially the same as at
the date of the last balance sheet included in the Registration Statement,
without considering the proceeds from the sale of the Securities, other than as
may be set forth in the Prospectus.
8.07. Review by Legal Counsel to the Members of the Underwriting Group. The
authorization of the Securities, Representative's Warrants, Representative's
Class A Warrants, Warrant Shares, Registration Statement, Prospectus and all
corporate proceedings and other legal matters incident thereto and to this
Agreement shall be reasonably satisfactory in all respects to legal counsel to
the members of the Underwriting Group.
8.08. Opinions of Legal Counsel.
8.08.01. Brenman Key & Bromberg, P.C., Legal Opinion. The Company
shall have furnished to the members of the Underwriting Group an opinion,
dated the Closing Date, addressed to the members of the Underwriting Group,
from Brenman Key & Bromberg, P.C., legal counsel to the Company, to the
effect that based upon a review by them of the Registration Statement,
Prospectus, the Company's certificate of incorporation, bylaws and relevant
corporate proceedings and contracts, an examination of such statutes they
deem necessary and based upon such other investigation by such legal
counsel as they deem necessary to express such opinion:
(i) The Company and each of its subsidiaries, if any, have been
duly incorporated and are validly existing corporations in good
corporate standing under the laws of the state in which it was
incorporated, with full corporate power and authority to own and
operate its properties and to carry on its business as set forth in
the Registration Statement and Prospectus.
(ii) The Company has authorized and outstanding securities as set
forth in the Registration Statement and Prospectus; the outstanding
securities of the Company and each of its subsidiaries, if any, and
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the Securities conform to the statements concerning them in the
Registration Statement and Prospectus; the outstanding securities of
the Company and each of its subsidiaries, if any, have been duly and
validly issued and are fully paid and nonassessable and contain no
preemptive rights; the Securities being sold by the Company to the
Underwriting Group, the Representative's Warrants and the
Representative's Class A Warrants have been duly and validly
authorized and, upon issuance thereof and payment therefor in
accordance with this Agreement and the Representative's Warrants and
Representative's Class A Warrants will be duly and validly issued,
fully paid and nonassessable and will not be subject to the preemptive
rights of any shareholder of the Company.
(iii) To legal counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are known to such legal counsel which are necessary for
the valid authorization, issue or sale of the Securities being sold by
the Company to the Underwriting Group hereunder, except as required
under the Act or the securities laws of the states in which the
Securities are qualified or except as required by the NASD.
(iv) To legal counsel's knowledge, the issuance and sale of the
Securities being sold by the Company to the Underwriting Group and the
consummation of the transactions herein contemplated and compliance
with the terms of this Agreement will not conflict with or result in a
breach of any of the terms, conditions, or provisions of or constitute
a default under the certificate of incorporation or bylaws of the
Company, or any note, indenture, mortgage, deed of trust, or other
agreement or instrument known to such counsel to which the Company is
a party or by which the Company or any of its property is bound or any
existing law (provided this Section 8.08 (iv) shall not relate to
federal or state securities laws), order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality,
agency, body, arbitration tribunal, or court, domestic or foreign,
having jurisdiction over the Company or its property and which is
known to such counsel.
(v) No preemptive rights exist with respect to the Company's
securities.
(vi) The Company has authorized capitalization as described in
the Registration Statement.
(vii) Based upon written or oral communications from the
Commission, the Registration Statement has become effective under the
Act and, to the knowledge of such legal counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or is
pending or contemplated; legal counsel has participated in the
preparation of the Registration Statement and Prospectus and each
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<PAGE>
amendment and supplement thereto, and no facts have come to the
attention of legal counsel to lead counsel to believe that either the
Registration Statement or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances under which made (except for the financial
statements and other financial data included therein, as to which
legal counsel expresses no opinion); and such counsel is familiar with
all contracts referred to in the Registration Statement or Prospectus
and such contracts are sufficiently summarized or disclosed therein or
filed as exhibits thereto as required, and such legal counsel does not
know of any other contracts that are required to be summarized or
disclosed or filed, and such legal counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
is subject of such a character required to be disclosed in the
Registration Statement or the Prospectus which are not disclosed and
properly described therein.
(viii) This Agreement has been duly authorized by the Company and
is a valid and binding agreement of the Company enforceable according
to its terms subject to applicable bankruptcy, insolvency and other
laws concerning the enforceability of creditors' rights generally;
provided that such counsel need express no opinion as to the
enforceability of any indemnification or contribution provisions
contained in this Agreement. A sufficient number of shares of the
Company's Common Stock have been duly reserved for issuance upon
exercise of the Class A Warrants, the Representative's Warrants, and
the Representatives Class A Warrants.
(ix) Except as disclosed in the Registration Statement and
Prospectus, to the knowledge of legal counsel, the Company is not in
default under any of the contracts, licenses, leases or agreements to
which it is a party and which are described in the Registration
Statement or attached thereto as exhibits and the offering of the
Securities being sold by the Company to the Underwriting Group will
not cause the Company to become in default of any of such contracts,
licenses, leases or agreements.
(x) Except as disclosed in the Registration Statement and
Prospectus, to the knowledge of legal counsel, the properties owned by
the Company and its subsidiaries, if any, described in the
Registration Statement are free and clear of all liens, charges,
encumbrances or restrictions; all of the leases, subleases and other
agreements known to such counsel under which the Company and each of
its subsidiaries, if any, holds its properties and conducts its
business are in full force and effect; neither the Company nor any of
its subsidiaries, if any, is in default under any of the material
terms or provisions of any of such leases, subleases or other
agreements known to such counsel; and there are no claims against the
Company or any of its subsidiaries, if any, concerning its rights
under such leases, subleases and other agreements and concerning its
right to continued possession of its properties.
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<PAGE>
(xi) Legal counsel is unaware of any promoter, affiliate, parent
or subsidiaries of the Company except as are described in the
Registration Statement and Prospectus.
(xii) Such counsel has not received and is not aware of the
Company having received any notice of any claim from any third party
which notice would cause such counsel to conclude that the Company
does not own or possess adequate rights with respect to the U.S.
Patents, the U.S. Trademarks, or other material patents, patent
rights, trademarks, service marks, trade names, copyrights described
or referred to in the Prospectus as owned or used by the Company or
which are necessary for the conduct of the Company's business or
proposed business as described in the Prospectus.
(xiii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or
other securities of the Company have registration rights with respect
to securities of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities of
the Company having rights to registration of such Common Stock, or
other securities, because of the filing of the Registration Statement
by the Company have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by reason of
lapse of time following notification of the Company's intent to file
the Registration Statement, or have included securities in the
Registration Statement pursuant to the exercise of such rights.
In rendering such opinions, such legal counsel shall be entitled to
rely upon Public Authority Documents and upon information provided by
client officials in written Certificates provided that copies of such
Public Authority Documents and Certificates are attached as exhibits to the
written opinion of legal counsel. The term "Public Authority Documents"
shall have the meaning ascribed to it in the Legal Opinion Accord of the
ABA Section of Business Law (1991). Such opinions may be subject to such
qualifications, exceptions, definitions, limitations as are normally
included in similar opinions.
8.08.02. The Company shall furnish to the members of the Underwriting
Group an opinion, dated the Closing Date, addressed to the members of the
Underwriting Group, from ________________________ to the effect that:
(i) To the knowledge of such counsel, the Company's business and
the business of each of the Company's subsidiaries, if any, is in
compliance with all laws applicable to the FDA and DOT, all applicable
rules and regulations of the FDA and DOT and all laws and regulations
of any states in which such business is conducted.
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<PAGE>
(ii) Such counsel has not received and is not aware of the
Company having received any notice of any claim by the FDA or DOT or
any other governmental agency that the products and services being
marketed by the Company are not in compliance with all applicable
rules and regulations of the FDA and DOT and any laws and regulations
of any states in which such products and services are marketed.
In rendering such opinion, such legal counsel shall be entitled to
rely upon Public Authority Documents and upon information provided by
client officials in written Certificates provided that copies of such
Public Authority Documents and Certificates are attached as exhibits to the
written opinion of legal counsel. The term "Public Authority Documents"
shall have the meaning ascribed to it in the Legal Opinion Accord of the
ABA Section of Business Law (1991). Such opinions may be subject to such
qualifications, exceptions, definitions, limitations as are normally
included in similar opinions.
8.09.Accountant's Letter. The Representative shall have received a letter
addressed to the Representative and dated the Closing Date from Ernst & Young
LLP, independent public accountants for the Company, stating that with respect
to the Company they are independent public accountants within the meaning of the
Act and the applicable published Rules and Regulations thereunder; in their
opinion, the financial statements audited by them of the Company at all dates
and for all periods referred to in their opinion and included in the
Registration Statement and Prospectus, comply in all material respects with the
applicable accounting requirements of the Act and the published Rules and
Regulations thereunder with respect to registration statements on Form SB-2; on
the basis of certain indicated procedures (but not an audit in accordance with
generally accepted accounting principles), including reading of the instruments
of the Company set forth in the Prospectus, a reading of the latest available
interim unaudited financial statements of the Company, whether or not appearing
in the Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the minute
book of the Company, nothing has come to their attention, except as disclosed in
their letter, which would cause them to believe that during the period from the
last audited balance sheet included in the Registration Statement to a specified
date not more than two days prior to the date of such letter:
(i) there has been any material change in the financial position
of the Company other than as contemplated by disclosures contained in
the Prospectus;
(ii) there has been any material change in the capital stock or
surplus accounts of the Company or any payment or declaration of any
dividend or other distribution in respect thereof or exchange therefor
or in the debt of the Company from that shown in the Company's last
audited balance sheet included in the Prospectus, other than as
contemplated by disclosures contained in the Prospectus;
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(iii) there have been any material decreases in working capital
or net worth as compared with amounts shown in the Company's last
audited balance sheet included in the Prospectus other than as
contemplated by disclosures contained in the Prospectus;
(iv) there have been any material decreases, as compared with
amounts shown in the Company's last audited balance sheet included in
the Prospectus, in the cash balances other than as contemplated by
disclosures contained in the Prospectus;
(v) the financial statements and schedules set forth in the
Registration Statement and Prospectus do not present fairly the
financial position and results of operations of the Company for the
periods indicated in conformity with generally accepted accounting
principles applied on a consistent basis, and are not in all material
respects a fair presentation of the information purported to be shown;
and
(vi) the dollar amounts, percentages and other financial
information set forth in the Registration Statement and Prospectus
under the captions "Summary," "The Offering," "Selected Financial
Information," "Risk Factors," "Use of Proceeds," "Capitalization,"
"Dilution," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "The Company," "Executive
Compensation," and "Certain Relationships and Related Transactions"
are not in agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
Such letter shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to
the Representative as the Representative reasonably requests.
8.10. Conformed Copies of Accountant's Letter. The Representative shall be
furnished without charge, in addition to the original signed copies, such number
of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.
8.11. Officer's Certificates. The Company shall have furnished to the
Representative two certificates each signed by the chairman of the board, by the
president and by the chief financial officer of the Company, one dated the date
of this Agreement and one dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the
certificate and the Company has complied with all the agreements and
has satisfied all the conditions on its part to be performed or
satisfied at or prior to the date of the certificate.
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(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been
issued and to the best of the knowledge of the respective signers,
after such respective signers have made inquiry, no proceeding for
that purpose has been initiated or is threatened by the Commission.
(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and
supplements thereto, and the Registration Statement and the Prospectus
and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein
are true and correct, and neither the Registration Statement nor
Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amended or a supplemented Prospectus which has not been so
set forth.
(iv) This Agreement has been, and, as of the Closing Date, the
Representatives Warrants and the Representative's Class A Warrants
will have been, duly authorized and executed by the Company.
(v) The respective signers have each reviewed the questionnaires
provided to the Representative by each officer, director, and 5% or
more shareholder of the Company and, to the best of their knowledge,
the statements made in such questionnaires are true and correct.
(vi) Except as set forth in the Registration Statement and
Prospectus, since the respective dates as of which information is
given in the Registration Statement and Prospectus and prior to the
date of such certificate, (i) there has not been any change in the
officers or directors of the Company or any substantially adverse
change, financial or otherwise, in the affairs or condition of the
Company, and (ii) the Company has not incurred any liabilities, direct
or contingent, or entered into any transactions, otherwise than in the
ordinary course of business.
(vii) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, no dividends or
distributions whatever have been declared and/or paid on or with
respect to the securities of the Company.
8.12. Tender for Delivery. All of the Securities being offered by the
Company which have been sold in the offering shall be tendered for delivery in
accordance with the terms and provisions of this Agreement.
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8.13. Blue Sky Qualification. The Securities shall be qualified in such
states as are reasonably designated by the Representative as set forth in
Section 5.04 hereof and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date or Option
Closing Date. On both the effective date of the Registration Statement and on
the Closing Date, the Company and the Representative shall receive from Brenman
Key & Bromberg, P.C., a written opinion which contains the following:
(i) The names of the states in which applications to register or
qualify the Securities have been filed;
(ii) The status of such registrations or qualifications in such
states as of the date thereof;
(iii) A list containing the name of each such state in which the
Securities may be legally offered and sold by a dealer licensed in
such state and the number of each which may be legally offered and
sold in each such state as of the date thereof;
(iv) With respect to the written opinion dated on the effective
date, a representation that such legal counsel will continuously
update such written information if any changes occur in the
information provided therein between the effective date and the
Closing Date and Option Closing Date; and
(v) A statement that the Company, the members of the Underwriting
Group and selected dealers in the offering may rely upon the opinions
contained therein.
8.14. Approval of Legal Counsel to the Representative. All opinions,
letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if
they are in form and substance satisfactory to legal counsel to the
Representative. The suggested form of such documents shall be provided to the
legal counsel to the Representative at least three business days before the
Closing Date.
8.15. Officer's Certificate as a Company Representative. Any certificate
signed by an officer of the Company and delivered to the Representative or to
legal counsel to the members of the Underwriting Group will be deemed a
representation and warranty by the Company to the members of the Underwriting
Group as to the statements made therein.
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SECTION 9
---------
Termination
-----------
9.01. Termination Because of Noncompliance. This Agreement may be
terminated by the members of the Underwriting Group by notice to the Company in
the event that the Company shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Representative in writing. This
Agreement may be terminated by the Company by notice to the Representative in
the event the members of the Underwriting Group shall have failed or been unable
to comply with any of the terms, conditions or provisions of this Agreement on
the part of the members of the Underwriting Group to be performed, complied with
or fulfilled within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Company in writing.
9.02. Termination Because of Changes. This Agreement may be terminated by
the members of the Underwriting Group by notice to the Company if the
Representative believes in its sole judgment that any changes have occurred in
or with respect to the management of the Company, that material adverse changes
have occurred in or with respect to the condition or obligations of the Company,
or if the Company shall have sustained a loss or anticipated loss as a result of
a strike, governmental action, fire, flood, accident, contract termination, or
other calamity of such a character as, in the sole judgment of the
Representative, may interfere materially with the conduct of the Company's
business and operations regardless of whether or not such loss or anticipated
loss shall have been insured.
9.03. Market Out Termination. This Agreement may be terminated by the
members of the Underwriting Group by notice to the Company at any time if, in
the judgment of the Representative, payment for and delivery of the Securities
is rendered impracticable or inadvisable because (i) additional material
governmental restrictions not in force and effect on the date hereof shall have
been imposed upon the trading in securities generally, or minimum or maximum
prices shall have been generally established on the New York or American Stock
Exchange, or trading in securities generally on either such Exchange shall have
been suspended, or a general moratorium shall have been established by federal
or state authorities, or (ii) a war or other national calamity or emergency
shall have occurred, or (iii) of any suspension of trading of the Common Stock
of the Company in the over the counter market, or (iv) the occurrence of a
material adverse event affecting the Company which materially impairs the
investment quality of the securities offered, or (v) substantial and material
adverse changes in the condition of the securities markets beyond normal
fluctuations have occurred.
- 37 -
<PAGE>
9.04. Effect of Termination Hereunder. If the members of the Underwriting
Group decide to terminate this Agreement pursuant to this Section 9 or the
Company decides to terminate this Agreement pursuant to Section 10 hereof, such
party shall provide notice of such termination to the other party. In such
event, the Representative shall provide the Company with a statement of the
Underwriting Group's actual accountable out of pocket expenses, which shall
include but are not limited to, fees of legal counsel to the members of the
Underwriting Group and the fees of independent consultants who are not directly
or indirectly affiliated or associated with a member of the NASD and who are
retained by the Underwriting Group to provide a service in connection with the
due diligence investigation of the proposed offering, entertainment expenses,
travel expenses, postage expenses, advertising costs, duplication expenses, long
distance telephone expenses, and any other actual out of pocket accountable
expense incurred by the Underwriting Group in connection with the proposed
offering. The Representative shall not be required to include in such
accountable expenses any of the expenses to be paid by the Company under Section
5.07 hereof, and, if the Underwriting Group has paid any of such expenses on
behalf of the Company, the Company shall separately reimburse the Underwriting
Group for such advances immediately upon receipt of a statement therefor from
the Representative. If such actual accountable out of pocket expenses are more
than the amount of the nonaccountable expense payments the Company has made to
the Underwriting Group, the Underwriting Group will be entitled to keep the
amount of the nonaccountable expense payments the Company has made to the
Underwriting Group and, within 10 days after receipt by the Company of such
statement, the Company will pay to the Representative the excess expenses the
Underwriting Group has incurred, but if the actual accountable out of pocket
expenses are less than the amount of nonaccountable expense payments the
Underwriting Group has received from the Company, the Underwriting Group will
return the difference to the Company. The Company and the members of the
Underwriting Group shall not have any liabilities to each other if the Company
or the members of the Underwriting Group decide not to proceed with the proposed
offering for any reason set forth in this Section 9 or in Section 10 hereof,
except that the Company shall remain obligated to pay the costs and expenses
provided to be paid by it as specified in Sections 5.07 and 9.04 hereof; and the
Company, and the members of the Underwriting Group shall be obligated to pay,
respectively, all losses, claims, damages or liabilities, joint or several,
under Section 6 hereof.
SECTION 10
----------
Representations and Warranties of
---------------------------------
the Members of the Underwriting Group
-------------------------------------
The members of the Underwriting Group represent and warrant to and agree
with the Company that:
10.01. Registration as Broker Dealer and Member of NASD. The members of the
Underwriting Group are registered as broker dealers with the Commission and are
members in good standing of the NASD and are licensed as a dealer in all states
in which they will sell the Securities.
10.02. No Pending Proceedings. There is not now pending against the
Representative any action or proceeding of which it has been advised, either in
any court of competent jurisdiction, before the Commission or any state
securities commission, concerning its activities as a broker or dealer that, in
the opinion of the Representative, would prevent it from acting as such under
federal securities laws or under the laws of the states in which it intends to
offer the Securities.
- 38 -
<PAGE>
10.03. Company's Right to Terminate. In the event any action or proceeding
of the type referred to in Section 10.02 above shall be instituted against the
Representative at any time prior to the Closing Date hereunder, or in the event
there shall be filed by or against the Representative in any court pursuant to
any federal, state, local or municipal statute, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of assets of the Representative or if the Representative makes an assignment for
the benefit of creditors, the Company shall have the right on written notice to
the Representative to terminate this Agreement without any liability to the
members of the Underwriting Group of any kind except for the payment of expenses
as provided in Section 5.07 hereof.
10.4. Finder. The members of the Underwriting Group know of no outstanding
claims against them for compensation for services in the nature of a finder's
fee, origination fee or financial consulting fee with respect to the offer and
sale of the Securities hereunder.
10.5 Compliance. The members of the Underwriting Group, severally and not
jointly, agree to offer and sell the Securities being purchased hereunder in
accordance with the requirements of federal and state securities laws and the
rules of the NASD.
SECTION 11
----------
Right of First Refusal
----------------------
For a period of three years after the effective date of the Registration
Statement, the Representative shall have a preferential right to purchase for
its account or to sell for any account of the Company, its parent company, if
any, or the Company's subsidiaries, if any, any securities with respect to which
the Company, its parent company, or its subsidiaries may seek a public or
private offering within the United States for cash. The Company will consult the
Representative with regard to any such covered offering for cash and will offer
the Representative the opportunity to purchase or sell any such securities on
terms not less favorable to the Company, its parent company, or its subsidiaries
than it or they can secure elsewhere. The Representative will have 20 days in
which to accept such offer. If the Representative rejects such offer, the
Company, its parent company, or its subsidiaries may sell such securities on
terms not less favorable than those offered to the Representative. If such
securities are not sold within a period of 270 days, the Representative will
once again have the rights specified herein with respect to the sale or purchase
of such securities. The Company has informed the Representative that it has not
previously granted a similar right of first refusal to any other person which is
currently binding on the Company.
- 39 -
<PAGE>
SECTION 12
----------
Fee Payable on Occurrence of Certain Events
-------------------------------------------
12.01 Mergers and Acquisitions. Subject to the purchase of the Firm
Securities by the members of the Underwriting Group, for a period of five years
after the effective date, the Representative will provide consulting services
which are customary in the industry in connection with, and the Representative
will be paid a consulting fee in connection with any transaction initiated by
the Representative involving, a merger, consolidation, stock exchange, or the
acquisition or sale of all or a material part of the assets or business of any
entity, if such transaction involves the Company, its parent company, or its
subsidiaries. A transaction will be deemed initiated by the Representative if it
is suggested by the Representative to either party to the transaction. The
consulting fee will be computed as follows:
Amount of Transaction Fee
-------------------------------------- -------
$1.00 - $1,000,000 5% plus
$1,000,001 - $2,000,000 4% plus
$2,000,001 - $3,000,000 3% plus
$3,000,001 - $4,000,000 2% plus
$4,000,001 and over 1%
Amount of the transaction includes:
(i) the total proceeds and other consideration being received by
the Company, its parent company, or its subsidiaries and/or any of
their stockholders upon the consummation of the transaction (including
payments made in installments) inclusive of cash, securities, notes,
liabilities assumed, consulting agreements and agreements not to
compete;
(ii) if a portion of such consideration includes contingent
payments (whether or not related to future earnings or operations),
50% of the maximum amount of such payments; and
(iii) in the event that the aggregate consideration for a
transaction consists in whole or in part of securities, for the
purposes of calculating the amount of the consideration, the value of
such securities will be, in the case of the existence of a public
trading market thereof, the average of the closing sale prices for the
five days preceding the consummation of the transaction or, in the
absence of a public trading market thereof, the fair market value
thereof as agreed to by the parties on the day preceding the
consummation of the transaction.
If the Company, its parent company, or any of its subsidiaries proposes to
engage in any such type of transaction which was not initiated by the
Representative, but in connection with which the Company, its parent company, or
- 40 -
<PAGE>
any of its subsidiaries proposes to obtain services from an investment banker,
the Company, its parent company, or such Subsidiary shall provide the
Representative with the first opportunity to provide consulting services which
are customary in the industry in connection therewith. The Representative shall
have 10 days within which to accept such offer. If the Representative does not
accept such offer within such 10 days, the Company and/or its subsidiary shall
be free to obtain such services for such proposed transaction from any
investment banker selected by the Company and/or its subsidiary. If the
Representative accepts such offer, the fee for such services shall be determined
by using 50% of the full 5% to 1% scale set forth above. The Company has not
previously granted similar rights to any other person.
12.02 Warrant Exercise Fee. If the Representative provides written notice
to the Company, at any time after 12 months from the effective date of the
Registration Statement, that the Representative is electing to solicit the
exercise of the Class A Warrants by the holders thereof, the Company will pay to
the Representative a fee of __% of the aggregate exercise price received by the
Company as a result of the Representatives's solicitation of such holders, if
(i) the market price of the Company's Common Stock on the date a Class A Warrant
is exercised is greater than the exercise price under the Class A Warrants, (ii)
the Class A Warrant is not held in a discretionary account, and (iii) the
solicitation of the exercise of the Class A Warrant is not in violation of Rule
10b-6 promulgated under the Exchange Act. [THIS PROVISION IS STILL SUBJECT TO
DISCUSSION.]
SECTION 13
----------
Notice
------
Except as otherwise expressly provided in this Agreement:
13.01. Notice to the Company. Whenever notice is required by the provisions
of this Agreement to be given to the Company, such notice shall be in writing
addressed as follows:
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
13.02. Notices. Whenever notice is required by the provisions of this
Agreement to be given to the members of the Underwriting Group, such notice
shall be given in writing addressed to the Representative at the address set out
at the beginning of this Agreement.
- 41 -
<PAGE>
SECTION 14
----------
Miscellaneous
-------------
14.01. Benefit. This Agreement is made solely for the benefit of the
members of the Underwriting Group, the Company, their respective officers and
directors and any controlling person referred to in Section 15 of the Act, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Securities. In addition, the indemnity,
defense and contribution obligations of the Company included in Section 6 of
this Agreement also inure to the benefit of the selected dealers and any person
who controls the selected dealers within the meaning of Section 15 of the Act.
14.02. Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements as set forth in or made pursuant to
this Agreement and the indemnity and contribution agreements contained in
Section 6 hereof shall survive and remain in full force and effect, regardless
of (i) any investigation made by or on behalf of the Company, or the members of
the Underwriting Group or any such officer or director thereof or any
controlling person of the Company or of any member of the Underwriting Group,
(ii) delivery of or payment for the Securities, and (iii) the occurrence of
Closing Date and the Option Closing Date; and any successor of the Company, any
member of the Underwriting Group or any controlling person, officer or director
thereof, shall be entitled to the benefits hereof.
14.03. Governing Law. The validity, interpretation and construction of this
Agreement and of each part hereof will be governed by the laws of the state of
Colorado.
14.04. The Information of the Members of the Underwriting Group.
Notwithstanding any participation by the legal counsel of the members of the
Underwriting Group in the reorganization and/or revision of the Prospectus, the
statements with respect to the public offering of the Securities on the cover
page of the Prospectus and the Notes thereto and under the caption
"Underwriting" in the Prospectus constitute the only written information
furnished by or on behalf of the members of the Underwriting Group referred to
in Sections 2.02, 6.01 and 6.02 hereof.
14.05. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
- 42 -
<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
between the members of the Underwriting Group and the Company.
Very truly yours,
GLOBAL MED TECHNOLOGIES, INC.
By:
-------------------------------------------
Michael I. Ruxin, Chairman of the Board
By:
-------------------------------------------
William J. Collard, Secretary
THE REPRESENTATIVE, ON BEHALF OF THE UNDERWRITING GROUP, HEREBY CONFIRMS AS OF
THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE AGREEMENT BETWEEN THE
COMPANY AND THE UNDERWRITING GROUP.
RAF FINANCIAL CORPORATION
By:
--------------------------------------
Robert L. Long, Senior Vice President
of RAF Financial Corporation, as
Attorney in Fact for the several
Underwriters named in Schedule I to the
Underwriting Agreement
- 43 -
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Number of Shares of Class A Warrants
Underwriter Common Stock Purchased to be Purchased
- ------------------------- ---------------------- ---------------
RAF Financial Corporation
Total
--------------------- ------------------
- 44 -
EXHIBIT 3.1
Exhibit A
AMENDED & RESTATED
ARTICLES OF INCORPORATION
OF
NATIONAL MRO, INC.
These Amended & Restated Articles of Incorporation were approved by the
shareholders of National MRO, Inc. on May 5, 1995 and the number of votes cast
for these Amended & Restated Articles of Incorporation by each voting group
entitled to vote separately on these Amended and Restated Articles was
sufficient for approval by that voting group. From this date forward these
Amended & Restated Articles of Incorporation shall supersede the original
Articles of Incorporation and all amendments and supplements thereto. These
Amended & Restated Articles of Incorporation correctly set forth the provisions
of the Articles of Incorporation, as amended.
ARTICLE I
NAME
The name of the Corporation is:
Global Data Technologies, Inc.
ARTICLE II
CAPITAL
The aggregate number of shares of all classes of capital stock which this
corporation shall have authority to issue is 50,000,000 shares, of which
10,000,000 shares shall be shares of Preferred Stock, par value $.01 per share,
and 40,000,000 shares shall be shares of Common Stock, $.01 par value per share.
Preferred Stock. The designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the Preferred Stock, and
variations in the relative rights and preferences as between different series
shall be established in accordance with the Colorado Business Corporation Act by
the Board of Directors.
Except for such voting powers with respect to the election of directors or
other matters as may be stated in the resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of any such series shall
have no voting power whatsoever.
<PAGE>
Common Stock. The holders of Common Stock shall have and possess all rights
as shareholders of the corporation, including such rights as may be granted
elsewhere by these Articles of Incorporation, except as such rights may be
limited by the preferences, privileges and voting powers, and the restrictions
and limitations of the Preferred Stock.
Subject to preferential dividend rights, if any, of the holders of
Preferred Stock, dividends on the Common Stock may be declared by the Board of
Directors and paid out of any funds legally available therefor at such times and
in such amounts as the Board of Directors shall determine.
The capital stock, after the amount of the subscription price has been paid
in, shall not be subject to assessment to pay the debts of the corporation.
Any stock of the corporation may be issued for money, property, services
rendered, labor done, cash advances for the corporation, or for any other assets
of value in accordance with the action of the Board of Directors, whose judgment
as to value received in return therefor shall be conclusive and said stock when
issued shall be fully paid and nonassessable.
ARTICLE III
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
right to purchase, subscribe for, or otherwise acquire any unissued or treasury
shares of stock of the corporation, or any options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares, or any
shares, bonds, notes, debentures, or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such unissued or treasury shares.
ARTICLE IV
CUMULATIVE VOTING
A shareholder of the corporation shall not be entitled to cumulative
voting.
ARTICLE V
INDEMNIFICATION
The corporation shall indemnify, to the fullest extent permitted by
applicable law, any person, and the estate and personal representative of any
such person, against all liability and expense (including attorneys' fees)
incurred by reason of the fact that he is or was a director or officer of the
corporation or, while serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of, or in any similar
managerial or fiduciary position of, another domestic or foreign corporation or
other individual or entity or of an employee benefit plan. The corporation also
shall indemnify any person who is serving or has served the corporation as
<PAGE>
director, officer, employee, fiduciary, or agent, and that person's estate and
personal representative, to the extent and in the manner provided in any bylaw,
resolution of the shareholders or directors, contract, or otherwise, so long as
such provision is legally permissible.
ARTICLE VI
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders 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 the corporation or to its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for acts specified under Section 7-108-403 of the
Colorado Business Corporation Act or any amended or successor provision thereof,
or (iv) for any transaction from which the director derived an improper personal
benefit. If the Colorado Business Corporation Act is amended after this Article
is adopted 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 Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
ARTICLE VII
MEETINGS/VOTING OF SHAREHOLDERS
Meetings of shareholders shall be held at such time and place as provided
in the bylaws of the corporation. At all meetings of the shareholders, one-third
of all shares entitled to vote at the meeting shall constitute a quorum.
With respect to any action to be taken by the shareholders of this
corporation which pursuant to statute requires the vote of two-thirds of the
outstanding shares entitled to vote thereon, an affirmative vote of a majority
of the outstanding shares entitled to vote thereon, or of any class or series,
shall be required.
Signed this 22th day of May, 1995.
NATIONAL MRO, INC.
By /S/ MICHAEL I. RUXIN
-------------------------------
Michael I. Ruxin, President
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GLOBAL MED TECHNOLOGIES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation before this amendment is Global Data
Technologies, Inc.
2. The name of the corporation after this amendment is Global Med
Technologies, Inc.
3. Article I hereby is amended to read as follows: The name of the
corporation is Global Med Technologies, Inc.
4. A sufficient number of shares were voted by the shareholders of the
Corporation on May 29, 1996 to adopt the foregoing amendment to the Articles of
Incorporation, in the manner prescribed by the Colorado Business Corporation
Act.
On behalf of Global Med Technologies, Inc., Michael I. Ruxin and Sonya
Levine, by their signatures set forth below, do hereby confirm, under penalties
of perjury, that the foregoing Articles of Amendment to the Articles of
Incorporation of Global Med Technologies, Inc. are a true and correct copy of
said document.
GLOBAL MED TECHNOLOGIES, INC.
By /S/ MICHAEL I. RUXIN
----------------------------------------
Michael I. Ruxin, Chairman and CEO
By /S/ SONYA LEVINE
----------------------------------------
Sonya Levine, Assistant Secretary
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GLOBAL DATA TECHNOLOGIES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is Global Data Technologies, Inc.
2. The Articles of Incorporation hereby are amended to include Exhibit A
attached hereto, which sets forth the designations, preferences, limitations,
and relative rights of the Series A Preferred Stock.
3. This Amendment was duly adopted by the Board of Directors on January 17,
1996.
On behalf of Global Data Technologies, Inc., Michael I. Ruxin and Sonya
Levine, by their signatures set forth below, do hereby confirm, under penalties
of perjury, that the foregoing Articles of Amendment to the Articles of
Incorporation of Global Data Technologies, Inc. are a true and correct copy of
said document.
GLOBAL DATA TECHNOLOGIES, INC.
By /S/ MICHAEL I. RUXIN
------------------------------------
Michael I. Ruxin, Chairman
By /S/ SONYA LEVINE
------------------------------------
Sonya Levine, Assistant Secretary
<PAGE>
Exhibit A
1. Designations and Amount. 100,000 shares of the Company's authorized
preferred stock, par value $.01 per share, are designated as shares of Series A
Preferred Stock (the "Series A Preferred Stock").
2. Rank. The Series A Preferred Stock shall be senior to the Common Stock.
3. Dividends. The holders of the Series A Preferred Stock shall be entitled
to dividends when, as and if declared on the same basis as holders of the
Company's $.01 par value common stock (the "Common Stock") or other series of
preferred stock, subject to adjustment as provided in paragraph 7, below.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the holders of the Series A Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Company available for distribution to its shareholders, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of the Common Stock, an amount equal to the then-applicable conversion price per
share, plus any cumulative unpaid dividends, subject to adjustment as provided
in paragraph 7 below.
(b) None of the following events shall be treated as or deemed to be a
liquidation hereunder:
(i) A merger, consolidation or reorganization of the Company;
(ii) A sale or other transfer of all or substantially all of the
Company's assets;
(iii) A sale of the Company's capital stock;
(iv) A purchase or redemption by the Company of stock of any
class; or
(v) Payment of a dividend or distribution from funds legally
available therefor.
5. Voting Rights. The holders of the Series A Preferred shares shall be
entitled to vote on all matters and vote as a single class with the Common Stock
and other series of preferred stock, except that the holders of Series A
Preferred are entitled to elect as a class one director to the Corporation's
Board of Directors. The holders of Series A Preferred also are entitled to
participate with the holders of Common Stock in electing the remaining
directors.
<PAGE>
6. Conversion. The Series A Preferred Stock shall have the following
conversion rights (the "Conversion Rights"):
(a) Holder's Optional Right to Convert. Each share of Series A
Preferred Stock shall be convertible into shares of the Company's Common Stock
at the option of the holder.
(b) Mandatory Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of the Company's Common Stock upon
closing of a firm commitment underwritten public offering of the Company's
Common Stock yielding gross proceeds of not less than $15 million at a public
offering price of not less than $3.75 per share.
(c) Conversion Basis. Each share of Series A Preferred Stock shall be
convertible into one share of Common Stock (the "Conversion Basis"), subject to
adjustment as provided in paragraph 7 below.
(d) Mechanics of Optional Conversion. Before the holder of the Series
A Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall (i) give written notice to the Company, at the office of the
Company or of its transfer agent for the Common Stock or the Series A Preferred
Stock, that he elects to convert the same and shall state therein the number of
shares of Series A Preferred Stock being converted and (ii) surrender the
certificate or certificates therefor, duly endorsed. Thereupon the Company shall
promptly issue and deliver to such holder of Series A Preferred Stock a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled. The conversion shall be deemed to have been made and the
resulting shares of Common Stock shall be deemed to have been issued immediately
prior to the close of business on the date of such notice and surrender of the
shares of Series A Preferred Stock.
(e) Mechanics of Mandatory Conversion. Upon closing of a firm
commitment underwritten public offering of the Company's Common Stock yielding
gross proceeds of not less than $15 million at a public offering price of not
less than $3.75 per share, each share of Series A Preferred Stock shall be
automatically converted into shares of the Company's Common Stock. No action is
required to be taken by the Company or the holder of the Series A Preferred
Stock in order to effect the conversion. The conversion shall be deemed to have
been made and the resulting shares of Common Stock shall be deemed to have been
issued as of the date of the closing of such public offering.
7. Adjustments to the Conversion Basis, Dividends, and Liquidation
Preference.
(a) Stock Splits and Combinations. At any time after the Company first
issues the Series A Preferred Stock and while any of the shares of Series A
Preferred Stock remain outstanding, if the Company shall effect a subdivision or
combination of the Common Stock, the Conversion Basis, dividend rate, and
liquidation preference then in effect immediately before that subdivision or
combination shall be proportionately adjusted. For example, if the Company
-2-
<PAGE>
accomplishes a 10:1 reverse stock split, following the reverse stock split each
ten shares of Series A Preferred Stock shall be convertible into one share of
Common Stock; and the liquidation preference, which is based on the number of
shares of Preferred Stock outstanding will remain the same. Any adjustment under
this Paragraph 7 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(b) Reclassification, Exchange or Substitution. At any time after the
Company first issues the Series A Preferred Stock and while any of the shares of
Series A Preferred Stock remain outstanding, if the Common Stock issuable upon
the conversion of the Series A Preferred Stock shall be changed into the same or
a different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for elsewhere
in this Paragraph 7), then and in each such event the holder of each share of
Series A Preferred Stock shall have the right thereafter to convert such share
into the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock into which such shares of Series
A Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustments
as provided herein. Dividend rates and liquidation preference will also be
equitably adjusted.
(c) Reorganization, Mergers, Consolidations or Sales of Assets. At any
time after the Company first issues the Series A Preferred Stock and while any
of the shares of Series A Preferred Stock remain outstanding, if there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification, or exchange of shares provided for elsewhere in
this Paragraph 7) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the Company's
assets to any other person, then as a part of such reorganization, merger,
consolidation, or sale, at least thirty days' notice of such proposed
reorganization, merger, consolidation, or sale of assets shall be given to all
record holders of the Series A Preferred Stock. (A) If any holder converts his
Series A Preferred Stock into Common Stock prior to the completion of the
reorganization, merger, consolidation, or sale of assets, such holder shall
participate in the transaction as any other holder of Common Stock. (B) If any
holder does not convert his Series A Preferred Stock into Common Stock, then
such holder shall be entitled to convert his Series A Preferred Stock in
accordance with the Plan of Reorganization, Merger, Consolidation, or Sale of
Assets that may have been agreed between the Company and the other party
thereto, and the liquidation preference and dividend rates shall be determined
equitably in accordance with the Plan.
(d) Notices of Record Date. In the event of any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, entity, or person, or any
voluntary or involuntary dissolution, liquidating, or winding up of the Company,
the Company shall mail to each holder of Series A Preferred Stock at least 30
days prior to the record date specified therein, a notice specifying the date
-3-
<PAGE>
specified therein, a notice specifying the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up is expected to become effective, and the time, if any
is to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up.
(e) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall pay cash equal to the product of such fraction multiplied by the fair
market value of one share of the Company's Common Stock on the date of
conversion, as determined in good faith by the Board of Directors.
(f) Reservation of Stock Issuable Upon Conversion. The Company shall
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series A Preferred Stock, a number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
the Series A Preferred Stock.
(g) Notices. Any notice required by the provisions of this Paragraph 7
to be given to the holder of shares of the Series A Preferred Stock shall be
deemed given when personally delivered to such holder or five business days
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Company.
(h) Payment of Taxes. The Holder of the Series A Preferred Stock will
pay all taxes and other governmental charges that may be imposed in respect of
the issue or delivery of shares of Common Stock upon conversion of shares of
Series A Preferred Stock.
8. Restrictions and Limitations.
(a) So long as any shares of Series A Preferred Stock remain
outstanding, the Company, without the vote or written consent by the holders of
a majority of the then outstanding shares of Series A Preferred Stock voting as
a single class, shall not purchase, redeem, or otherwise acquire (or pay into or
set aside a sinking fund for such purpose), any of the Common Stock; or
(b) So long as any shares of Series A Preferred Stock remain
outstanding, the Company, without the approval by vote or written consent of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, voting as a separate class, shall not take any action which would:
-4-
<PAGE>
(i) Alter or change any of the rights, preferences, privileges
of, or limitations provided for herein for the benefit of any shares of the
Series A Preferred Stock, or
(ii) Increase the authorized number of shares of the Series A
Preferred Stock.
9. No Reissuance of Series A Preferred Stock. No share or shares of Series
A Preferred Stock acquired by the Company by reason of conversion or otherwise
shall be reissued as Series A Preferred Stock, and all such shares thereafter
shall be returned to the status of undesignated and unissued shares of preferred
stock of the Company.
10. Redemption. Upon 30 days notice, holders of a majority of Series A
Preferred Stock may elect to cause the Corporation to redeem up to one-third of
the Series A Preferred Stock originally issued on each of the fifth, sixth and
seventh anniversaries of January 31, 1996. The redemption price shall be $3.75
per share, plus any accrued but unpaid dividends. The Series A Preferred Stock
shall not be subject to further calls or assessments by the Corporation. The
Company is not required to establish any sinking fund or other fund for the
benefit of the holders of the Series A Preferred Stock.
-5-
EXHIBIT 3.4
BYLAWS
OF
NATIONAL MRO, INC.
May, 1989
<PAGE>
INDEX TO BYLAWS
OF
NATIONAL MRO, INC.
Page
----
ARTICLE I - Offices
- -------------------
Section 1.01 Business Offices 1
Section 1.02 Registered Office 1
ARTICLE II - Shareholders
- -------------------------
Section 2.01 Annual Meeting 1
Section 2.02 Special Meetings 1
Section 2.03 Place of Meetings 2
Section 2.04 Notice of Meetings 2
Section 2.05 Waiver of Notice 2
Section 2.06 Closing of Transfer Books or Fixing 2
of Record Date 3
Section 2.07 Voting List 3
Section 2.08 Proxies 4
Section 2.09 Quorum and Manner of Acting 4
Section 2.10 Extraordinary Matters 4
Section 2.11 Voting of Shares 5
Section 2.12 Voting of Shares by Certain Holders 5
Section 2.13 Action Without a Meeting 7
ARTICLE III - Board of Directors
- --------------------------------
Section 3.01 General Powers 7
Section 3.02 Number, Tenure and Qualifications 7
Section 3.03 Resignation 8
Section 3.04 Removal 8
Section 3.05 Vacancies 8
Section 3.06 Regular Meetings 8
Section 3.07 Special Meetings 9
Section 3.08 Meetings by Telephone 9
Section 3.09 Notice of Meetings 9
Section 3.10 Waiver of Notice 10
Section 3.11 Presumption of Assent 10
Section 3.12 Quorum and Manner of Acting 10
Section 3.13 Action Without a Meeting 10
Section 3.14 Executive and Other Committees 11
Section 3.15 Compensation 11
ARTICLE IV - Officers
- ---------------------
Section 4.01 Number and Qualifications 12
Section 4.02 Election and Term of office 12
Section 4.03 Compensation 12
Section 4.04 Resignation 13
Section 4.05 Removal 13
Section 4.06 Vacancies 13
Section 4.07 Authority and Duties 13
Section 4.08 Surety Bonds 15
<PAGE>
ARTICLE V - Stock
- -----------------
Section 5.01 Issuance of Shares 15
Section 5.02 Stock Certificates; Uncertificated Shares 15
Section 5.03 Consideration for Shares 16
Section 5.04 Lost Certificates 16
Section 5.05 Transfer of Shares 16
Section 5.06 Holders of Record 17
Section 5.07 Shares Held for Account of Another 17
Section 5.08 Transfer Agents, Registrars and Paying Agents 17
ARTICLE VI -Indemnification
- ---------------------------
Section 6.01 Definitions 17
Section 6.02 Right to Indemnification 18
Section 6.03 Advancement of Expenses 19
Section 6.04 Burden of Proof 19
Section 6.05 Notification and Defense of Claim 19
Section 6.06 Enforcement 20
Section 6.07 Proceedings by a Party 21
Section 6.08 Subrogation 21
Section 6.09 Other Payments 21
Section 6.10 Insurance 21
Section 6.11 Other Rights and Remedies 22
Section 6.12 Applicability; Effect 22
Section 6.13 Severability 22
ARTICLE VII - Miscellaneous
- ---------------------------
Section 7.01 Voting of Securities by the Corporation 23
Section 7.02 Seal 23
Section 7.03 Fiscal Year 23
Section 7.04 Amendments 23
<PAGE>
BYLAWS
OF NATIONAL MRO, INC.
ARTICLE I
Offices
Section 1.01 Business Offices. The corporation may have such offices, either
within or outside Colorado, as the board of directors may from time to time
determine or as the business of the corporation may require.
Section 1.02 Registered Office. The registered office of the corporation
required by the Colorado Corporation Code to be maintained in Colorado shall be
as set forth in the articles of incorporation, unless changed as provided by
law.
ARTICLE II
Shareholders
Section 2.01 Annual Meeting. An annual meeting of the shareholders shall be held
on the third Tuesday in the month of June in each year, or on such other date as
may be determined by the board of directors, beginning with the year 1990, for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual meeting is a
legal holiday in Colorado the meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as conveniently may be.
Failure to hold an annual meeting as required by these bylaws shall not
invalidate any action taken by the board of directors or officers of the
corporation.
Section 2.02 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the president or the board of directors, and shall be called by the president at
the request of the holders of not less than one-tenth of all the outstanding
shares of the corporation entitled to vote at the meeting.
Section 2.03 Place of Meetings. Each meeting of the shareholders shall be held
at such place, either within or outside Colorado, as may be designated in the
notice of meeting, or, if no place is designated in the notice, at the principal
office of the corporation if in Colorado, or if the principal office is not
located in Colorado, at the registered office of the corporation in Colorado.
Section 2.04 Notice of Meetings. Except as otherwise required by law, written
notice of each meeting of the shareholders stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called shall be given, either personally (including
delivery by private courier) or by first class, certified or registered mail, to
each shareholder of record entitled to notice of such meeting, not less than ten
nor more than 50 days before the date of the meeting, except that if the
authorized shares of the corporation are to be increased, at least 30 days
notice shall be given, and if the sale, lease, exchange or other disposition of
all or substantially all of the property and assets of the corporation not in
the usual and regular course of business is to be voted on, at least 20 days
notice shall be given. Such notice shall be deemed to be given, if personally
delivered, when delivered to the shareholder, and, if mailed, when deposited in
the United States mail, addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid, but if three successive notices mailed to the last-known address of any
shareholder of record are returned as undeliverable no further notices to such
shareholder shall be necessary until another address for such shareholder is
made known to the corporation. If a meeting is adjourned to another time or
place, notice need not be given if the time and place thereof are announced at
the meeting, unless the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed, in either of which case notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting in accordance with the foregoing provisions of this Section 2.04.
<PAGE>
Section 2.05 Waiver of Notice. Whenever notice is required by law, the articles
of incorporation or these bylaws to be given to any shareholder, a waiver
thereof in writing signed by the shareholder entitled to such notice, whether
before, at or after the time stated therein, shall be equivalent to the giving
of such notice. By attending a meeting, a shareholder (a) waives objection to
lack of notice or defective notice of such meeting unless the shareholder, at
the beginning of the meeting, objects to the holding of the meeting or the
transacting of business at the meeting, and (b) waives objection to
consideration at such meeting of a particular matter not within the purpose or
purposes described in the notice of such meeting unless the shareholder objects
to considering the matter when it is presented.
Section 2.06 Closing of Transfer Books or Fixing of Record Date. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
the adjournment thereof, or shareholders or in order to other proper purpose,
the board of directors may provide that the stock transfer books shall be closed
for any stated period not exceeding 50 days. In lieu of closing the stock
transfer books the board of directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than 50 days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. If the stock transfer books
shall be closed or a record date fixed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of the shareholders,
such books shall be closed for at least, or such record shall be fixed not less
than, ten days immediately preceding such meeting (30 days if the authorized
stock is to be increased, 20 days if the sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the
corporation not in the usual and regular course of business is to be
considered). If the stock transfer books are not so closed or no record date is
so fixed, the date on which notice of the meeting is mailed or the date on which
the resolution of the board of directors declaring the dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of the shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of the closing has expired. Notwithstanding the foregoing
provisions of this Section, the record date for determining shareholders
entitled to take action without a meeting as provided in Section 2.13 below
shall be the date specified in such Section.
Section 2.07 Voting List. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before each meeting of the shareholders, a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
For a period of ten days before such meeting, this record shall be kept on file
at the principal office of the corporation, whether within or outside Colorado,
and shall be subject to inspection by any shareholder for any purpose germane to
the meeting at any time during usual business hours. Such record shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder for any purpose germane to the meeting
during the whole time of the meeting. The original stock transfer books shall be
prima facie evidence as to who are the shareholders entitled to examine such
record or transfer books or to vote at any meeting of the shareholders.
Section 2.08 Proxies. At any meeting of the shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 2.09 Quorum and Manner of Acting. At all meetings of shareholders, a
majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless the vote of a greater proportion or number or voting by
classes is otherwise required by the laws of Colorado, the articles of
incorporation or these bylaws. In the absence of a quorum, a majority of the
shares so represented may adjourn the meeting from time to time for a period not
to exceed sixty days at any one adjournment. At any such adjourned meeting, at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the original meeting.
<PAGE>
Section 2.10 Extraordinary Matters. Notwithstanding the provisions of Section
2.09, the following actions shall require the affirmative vote or concurrence of
a majority of all of the outstanding shares of the corporation (or of each class
if class voting is required by the laws of Colorado or the articles of
incorporation) entitled to vote thereon: (a) adopting an amendment or amendments
to the articles of incorporation, (b) lending money to, guaranteeing the
obligations of or otherwise assisting any of the directors of the corporation or
of any other corporation the majority of whose voting capital stock is owned by
the corporation, (c) authorizing the sale, lease, exchange or other disposition
of all or substantially all of the property and assets of the corporation, with
or without its goodwill, not in the usual and regular course of business, (d)
approving a plan of merger, consolidation or exchange that is required to be
approved by the shareholders, (e) adopting a resolution submitted by the board
of directors to dissolve the corporation, and (f) adopting a resolution
submitted by the board of directors to revoke voluntary dissolution proceedings.
Section 2.11 Voting of Shares. Subject to the provisions of Section 3.06, each
outstanding share of record, regardless of class, is entitled to one vote, and
each outstanding fractional share of record is entitled to a corresponding
fractional vote, on each matter submitted to a vote-of the shareholders either
at a meeting thereof or pursuant to Section 2.13, except to the extent that the
voting rights of the shares of any class or classes are limited or denied by the
articles of incorporation as permitted by the Colorado Corporation Code. In the
election of directors each record holder of stock entitled to vote at such
election shall have the right to vote the number of shares owned by him for as
many persons as there are directors to be elected, and for whose election he has
the right to vote. Cumulative voting shall not be allowed.
Section 2.12 Voting of Shares by Certain Holders.
------------------------------------
(a) Shares Held or Controlled by the Corporation. Neither treasury shares
nor shares held by another corporation if a majority of the shares
entitled to vote for the election of directors of such other
corporation is held by this corporation, shall be voted at any meeting
or counted in determining the total number of outstanding shares at any
given time.
(b) Shares Held by Another Corporation. Shares standing in the name of
another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe or, in the absence of such
provision, as the board of directors of such corporation may determine.
(c) Shares Held by More Than One Person. Shares standing of record in the
names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety
or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, voting with respect to the
shares shall have the following effects: (i) if only one person votes,
his act binds all; (ii) if two or more persons vote, the act of the
majority so voting binds all; (iii) if two or more persons vote, but
the vote is evenly split on any particular matter, each faction may
vote the shares in question proportionally, or any person voting the
shares of a beneficiary, if any, may apply to any court of competent
jurisdiction in Colorado to appoint an additional person to act with
the persons so voting the shares, in which case the shares shall be
voted as determined by a majority of such persons; and (iv) if a
tenancy is held in unequal interests, a majority or even split for the
purposes of subparagraph (iii) shall be a majority or even split in
interest. The foregoing effects of voting shall not be applicable if
the secretary of the corporation is given written notice of alternative
voting provisions and is furnished with a copy of the instrument or
order wherein the alternative voting provisions are stated.
<PAGE>
(d) Shares Held in Trust or by a Personal Representative. Shares held by an
administrator, executor, guardian, conservator or other personal
representative may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy,
but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
(e) Shares Held by a Receiver. Shares standing in the name of a receiver
may be voted by such receiver and shares held by or under the control
of a receiver may be voted by such receiver without the transfer
thereof into his name if authority so to do is contained in an
appropriate order of the court by which such receiver was appointed.
(f) Pledged Shares. A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
(g) Redeemable Shares Called for Redemption. Redeemable shares that have
been called for redemption shall not be entitled to vote on any matter
and shall not be deemed outstanding shares on and after the date on
which written notice of redemption has been mailed to shareholders and
a sum sufficient to redeem such shares has been deposited with a bank
or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of
certificates therefor.
Section 2.13 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof. Such consent which may be signed in
counterparts) shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Unless the consent
specifies a different effective date, action taken without a meeting pursuant to
a consent in writing as provided herein shall be effective when all shareholders
entitled to vote have signed the consent. The record date for determining
shareholders entitled to take action without a meeting is the date the first
shareholder signs the consent. All consents signed pursuant to this Section 2.13
shall be delivered to the secretary of the corporation for inclusion in the
minutes or for filing with the corporate records.
ARTICLE III
Board of Directors
Section 3.01 General Powers. The business and affairs of the corporation shall
be managed by its board of directors, except as otherwise provided in the
Colorado Corporation Code, the articles of incorporation or these bylaws.
Section 3.02 Number. Tenure and Qualifications. So long as the stock of the
corporation is owned by fewer than three shareholders, the number of directors
of the corporation shall be the same as the number of shareholders, or such
greater number as may be specified from time to time by resolution of the board
of directors or of the shareholders. If the stock of the corporation becomes
owned by more than two shareholders, and so long as it is so owned, the number
of directors of the corporation shall be three, or such greater number as may be
specified from time to time by resolution of the board of directors or of the
shareholders. Except as provided in Sections 2.01 and 3.05, the director or
directors shall be elected at each annual meeting of the shareholders. Each
director shall hold office until the next annual meeting of the shareholders and
thereafter until his successor shall have been elected and qualified, or until
his earlier death, resignation or removal. Directors must be at least eighteen
years old but need not be residents of Colorado or shareholders of the
corporation.
<PAGE>
Section 3.03 Resignation. Any director may resign at any time by giving written
notice to the president or to the board of directors. A director's resignation
shall take effect at the time specified in the notice and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.04 Removal. At a meeting called expressly for that purpose, the entire
board of directors or any lesser number may be removed, with or without cause,
by a vote of the holders of a majority of shares then entitled to vote at an
election of directors; except that if the holders of shares of any class of
stock are entitled to elect one or more directors by the provisions of the
articles of incorporation, the provisions of this Section 3.04 shall apply, with
respect to the removal of a director or directors so elected by such class, to
the vote of the holders of the outstanding shares of that class and not to the
vote of the outstanding shares as a whole. Any reduction in the authorized
number of directors shall not have the effect of shortening the term of any
incumbent director unless such director is also removed from office in
accordance with this Section 3.04.
Section 3.05 Vacancies. Unless otherwise required in the articles of
incorporation, any vacancy occurring in the board of directors, other than
vacancies due to an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum, or by the affirmative vote of two directors if there are only two
directors remaining, or by a sole remaining director, or by the shareholders if
there are no directors remaining. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of directors shall be filled by
the affirmative vote of a majority of the directors then in office or by the
shareholders, except that a directorship being filled by reason of a required
increase in the number of directors pursuant to Section 3.02 shall be filled by
the shareholders. A director chosen to fill a vacancy by reason of an increase
in the number of directors shall hold office until the next annual meeting of
the shareholders and thereafter until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal.
Section 3.06 Regular Meetings. A regular meeting of the board of directors shall
be held immediately after and at the same place as the annual meeting of the
shareholders, or as soon thereafter as conveniently may be, at the time and
place, either within or outside Colorado, determined by the board, for the
purpose of electing officers and for the transaction of such other business as
may come before the meeting. Failure to hold such meeting, however, shall not
invalidate any action taken by any officer then or thereafter in office. The
board of directors may provide, by resolution, the time and place, either within
or outside Colorado, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.07 Special Meetings. Special meetings of the board of directors may be
called by or at the request of the president or any two directors. The person or
persons authorized to call special meetings of the board of directors may fix
any convenient place, either within or outside Colorado, as the place for
holding any special meeting of the board called by them.
Section 3.08 Meetings by Telephone. Unless otherwise provided by the articles of
incorporation, one or more members of the board of directors may participate in
a meeting of the board by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
Section 3.09 Notice of Meetings. Notice of each meeting of the board of
directors t except those regular meetings for which notice is not required)
stating the place, day and hour of the meeting shall be given to each director
at least five days prior thereto by the mailing of written notice by first
class, certified or registered mail, or at least two days prior thereto by
personal delivery (including delivery by private courier) of written notice or
by telephone, telegram, telex, cablegram or other similar method, except that in
the case of a meeting to be held pursuant to Section 3.08 notice may be given by
telephone one day prior thereto. The method of notice need not be the same to
each director. Notice shall be deemed to be given when deposited in the United
States mail, with postage thereon prepaid, addressed to the director at his
business or residence address, when delivered or communicated to the director or
when the telegram, telex, cablegram or other form of notice is personally
delivered to the director or delivered to the last address of the director
furnished by him to the corporation for such purpose. Neither the business to be
transacted at nor the purpose of any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting unless otherwise
required by statute.
<PAGE>
Section 3.10 Waiver of Notice. Whenever notice is required by law, the articles
of incorporation or these bylaws to be given to the directors, a waiver thereof
in writing signed by the director entitled to such notice, whether before, at or
after the time stated therein, shall be equivalent to the giving of such notice.
By attending or participating in a meeting, a director waives any required
notice of such meeting unless, at the beginning of the meeting, he objects to
the holding of the meeting or the transacting of business at the meeting.
Section 3.11 Presumption of Assent. A director of the corporation who is present
at a meeting of the board of directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless he
objects at the beginning of the meeting to the holding of the meeting or the
transacting of business at the meeting, contemporaneously requests that his
dissent to the action taken be entered in the minutes of such meeting or gives
written notice of his dissent to the presiding officer of such meeting before
its adjournment or to the secretary of the corporation immediately after
adjournment of such meeting. The right of dissent as to a specific action taken
at a meeting of the board is not available to a director who votes in favor of
such action.
Section 3.12 Quorum and Manner of Acting. So long as the number of directors of
the corporation is less than three as provided in Section 3.02, a quorum for the
transaction of any business at a meeting of the board of directors shall consist
of the total number of directors required or authorized to be in office and the
vote of all of such directors shall be required to be the act of the board of
directors. If the number of directors is three or more, a quorum shall consist
of a majority of the directors, and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, except as otherwise may be required by law, the articles of
incorporation or these bylaws. If less than a quorum is present at a meeting,
the director or directors present may adjourn the meeting from time to time,
without further notice other than an announcement at the meeting, until a quorum
shall be present. No director may vote or act by proxy or power of attorney at
any meeting of the directors.
Section 3.13 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the directors may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by all of the directors. Such consent (which
may be signed in counterparts) shall have the same force and effect as a
unanimous vote of the directors and may be stated as such in any document.
Unless the consent specifies a different effective date, action taken without a
meeting pursuant to a consent in writing as provided herein is effective when
all directors have signed the consent. All consents signed pursuant to this
Section 3.13 shall be delivered to the secretary of the corporation for
inclusion in the minutes or for filing with the corporate records.
Section 3.14 Executive and Other Committees. The board of directors, by
resolution adopted by a majority of the full board, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in the resolution establishing such committee, shall have
and may exercise all of the authority of the board of directors in the
management of the business and affairs of the corporation, except that no such
committee shall have the power or authority to (a) declare dividends or
distributions, (b) approve, recommend or submit to the shareholders actions or
proposals required by law to be approved by the shareholders, (c) fill vacancies
on the board of directors or any committee thereof, including any committee
authorized by this Section 3.14, (d) amend the bylaws, (e) approve a plan of
merger not requiring shareholder approval, (f) reduce earned or capital surplus,
(g) authorize or approve the reacquisition of shares of the corporation, unless
pursuant to a general formula or method specified by the board of directors, or
(h) authorize or approve the issuance or sale of, or any contract to issue or
sell, shares of the corporation's stock or designate the terms of a series of a
class of shares. The delegation of authority to any committee shall not operate
to relieve the board of directors or any member of the board from any
responsibility imposed by law. Subject to the foregoing, the board of directors
may provide such powers, limitations and procedures for such committees as the
board deems advisable. To the extent the board of directors does not establish
other procedures, each committee shall be governed by the procedures set forth
in Sections 3.06 (except as they relate to an annual meeting) and 3.07 through
3.13 as if the committee were the board of directors. Each committee shall keep
regular minutes of its meetings, which shall be reported to the board of
directors when required and submitted to the secretary of the corporation for
inclusion in the corporate records.
<PAGE>
Section 3.15 Compensation. By resolution of the board of directors,
notwithstanding any personal interest of a director in such action, a director
may be paid his expenses, if any, of attendance at each meeting of the board of
directors and each meeting of any committee of the board of which he is a member
and may be paid a fixed sum for attendance at each such meeting or a stated
salary, or both a fixed sum and a stated salary. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
Officers
Section 4.01 Number and Qualifications. The officers of the corporation shall
consist of a president, a secretary, a treasurer and such other officers,
including a chairman of the board, one or more vice-presidents and a controller,
as may from time to time be elected or appointed by the board. In addition, the
board of directors or the president may elect or appoint such assistant and
other subordinate officers, including assistant vice presidents, assistant
secretaries and assistant treasurers, as it or he shall deem necessary or
appropriate. Any number of offices may be held by the same person, except that
no person may simultaneously hold the offices of president and secretary. All
officers must be at least eighteen years old.
Section 4.02 Election and Term of Office. Except as provided in Sections 4.01
and 4.06, the officers of the corporation shall be elected by the board of
directors annually at the first meeting of the board held after each annual
meeting of the shareholders as provided in Section 3.06. If the election of
officers shall not be held as provided herein, such election shall be held as
soon thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, or until the
expiration of his term in office if elected or appointed for a specified period
of time, or until his earlier death, resignation or removal.
Section 4.03 Compensation. Officers shall receive such compensation for their
services as may be authorized or ratified by the board of directors and no
officer shall be prevented from receiving compensation by reason of the fact
that he is also a director of the corporation. Election or appointment as an
officer shall not of itself create a contract or other right to compensation for
services performed as such officer.
Section 4.04 Resignation. Any officer may resign at any time, subject to any
rights or obligations under any existing contracts between the officer and the
corporation, by giving written notice to the president or to the board of
directors. An officer's resignation shall take effect at the time specified in
such notice, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.05 Removal. Any officer may be removed at any time by the board of
directors, or, in the case of assistant and other subordinate officers, by the
board of directors or the president (whether or not such officer was appointed
by the president) whenever in its or his judgment, as the case may be, the best
interests of the corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer shall not in itself create contract
rights.
<PAGE>
Section 4.06 Vacancies. A vacancy in any office, however occurring, may be
filled by the board of directors, or, if such office may be filled by the
president as provided in Section 4.01, by the president, for the un-expired
portion of the term.
Section 4.07 Authority and Duties. The officers of the corporation shall have
the authority and shall exercise the powers and perform the duties specified
below and as may be additionally specified by the president, the board of
directors or these bylaws (and in all cases where the duties of any officer are
not prescribed by the bylaws or by the board of directors, such officer shall
follow the orders and instructions of the president), except that in any event
each officer shall exercise such powers and perform such duties as may be
required by law:
(a) President. The president shall, subject to the direction and supervision of
the board of directors, (i) be the chief executive officer of the
corporation and have general and active control of its affairs and business
and general supervision of its officers, agents and employees; (ii) unless
there is a chairman of the board, preside at all meetings of the
shareholders and the board of directors; (iii) see that all orders and
resolutions of the board of directors are carried into effect; and (iv)
perform all other duties incident to the office of president and as from
time to time may be assigned to him by the board of directors.
(b) Vice Presidents. The vice-president, if any (or if there is more than one
then each vice-president), shall assist the president and shall perform
such duties as may be assigned to him by the president or by the board of
directors. The vice-president, if there is one (or if there is more than
one then the vice-president designated by the board of directors, or if
there be no such designation then the vice-presidents in order of their
election), shall, at the request of the president, or in his absence or
inability or refusal to act, perform the duties of the president and when
so acting shall have all the powers of and be subject to all the
restrictions upon the president. Assistant vice presidents, if any, shall
have such powers and perform such duties as may be assigned to them by the
president or by the board of directors.
(c) Secretary. The secretary shall: (i) keep the minutes of the proceedings of
the shareholders, the board of directors and any committees of the board;
(ii) see that all notices are duly given in accordance with the provisions
of these bylaws or as required by law; (iii) be custodian of the corporate
records and of the seal of the corporation; (iv) keep at the corporation's
registered office or principal place of business within or outside Colorado
a record containing the names and addresses of all shareholders and the
number and class of shares held by each, unless such a record shall be kept
at the office of the corporation's transfer agent or registrar; tv) have
general charge of the stock books of the corporation, unless the
corporation has a transfer agent; and (vi) in general, perform all duties
incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the board of directors.
Assistant secretaries, if any, shall have the same duties and powers,
subject to supervision by the secretary.
(d) Treasurer. The treasurer shall: (i) be the principal financial officer of
the corporation and have the care and custody of all its funds, securities,
evidences of indebtedness and other personal property and deposit the same
in accordance with the instructions of the board of directors; (ii) receive
and give receipts and acquittances for moneys paid in on account of the
corporation, and pay out of the funds on hand all bills, payrolls and other
just debts of the corporation of whatever nature upon maturity; (iii)
unless there is a controller, be the principal accounting officer of the
corporation and as such prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account,
prepare and file all local, state and federal tax returns, prescribe and
maintain an adequate system of internal audit and prepare and furnish to
the president and the board of directors statements of account showing the
financial position of the corporation and the results of its operations;
(iv) upon request of the board, make such reports to it as may be required
at any time: and (v) perform all other duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him
by the board of directors or the president. Assistant treasurers, if any,
shall have the same powers and duties, subject to the supervision by the
treasurer.
<PAGE>
Section 4.08 Surety Bonds. The board of directors may require any officer or
agent of the corporation to execute to the corporation a bond in such sums and
with such sureties as shall be satisfactory to the board, conditioned upon the
faithful performance of his duties and for the restoration to the corporation of
all books, papers, vouchers, money and other property of whatever kind in his
possession or under hi control belonging to the corporation.
ARTICLE V
Stock
Section 5.01 Issuance of Shares. The issuance or sale by the corporation of any
shares of its authorized capital stock of any class, including treasury shares,
shall be made only upon authorization by the board of directors, except as
otherwise may be provided by law. No shares shall be issued until full
consideration has been received therefor. Every issuance of shares shall be
recorded on the books maintained for such purpose by or on behalf of the
corporation.
Section 5.02 Stock Certificates: Uncertificated Shares. The shares of stock of
the corporation shall be represented by certificates, except that the board of
directors may authorize the issuance of any class or series of stock of the
corporation without certificates as provided by law. If shares are represented
by certificates, such certificates shall be signed in the name of the
corporation by the chairman or vice-chairman of the board of directors or by the
president or a vice-president and by the treasurer or an assistant treasurer or
by the secretary or an assistant secretary and sealed with the seal of the
corporation or with a facsimile thereof. The signatures of the corporation's
officers on any certificate may also be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar. In case any
officer who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue. Certificates of stock shall be in such
form consistent with law as shall be prescribed by the board of directors.
Section 5.03 Consideration for Shares. Shares shall be issued for such
consideration expressed in dollars (but not less than the par value thereof) as
shall be fixed from time to time by the board of directors. Treasury shares
shall be disposed of for such consideration expressed in dollars as may be fixed
from time to time by the board. Such consideration may consist, in whole or in
part, of money, other property, tangible or intangible, or labor or services
actually performed for the corporation, but neither the promissory note of a
subscriber or direct purchaser of shares from the corporation, nor the unsecured
or nonnegotiable promissory note of any other person, nor future services shall
constitute payment or part payment for shares.
Section 5.04 Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The board of directors may in its
discretion require a bond in such form and amount and with such surety as it may
determine before issuing a new certificate.
Section 5.05 Transfer of Shares. Upon presentation and surrender to the
corporation or to the corporation's transfer agent of a certificate of stock
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, payment of all transfer taxes, if any, and the
satisfaction of any other requirements of law, including inquiry into and
discharge of any adverse claims of which the corporation has notice, the
corporation or the transfer agent shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transfer on the
books maintained for such purpose by or on behalf of the corporation. No
transfer of shares shall be effective until it has been entered on such books.
The corporation or the corporation's transfer agent may require a signature
guaranty or other reasonable evidence that any signature is genuine and
effective before making any transfer. Transfers of uncertificated shares shall
be made in accordance with applicable provisions of law.
<PAGE>
Section 5.06 Holders of Record. The corporation shall be entitled to treat the
holder of record of any share of stock as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof, except as may be required by the laws of
Colorado.
Section 5.07 Shares Held for Account of Another. The board of directors, in the
manner provided by the Colorado Corporation Code, may adopt a procedure whereby
a shareholder of the corporation may certify in writing to the corporation that
all or a portion of the shares registered in the name of such shareholder are
held for the account of a specified person or persons. Upon receipt by the
corporation of a certification complying with such procedure, the persons
specified in the certification shall be deemed, for the purpose or purposes set
forth therein, to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
Section 5.08 Transfer Agents, Registrars and Paying Agents. The board of
directors may at its discretion appoint one or more transfer agents, registrars
or agents for making payment upon any class of stock, bond, debenture or other
security of the corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification
Section 6.01 Definitions. For purposes of this Article, the following terms
shall have the meanings set forth below:
(a) Code. The term "Code" means the Colorado Corporation Code as it exists on
the date of the adoption of this Article and as it may hereafter be amended
from time to time, but in the case of any amendment, only to the extent
that the amendment permits the corporation to provide broader
indemnification rights than the Colorado Corporation Code permitted the
corporation to provide at the date of the adoption of this Article and
prior to the amendment.
(b) Corporation. The term "corporation" means the corporation and, in addition
to the resulting or surviving corporation, any domestic or foreign
predecessor entity of the corporation in a merger, consolidation or other
transaction in which the predecessor's existence ceased upon consummation
of the transaction.
(c) Expenses. The term "expenses" means the actual and reasonable expenses
(including but not limited to expenses of investigation and preparation and
fees and disbursements of counsel, accountants or other experts) incurred
by a party in connection with a proceeding.
(d) Liability. The term "liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to
an employee benefit plan) or expense incurred with respect to a proceeding.
(e) Party. The term "party" means any individual who was, is, or is threatened
to be made, a named defendant or respondent in a proceeding by reason of
the fact that he is or was a director, officer or employee of the
corporation and any individual who, while a director, officer or employee
of the corporation is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any
other foreign or domestic corporation or of any partnership, joint venture,
trust, other enterprise or employee benefit plan. A party shall be
considered to be serving an employee benefit plan at the corporation's
request if his duties to the corporation also impose duties on or otherwise
involve services by him to the plan or to participants in or beneficiaries
of the plan.
<PAGE>
(f) Proceeding. The term "proceeding" means any threatened, pending or
completed action, suit or proceeding, or any appeal therein, whether civil,
criminal, administrative, arbitrative or investigative (including an action
by or in the right of the corporation), and whether formal or informal.
Section 6.02 Right to Indemnification. The corporation shall indemnify any party
to a proceeding against liability incurred in, relating to or as a result of the
proceeding to the fullest extent permitted by law (including without limitation
in circumstances in which, in the absence of this Section 6.02, indemnification
would be (a) discretionary under the Code or (b) limited or subject to
particular standards of conduct under the Code).
Section 6.03 Advancement of Expenses. In the event of any proceeding in which a
party is involved or which may give rise to a right of indemnification under
this Article, following written request to the corporation by the party, the
corporation shall pay to the party, to the fullest extent permitted by law
(including without limitation in circumstances in which, in the absence of this
Section 6.02, advancement of expenses would be (a) discretionary under the Code
or (b) limited or subject to particular standards of conduct under the Code),
amounts to cover expenses incurred by the party in, relating to or as a result
of such proceeding in advance of its final disposition.
Section 6.04 Burden of Proof. If under applicable law the entitlement of a party
to be indemnified or advanced expenses hereunder depends upon whether a standard
of conduct has been met, the burden of proof of establishing that the party did
not act in accordance with such standard shall rest with the corporation. A
party shall be presumed to have acted in accordance with such standard and to be
entitled to indemnification or the advancement of expenses (as the case may be)
unless, based upon a preponderance of the evidence, it shall be determined that
the party has not met such standard. Such determination and any evaluation as to
the reasonableness of amounts claimed by a party shall be made by the board of
directors of the corporation or such other body or persons as may be permitted
by the Code. Subject to any express limitation of the Code, if so requested by
the party, such determination and evaluation as to the reasonableness of the
amounts claimed by the party shall be made by independent counsel who is
selected by the party and approved by the corporation (which approval shall not
be unreasonably withheld). For purposes of this Article, unless otherwise
expressly stated, the termination of any proceeding by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere or its equivalent, shall not create a presumption that a
party did not meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not permitted by
applicable law.
Section 6.05 Notification and Defense of Claim. Promptly after receipt by a
party of notice of the commencement of any proceeding, the party shall, if a
claim in respect thereof is to be made against the corporation under this
Article, notify the corporation in writing of the commencement thereof;
provided, however, that delay in so notifying the corporation shall not
constitute a waiver or release by the party of any rights under this Article.
With respect to any such proceeding: (a) the corporation shall be entitled to
participate therein at its own expense; (b) any counsel representing the party
to be indemnified in connection with the defense or settlement thereof shall be
counsel mutually agreeable to the party and to the corporation: and (c) the
corporation shall have the right, at its option, to assume and control the
defense or settlement thereof, with counsel satisfactory to the party. If the
corporation assumes the defense of the proceeding, the party shall have the
right to employ its own counsel, but the fees and expenses of such counsel
incurred after notice from the corporation of its assumption of the defense of
such proceeding shall be at the expense of the party unless (i) the employment
of such counsel has been specifically authorized by the corporation, (ii) the
party shall have reasonably concluded that there may be a conflict of interest
between the corporation and the party in the conduct of the defense of such
proceeding, or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such proceeding. Notwithstanding the foregoing, if an
<PAGE>
insurance carrier has supplied directors' and officers' liability insurance
covering a proceeding and is entitled to retain counsel for the defense of such
proceeding, then the insurance carrier shall retain counsel to conduct the
defense of such proceeding unless the party and the corporation concur in
writing that the insurance carrier's doing so is undesirable. The corporation
shall not be liable under this Article for any amounts paid in settlement of any
proceeding effected without its written consent. The corporation shall not
settle any proceeding in any manner that would impose any penalty or limitation
on a party without the party's written consent. Consent to a proposed settlement
of any proceeding shall not be unreasonably withheld by either the corporation
or the party.
Section 6.06 Enforcement. The right to indemnification and advancement of
expenses granted by this Article shall be enforceable in any court of competent
jurisdiction if the corporation denies the claim, in whole or in part, or if no
disposition of such claim is made within 90 days after the written request for
indemnification or advancement of expenses is received. If successful in whole
or in part in such suit, the party's expenses incurred in bringing and
prosecuting such claim shall also be paid by the corporation. Whether or not the
party has met any applicable standard of conduct, the court in such suit may
order indemnification or the advancement of expenses as the court deems proper
(subject to any express limitation of the Code). Further, the corporation shall
indemnify a party from and against any and all expenses and, if requested by the
party, shall (within ten business days of such request) advance such expenses to
the party, which are incurred by the party in connection with any claim asserted
against or suit brought by the party for recovery under any directors' and
officers' liability insurance policies maintained by the corporation, regardless
of whether the party is unsuccessful in whole or in part in such claim or suit.
Section 6.07 Proceedings by a Party. The corporation shall indemnify or advance
expenses to a party in connection with any proceeding (or part thereof)
initiated by the party only if such proceeding (or part thereof) was authorized
by the board of directors of the corporation.
Section 6.08 Subrogation. In the event of any payment under this Article, the
corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the indemnified party, who shall execute all papers and do
everything that may be necessary to assure such rights of subrogation to the
corporation.
Section 6.09 Other Payments. The corporation shall not be liable under this
Article to make any payment in connection with any proceeding against or
involving a party to the extent the party has otherwise actually received
payment (under any insurance policy, agreement or otherwise) of the amounts
otherwise indemnifiable hereunder. A party shall repay to the corporation the
amount of any payment the corporation makes to the party under this Article in
connection with any proceeding against or involving the party, to the extent the
party has otherwise actually received payment (under any insurance policy,
agreement or otherwise) of such amount.
Section 6.10 Insurance. So long as any party who is or was an officer or
director of the corporation may be subject to any possible proceeding by reason
of the fact that he is or was an officer or director of the corporation (or is
or was serving in any one or more of the other capacities covered by this
Article during his tenure as officer or director), if the corporation maintains
an insurance policy or policies providing directors' and officers' liability
insurance, such officer or director shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
applicable to any then current officer or director of the corporation, or the
corporation shall purchase and maintain in effect for the benefit of such
officer or director one or more valid, binding and enforceable policy or
policies of directors' and officers' liability insurance providing, in all
respects, coverage at least comparable to that provided to any then current
officer or director at the corporation.
Section 6.11 Other Rights and Remedies. The rights to indemnification and
advancement of expenses provided in this Article shall be in addition to any
other rights to which a party may have or hereafter acquire under any law,
provision of the articles of incorporation, any other or further provision of
these bylaws, vote of the shareholders or directors, agreement or otherwise. The
corporation shall have the right, but shall not be obligated, to indemnify or
advance expenses to any agent of the corporation not otherwise covered by this
Article in accordance with and to the fullest extent permitted by the Code.
<PAGE>
Section 6.12 Applicability; Effect. The rights to indemnification and
advancement of expenses provided in this Article shall be applicable to acts or
omissions that occurred prior to the adoption of this Article, shall continue as
to any party during the period such party serves in any one or more of the
capacities covered by this Article, shall continue thereafter so long as the
party may be subject to any possible proceeding by reason of the fact that he
served in any one or more of the capacities covered by this Article, and shall
inure to the benefit of the estate and personal representatives of each such
person. Any repeal or modification of this Article or of any Section or hereof
shall not affect any rights or obligations then existing. All rights to
indemnification under this Article shall be deemed to be provided by a contract
between the corporation and each party covered hereby.
Section 6.13 Severability. If any provision of this Article shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Article
(including without limitation, all portions of any Sections of this Article
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby, and (b) to the fullest extent possible, the
provisions of this Article (including, without limitation, all portions of any
Section of this Article containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent of this
Article that each party covered hereby is entitled to the fullest protection
permitted by law.
ARTICLE VII
Miscellaneous
Section 7.01 Voting of Securities by the Corporation. Unless otherwise provided
by resolution of the board of directors, on behalf of the corporation the
president or any vice-president shall attend in person or by substitute
appointed by him, or shall execute written instruments appointing a proxy or
proxies to represent the corporation at, all meetings of the shareholders of any
other corporation, association or other entity in which the corporation holds
any stock or other securities, and may execute written waivers of notice with
respect to any such meetings. At all such meetings and otherwise, the president
or any vice-president in person or by substitute or proxy as aforesaid, may vote
the stock or other securities so held by the corporation and may execute written
consents and any other instruments with respect to such stock or securities and
may exercise any and all rights and powers incident to the ownership of said
stock or securities, subject, however, to the instructions, if any, of the board
of directors.
Section 7.02 Seal. The corporate seal of the corporation shall be in such form
as adopted by the board of directors, and any officer of the corporation may,
when and as required, affix or impress the seal, or a facsimile thereof, to or
on any instrument or document of the corporation.
Section 7.03 Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 7.04 Amendments. The directors may amend or repeal these bylaws unless
the articles of incorporation reserve such power exclusively to the shareholders
in whole or in part or the shareholders, in amending or repealing a particular
bylaw provision, provide expressly that the directors may not amend or repeal
such bylaw. The shareholders may amend or repeal the bylaws even through the
bylaws may also be amended or repealed by the directors.
<PAGE>
Amendment to Bylaws
Section 2.09 was amended to read as follows pursuant to Consent to Action
by the Board of Directors dated April 15, 1996:
At all meetings of shareholders, one-third of all shares entitled to
vote at the meeting shall constitute a quorum.
EXHIBIT 4.1
RW-1 RW/CS
8/29/96
Void After 3:30 P.M., Mountain Time, on ______________________, 2001
REPRESENTATIVE'S WARRANTS TO PURCHASE COMMON SHARES
GLOBAL MED TECHNOLOGIES, INC.
This is to Certify That, FOR VALUE RECEIVED, RAF FINANCIAL CORPORATION,
1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203 ("Holder") is entitled
to purchase, subject to the provisions of this Warrant, from GLOBAL MED
TECHNOLOGIES, INC. ("Company"), at any time until 3:30 P.M., Mountain Time, on
_______________, 2001 ("Expiration Date"), Common Shares of the Company at a
purchase price per share of $_________ during the period this Warrant is
exercisable. The number of Common Shares to be received upon the exercise of
this Warrant and the price to be paid for a Common Share may be adjusted from
time to time as hereinafter set forth. The purchase price of a Common Share in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." This Warrant is or may be one of a series
of warrants identical in form issued by the Company to purchase an aggregate of
__________ Common Shares of the Company and the term "Warrants" as used herein
means all such Warrants (including this Warrant). The Common Shares, as adjusted
from time to time, underlying the Warrants are hereinafter sometimes referred to
as "Warrant Shares" and include all Common Shares that have been issued upon the
exercise of the Warrants and all unissued Common Shares underlying the Warrants.
(a) Exercise of Warrant. This Warrant may be exercised in whole or in part
at any time or from time to time until the Expiration Date or if the Expiration
Date is a day on which banking institutions are authorized by law to close, then
on the next succeeding day which shall not be such a day, by presentation and
surrender hereof to the Company or at the office of its stock transfer agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified in such Form,
together with all federal and state taxes applicable upon such exercise. The
Company agrees not to merge, reorganize or take any action that would terminate
this Warrant unless provisions are made as part of such merger, reorganization
or other action which would provide the holders of this Warrant with an
equivalent of this Warrant as specified in Section (i) hereof. The Company
agrees to provide notice to the Holder that any tender offer is being made for
the Company's Common Shares no later than three business days after the day the
Company becomes aware that any tender offer is being made for outstanding Common
Shares of the Company. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Common Shares purchasable hereunder. Upon receipt by the Company of this
Warrant at the office of the Company or at the office of the Company's stock
transfer agent, in proper form for exercise and accompanied by the Exercise
Price, the Holder shall be deemed to be the holder of record of the Common
Shares issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Common Shares shall not then be actually delivered to the Holder.
<PAGE>
(b) Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of Common Shares as shall be required for issuance or
delivery upon exercise of this Warrant.
(c) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Common Share called for upon any exercise hereof,
the Company shall, upon receipt by the Company or the Company's stock transfer
agent of the Exercise Price on such fractional share, pay to the Holder an
amount in cash equal to such fraction multiplied by the current market value of
such fractional share, determined as follows:
(1) If the Common Shares are listed on a national securities exchange,
are admitted to unlisted trading privileges on such an exchange, or are
listed for trading on a trading system of the National Association of
Securities Dealers, Inc. ("NASD") such as the NASDAQ Small Cap Market or
NASDAQ National Market System ("NMS"), then the current value shall be the
last reported sale price of the Common Shares on such an exchange or system
on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average of the closing bid prices
for the Common Shares for such day on such exchange or such system shall be
used; or
(2) If the Common Shares are not so listed on such exchange or system
or admitted to unlisted trading privileges, the current value shall be the
average of the last reported bid prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise of
this Warrant; or
(3) If the Common Shares are not so listed or admitted to unlisted
trading privileges and if bid and asked prices are not so reported, the
current value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the board of directors of
the Company.
(d) Exchange, Assignment or Loss of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other Warrants of different denominations entitling the Holder thereof to
purchase (under the same terms and conditions as provided by this Warrant) in
the aggregate the same number of Common Shares purchasable hereunder. This
Warrant may not be sold, transferred, assigned, or hypothecated on or before
__________________, 1997, except that it may be transferred or assigned in whole
or in part
2
<PAGE>
prior to __________________, 1997, to the officers of RAF Financial Corporation,
to other securities brokers and dealers who participated in the offering of
securities of the Company with respect to which this Warrant was issued
("Offering"), to the officers of such other securities brokers and dealers, or
by will or operation of law. Any such transfer or assignment shall be made by
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and with
funds sufficient to pay any transfer tax; whereupon the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be cancelled. This
Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation hereof at the office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any warrants issued in
substitution for or replacement of this Warrant, or into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Subject to such
right of indemnification, any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) Adjustment Provisions.
(1) Adjustments of the Exercise Price.
(A) If the Company subdivides its outstanding Common Shares into
a greater number of Common Shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately
reduced. Conversely, if the Company combines its outstanding Common
Shares into a lesser number of Common Shares, the Exercise Price in
effect immediately prior to such combination shall be proportionally
increased. In case of a subdivision or combination, the adjustment of
the Exercise Price shall be made as of the effective date of the
applicable event. A distribution on Common Shares, including a
distribution of Convertible Securities, to shareholders of the Company
on a pro rata basis shall be considered a subdivision of Common Shares
for the purposes of this subsection (1)(A) of this Section, except
that the adjustment will be made as of the record date for such
distribution and any such distribution of Convertible Securities shall
be deemed to be a distribution of the Common Shares underlying such
Convertible Securities.
3
<PAGE>
(B) If the Company shall at any time distribute or cause to be
distributed to its shareholders, on a pro rata basis, cash, assets, or
securities of any entity other than the Company, then the Exercise
Price in effect immediately prior to such distribution shall
automatically be reduced by an amount determined by dividing (x) the
amount (if cash) or the value (if assets or securities) of the
holders' of Warrants (as such term is defined in the first paragraph
hereof) pro rata share of such distribution determined assuming that
all holders of Warrants had exercised their Warrants on the day prior
to such distribution, by (y) the number of Common Shares issuable upon
the exercise of this Warrant by the Holder on the day prior to such
distribution.
(3) No Adjustment for Small Amounts. Anything in this Section (f) to
the contrary notwithstanding, the Company shall not be required to give
effect to any adjustment in the Exercise Price unless and until the net
effect of one or more adjustments, determined as above provided, shall have
required a change of the Exercise Price by at least one cent, but when the
cumulative net effect of more than one adjustment so determined shall be to
change the actual Exercise Price by at least one cent, such change in the
Exercise Price shall thereupon be given effect.
(4) Number of Shares Adjusted. Upon any adjustment of the Exercise
Price, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number
of Common Shares, calculated to the nearest full share, obtained by
multiplying the number of Common Shares initially issuable upon exercise of
this Warrant by the Exercise Price specified in the first paragraph hereof
and dividing the product so obtained by the new Exercise Price.
(5) Definitions.
(A) Whenever reference is made in this Section (f) to the
distribution of Common Shares, the term "Common Shares" shall mean the
Common Shares of the Company authorized as of the date hereof and any
other class of stock ranking on a parity with such Common Shares.
However, subject to the provisions of Section (i) hereof, Common
Shares issuable upon exercise hereof shall include only Common Shares
of the class designated as Common Shares of the Company as of the date
hereof.
(B) Whenever reference is made in this Section (f) to the
distribution of Convertible Securities, the term "Convertible
Securities" shall mean options or warrants or rights for the purchase
of Common Shares of the Company or for the purchase of any stock or
other securities convertible into or exchangeable for Common Shares of
the Company.
4
<PAGE>
(g) Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section (f) hereof, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office, and with its stock transfer and warrant agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided
and setting forth in reasonable detail the facts requiring such adjustment. Each
such officer's certificate shall be made available at all reasonable times for
inspection by the Holder and the Company shall, forthwith after each such
adjustment, deliver a copy of such certificate to the Holder.
(h) Notices to Holders. So long as this Warrant shall be outstanding and
unexercised (i) if the Company shall pay any dividend or make any distribution
upon the Common Shares or (ii) if the Company shall offer to the holders of
Common Shares for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then, in any such case, the Company shall
cause to be delivered to the Holder, at least 10 days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Shares of record shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding Common
Shares of the Company (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of an issuance of
Common Shares by way of dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding Common
Shares of the class issuable upon exercise of this Warrant) or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company shall cause effective
provision to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property which the Holder would have received upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance had this Warrant been exercised prior to the consummation of
such transaction. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section (i) shall
5
<PAGE>
similarly apply to successive reclassifications, capital reorganizations and
changes of Common Shares and to successive consolidations, mergers, sales or
conveyances. In the event the Company spins off a subsidiary by distributing to
the shareholders of the Company as a dividend or otherwise the stock of the
subsidiary, the Company shall reserve for the life of this Warrant, shares of
the subsidiary to be delivered to the Holders of the Warrants upon exercise to
the same extent as if they were owners of record of the Warrant Shares on the
record date for payment of the shares of the subsidiary.
(j) Registration Under the Securities Act of 1933.
(1) Within 45 days after receipt of a written request by the then
Holder(s) of Warrants or Warrant Shares representing at least 51% of the
total Warrant Shares made at any time within the period commencing
________________, 1997, and ending __________________, 2001, the Company
will file, no more than once, a registration statement under the Securities
Act of 1933, as amended, registering the Warrants and the Warrant Shares.
The Company will use its best efforts to cause such registration statement
to become effective.
(2) In addition, if at any time during the period commencing
_________________, 1997, and ending _________________, 2003, the Company
should file a registration statement under the Securities Act of 1933, as
amended (the "Act"), which relates to a current offering of securities of
the Company (except in connection with an offering (i) to employees or (ii)
of the Company's securities solely in exchange for properties, assets or
stock of other individuals or corporations), such registration statement
and the prospectus included therein shall also, at the written request to
the Company by any of the Holder(s) of the Warrants and Warrant Shares,
relate to, and meet the requirements of the Act with respect to any public
offering of the Warrants and Warrant Shares so as to permit the public sale
thereof in compliance with the Act. The Company shall give written notice
to the Holder(s) of its intention to file a registration statement under
the Act relating to a current offering of the aforesaid securities of the
Company 30 or more days prior to the filing of such registration statement,
and the written request provided for in the first sentence of this
subsection shall be made by the Holder(s) 10 or more days prior to the date
specified in the notice as the date on which it is intended to file such
registration statement. Neither the delivery of such notice by the Company
nor of such request by the Holder(s) shall in any way obligate the Company
to file such registration statement and notwithstanding the filing of such
registration statement, the Company may, at any time prior to the effective
date thereof, determine not to proceed to effectiveness with such
registration statement, without liability to the Holder(s). The Company
shall pay all expenses (with the exception of any selling commissions
relating to the sale of the Warrants and Warrant Shares which shall be paid
by the sellers thereof) of any such registration statement.
6
<PAGE>
(3) In addition, the Company will cooperate with the then Holder(s) of
the Warrants and Warrant Shares in preparing and signing any registration
statement, in addition to the registration statements discussed above,
required in order to sell or transfer the Warrants and Warrant Shares and
will sign and supply all information required therefor, but such additional
registration shall be at the then Holder(s) cost and expense.
(4) When, pursuant to subsection (1), (2), or (3) of this Section, the
Company shall take any action to permit a public offering or sale or other
distribution of the Warrants and Warrant Shares, the Company shall:
(A) Supply to each selling Holder a reasonable number of copies
of the preliminary, final and other prospectus in conformity with the
requirements of the Act and the Rules and Regulations promulgated
thereunder and such other documents as the Holders shall reasonably
request.
(B) Use its best efforts to register or qualify for sale the
Warrants and Warrant Shares in those states in which any of the
securities were sold in the Offering. The Company shall bear the
complete cost and expense (other than any selling commissions relating
to the sale of the Warrants and Warrant Shares, which shall be paid by
the sellers thereof) of such registrations or qualifications except
those filed under subsection (j)(3) which shall be at the Holder(s)
cost and expense.
(C) Keep effective such registration statement until the first of
the following events occur: (i) 36 months have elapsed after the
effective date of such registration statement or (ii) all of the
registered Warrant Shares issued by the Company either before or after
the effective date of such registration statement have been publicly
sold under such registration statement.
(D) Indemnify and hold harmless each such Holder and each
underwriter, within the meaning of the Act, who may purchase from or
sell for any such Holder, any Warrants or Warrant Shares, from and
against any and all losses, claims, damages, and liabilities
(including but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or settling
any claim) arising from (i) any untrue or alleged untrue statement of
a material fact contained in any registration statement furnished
pursuant to clause (A) of this subsection, or any prospectus included
therein or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (unless such untrue statement or
omission or such alleged untrue statement or omission was based upon
information furnished or required to be furnished in writing to the
Company by such Holder or underwriter expressly for use therein),
which indemnification shall include each person, if any, who controls
7
<PAGE>
any such Holder or underwriter within the meaning of the Act;
provided, however, that the Company shall not be so obligated to
indemnify any such Holder or underwriter or controlling person unless
such Holder and underwriter shall at the same time indemnify the
Company, its directors, each officer signing any registration
statement or any amendment to any registration statement and each
person, if any, who controls the Company within the meaning of the
Act, from and against any and all losses, claims, damages and
liabilities (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing, defending
or settling any claim) arising from (iii) any untrue or alleged untrue
statement of a material fact contained in any registration statement
or prospectus furnished pursuant to Clause (A) of this subsection, or
(iv) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but the indemnity of such Holder, underwriter
or controlling person shall be limited to liability based upon
information furnished, or required to be furnished, in writing to the
Company by such Holder or underwriter or controlling person expressly
for use therein. The Company shall not be liable for amounts paid in
settlement of any such litigation if such settlement was effected
without the consent of the Company. The indemnity agreement of the
Company herein shall not inure to the benefit of any such underwriter
(or to the benefit of any person who controls such underwriter) on
account of any losses, claims, damages, liabilities (or actions or
proceedings in respect thereof) arising from the sale of any of such
Warrants or Warrant Shares by such underwriter to a person if such
underwriter failed to send or give a copy of the prospectus furnished
pursuant to Clause (A) of this subsection, as the same may then be
supplemented or amended (if such supplement or amendment shall have
been furnished to the Holders pursuant to said Clause (A)), to such
person with or prior to the written confirmation of the sale involved.
(5) Each Holder shall supply such information as the Company may
reasonably require from such Holder, or any underwriter for such Holder,
for inclusion in such registration statement or posteffective amendment.
(6) The Company's agreements with respect to the Warrants and Warrant
Shares in this Section will continue in effect regardless of the exercise
or surrender of this Warrant.
(7) Any notices or certificates by the Company to the Holder and by
the Holder to the Company shall be deemed delivered if in writing and
delivered personally or sent by certified mail, return receipt requested,
to the Holder, addressed to the Holder at the Holder's address as set forth
on the Warrant or stockholder register of the Company, or, if the Holder
has designated, by notice in writing to the Company, any other address, to
such other address, and, if to the Company, addressed to it at 12600 West
Colfax Avenue, Suite A-500, Lakewood, Colorado 80215-3737. The Company may
change its address by written notice to Holders.
8
<PAGE>
(k) Transfer to Comply with the Securities Act of 1933. The Company may
cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Shares or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Section (j) hereof; unless legal counsel for the Company is of the
opinion as to any such certificate that such legend, or one similar thereto, is
unnecessary:
"The securities represented by this certificate may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement made under the Securities Act of 1933 (the
"Act") and under any applicable state securities law, or pursuant to
an exemption from registration under the Act and under any applicable
state securities law, the availability of which is to be established
to the satisfaction of the Company."
(l) Additional Legend. In the event this Warrant is exercised prior to
_________________, 1997, the following legend shall be set forth on the
certificate representing the Warrant Shares so acquired:
"The securities representing this Certificate are subject to
restrictions on transfer set forth in the Representative's Warrants to
Purchase Common Shares (the "Warrant") issued by the Company. A copy
of the Warrant is available for inspection at the principal office of
the Company."
(m) Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the state of Colorado.
(n) Exchange Provisions.
(1) For purposes of this Section (n), this Warrant shall be deemed to
represent the same number of Warrants as there are Warrant Shares
underlying this Warrant. For example, if there are 10,000 Warrant Shares
underlying this Warrant, then for purposes of this Section (n) the Holder
shall be deemed to hold 10,000 Warrants.
(2) For purposes of this Section (n), the following terms shall have
the following meanings:
(A) "Current Market Value of a Warrant Share" shall be the value
as determined under Section (c)(1) or (2) hereof except that the time
of the determination thereunder shall be the last business day prior
to the day the Company receives a notice from the Holder under this
Section (n).
9
<PAGE>
(B) "Warrant Value" shall mean the Current Market Value of a
Warrant Share underlying each Warrant minus or less the Exercise Price
of such Warrant as of the close of business on the last business day
prior to the day the Company receives a notice from the Holder under
this Section (n).
(3) The Holder shall have the right to exchange, in a cashless
transaction, all or part of the Holder's Warrants for Common Shares issued
by the Company at anytime prior to the Expiration Date of such Warrants by
providing written notice ("Notice") to the Company. Such Notice may only be
provided after _______________, 1997 and only at a time when the Company's
Common Shares are listed or approved for trading or quotation on an
exchange, interdealer communications system, or national quotation bureau.
Such Notice shall set forth the number of Warrants which the Holder elects
to exchange for Common Shares.
(4) Within 10 days after receipt of such Notice by the Company, the
Company shall issue the number of Common Shares of the Company to the
Holder which is determined by dividing the Warrant Value of the Warrants
being exchanged by the Current Market Value of a Warrant Share as of the
date the Notice is received by the Company.
(5) The Holder shall surrender the Warrant which the Holder is
exchanging for Common Shares upon receipt of such Common Shares. If the
entire Warrant is being exchanged by the Holder for Common Shares, the
Company shall cancel the entire Warrant. If less than the entire Warrant is
being exchanged for Common Shares, the Company shall issue a new Warrant to
the Holder representing the portion of this Warrant which was not exchanged
for Common shares.
Dated: _________________, 1996.
GLOBAL MED TECHNOLOGIES, INC.
By:
-------------------------------------
Michael I. Ruxin, Chairman of the
Board and Chief Executive Officer
10
<PAGE>
PURCHASE FORM
Dated: , 19
--------------- ----
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ____________ shares of Common Shares and hereby makes
payment of $_______________ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
---------------------------------------
Name:
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------------
Signature:
-------------------------------------------------------------------
ASSIGNMENT FORM
---------------
Dated , 19
------------- ----
FOR VALUE RECEIVED,
----------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
Name:
--------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
-----------------------------------------------------------------------
the right to purchase Common Shares represented by this Warrant to the extent
of Common Shares as to which such right is exercisable and does
- ----------------
hereby irrevocably constitute and appoint
--------------------------------------,
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature:
--------------------------------
11
EXHIBIT 5.1
(Form of Opinion)
______________, 1996
Global Med Technologies, Inc.
12600 West Colfax Avenue
Suite A-500
Lakewood, CO 80215
Gentlemen:
Reference is made to the registration statement (the"Registration
Statement") on Form SB-2 relating to the proposed public offering by Global Med
Technologies, Inc. (the "Company") (Registration No. 33-______) filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The Registration Statement relates to (i) up to 2,300,000 shares of Common
Stock, (ii) up to 1,150,000 Class A Common Stock Purchase Warrants (the
"Warrants"), (iii) up to 1,150,000 shares of Common Stock underlying the
Warrants, (iv) 1,120,446 shares of Common Stock being registered on behalf of
certain shareholders of the Company ("Selling Shareholders") and (v) warrants to
be issued to RAF Financial Corporation, the Representative of the Underwriters,
and the shares and warrants underlying the Representative's warrant. At your
request, this opinion is being furnished to you for filing as Exhibit 5 to the
Registration Statement.
We have acted as counsel to the Company in connection with the preparation
of the Registration Statement relating to the proposed sale of shares of Common
Stock and Warrants by the Company and the Selling Shareholders. In such
capacity, we have examined the originals or copies, certified or otherwise
identified, of the Articles of Incorporation, as amended, and Bylaws, as
amended, of the Company, corporate records of the Company, including minute
books of the Company as furnished to us by the Company, certificates of public
officials and of representatives of the Company, statutes and other records,
instruments and documents pertaining to the Company as a basis for the opinions
hereinafter expressed. In giving such opinions, we have relied upon certificates
of officers of the Company with respect to the accuracy of the factual matters
contained in such certificates.
Based upon the foregoing and subject to the other qualifications and
limitations stated in this letter, we are of the opinion that:
<PAGE>
Global Med Technologies, Inc.
September __, 1996
Page 2
(1) The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Colorado; and
(2) The shares of Common Stock and Warrants to be issued by the Company
pursuant to the Registration Statement have been duly authorized, and
upon payment of the price per share and price per Warrant set forth in
the final Prospectus, the shares of Common Stock and Warrants will be
validly issued, fully paid and non-assessable.
(3) The shares of Common Stock to be sold by the Selling Shareholders have
been duly authorized and are validly issued, fully paid and
non-assessable.
(4) The shares of Common Stock to be issued to holders of the Warrants and
the Selling Shareholders, upon exercise and payment of the exercise
price stated in the Warrants and warrants held by the Selling
Shareholders, will have been duly authorized, validly issued, fully
paid and non-assessable.
This opinion is a legal opinion and not an opinion as to matters of fact.
This opinion is limited to the laws of the State of Colorado and the United
States of America, and to the matters stated herein. This opinion is made as of
the date hereof, and after the date hereof, we undertake no, and disclaim any,
obligation to advise you of any change in any matters set forth herein, and we
express no opinion as to the effect of any subsequent course of dealing or
conduct between the parties. This opinion is furnished to you solely in
connection with the transactions referred to herein, and may not be relied on,
quoted by or otherwise referred to by any other person, firm or entity without
our prior written consent.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under "Legal Matters" in the Prospectus.
Very truly yours,
Brenman Key & Bromberg, P.C.
Enclosures
DEW/eaa
EXHIBIT 10.1
- --------------------------------------------------------------------------------
LEASE AGREEMENT
- --------------------------------------------------------------------------------
THIS LEASE made and entered into on April, 1992, by and between Golden Hill
Successor Limited Partnership ("Landlord"), and National MRO, Inc. a Colorado
Corporation ("Tenant").
I. DEMISED PREMISES
A. Office Space. The Landlord hereby leases to the Tenant and the Tenant
accepts that part of Suite A500, 12600 West Colfax Avenue, Lakewood,
CO 80215 ("the Building") as shown on the floor plan attached hereto
as Exhibit A, containing 7,522SF square feet of rentable space ("the
Premises" including all easements, rights and appurtenances therein)
for the term of 3 years commencing 1 May 1992 and ending 31 December,
1995 unless sooner terminated as provided herein, to be occupied and
used by the Tenant for general office purposes and for no other
purposes.
B. Covered Parking Spaces. The Landlord hereby leases to the Tenant three
(3) covered parking spaces under the Building to be used by the Tenant
for the parking of automobiles of the Tenant and its employees and
invitees.
II. RENT
A. Base Rent.
1. Office Space. The Tenant shall pay to the Landlord as rent for
the office space, without any setoff or deduction whatsoever, the
sum of $323,637.30 ("Base Rent"), in equal monthly installments
of [See Addendum] in advance on the first day of each calendar
month during the term hereof.
2. Covered Parking Spaces. The Tenant shall pay to the Landlord as
rent for the parking spaces, without any setoff or deduction
whatsoever, the sum of [See Addendum] ("Base Rent"), in equal
monthly installments of [See Addendum] in advance on the first
day of each calendar month during the term hereof.
4. Proration - Interest. If the term hereof commences on any day
other than the first day of a calendar month, a pro rata fraction
shall be paid for the partial month at the beginning of the said
term, if any, as hereinafter provided [after five (5) days].
Unpaid rent, additional rent and unpaid Tenant Improvement costs
shall bear interest at the rate of 18% per annum from the date
due until paid.
B. Additional Rent.
1. Definitions.
a. "Rentable Area in the Building" means all of the office
areas in the Building, including the corridors and restrooms
which service such office areas;
b. Tenant's Proportionate Share" means 3.9%, which is the
ratio of the office space leased by the Tenant to the total
rentable area in the Building;
c. "Operating Expenses" means the total reasonable operating
expenses related to the building, of which the Premises are
a part, and the land on which the building is located, which
are incurred by the Landlord, and shall include, without
limitation, personal property and ad valorem taxes, heat,
gas, electricity, fuel, costs of water and sewerage,
ventilating and air conditioning, management expenses
(Management expenses may not exceed 5% of Gross Income)
fees, labor, including supplies, repairs, maintenance,
painting, wall and window washing, general janitorial
service, real estate taxes, insurance, trash removal, and
other items properly constituting direct operating costs
according to standard accounting practices, but not
including depreciation of the Building or equipment,
interest expense on borrowed money of any form or nature,
federal or state income taxes, [change of ownership taxes],
expenditures required to be capitalized for federal income
tax purposes, office expenses or salaries of the Landlord's
executive officers, commissions and fees paid for the rental
of the Building, or any parts thereof, or tenant
improvements. [According to generally accepted accounting
principles.]
<PAGE>
d. Real Estate Tax Clause
1.) Real estates taxes defined. The term "Real Estate
Taxes" shall mean all taxes and special assessments of
every kind and nature assessed by any governmental
authority on the Property, which the Landlord shall
become obligated to pay because of or in connection
with the ownership, leasing and operation of the
Property, subject to the following: A "Tax Year" shall
mean that twelve (12) calendar month period commencing
with the date as of which real estate tax assessments
are payable.
a.) Special assessments. The amount of special taxes
or special assessment to be included shall be
limited to the amount of the installment plus any
interest payable thereon of such special tax or
special assessment required to be paid during the
year in respect of which Real Estate Taxes are
being determined; and
b.) Exclusions. There shall be excluded from Real
Estate Taxes all income taxes, excess profits
taxes, excise taxes, franchise taxes, estate,
succession, inheritance and transfer taxes;
provided, however, that if at any time during the
Term of this Lease the present system of ad
valorem taxation of real property shall be changed
so that in lieu of the whole or any part of the ad
valorem tax on real property, there shall be
assessed on Landlord a capital levy or other tax
on the gross rents received with respect to the
Property, or a federal, state, county, municipal
or other local income, franchise, excise or
similar tax, assessment, levy or charge (distinct
from any now in effect) measured by or based, in
whole or in part, upon any such gross rents, then
any and all of such taxes, assessments, levies or
charges, to the extent so measured or based, shall
be deemed to be included [but not any change of
ownership taxes].
C. RENT INCREASES. The total annual rent shall be computed as follows:
1. Total rent shall be computed by adding to the Base Rent the
amount obtained by multiplying (a) the amount by which the total
Operating Expenses and the Real Estate Taxes for the prior
calendar year exceed $5.00, multiplied by the Rentable Area in
the Building by (b) the Tenant's Proportionate Share. If the
product provided by the foregoing sentence is zero or less, then
the annual rent shall be Base Rent. [In no event shall Tenant be
required to pay more than a 10% increase per year over the
previous year's operating expenses and taxes during any calendar
year thereafter.]
2. Landlord shall make its best estimate as to the amount of
Tenant's Additional Rent, which amount (Tenant's Estimated
Additional Rent), Tenant shall pay monthly. Annually after
assessing past and estimated Operating Expenses, the Landlord may
adjust the monthly Tenant's Estimated Additional Rent provided
for herein upward or downward to reflect more accurately
anticipated Operating Expenses. All payments due at least 20 days
after the revision notice shall be made at the new rate. [Total
rent shall be prorated for any partial year.]
As of the close of each calendar year, Landlord shall
compute the actual Operating Expenses and Taxes of the Building
for the previous twelve-month period (if the building has been
operating for less than twelve months, the cost of operating the
Building for a year shall be determined by dividing the actual
Operating Expenses and Taxes by the number of days of actual
operation and multiplying by 365). Landlord shall deliver to
Tenant notice of such cost and the amount due less the $5.00 per
square foot annual allowance, if any, from Tenant no later than
April 15 of the year immediately subsequent to the year to which
such costs relate. Tenant shall reimburse Landlord within 30
days after notice of any deficiency between estimated Operating
Expenses and Taxes paid and actual Operating Expenses and Taxes
incurred. Landlord shall, upon Tenant's request, deliver to
Tenant a written accounting showing how operating costs were
calculated for the building. [Except in no event shall Tenant be
required to pay for any increase in operating expenses over 10%
per annum.]
<PAGE>
III. IMPROVEMENTS. On or before the date the term commences, the Landlord shall
cause the Premises to be completed in accordance with the terms and
conditions of the "Tenant Improvement Work Letter" attached hereto as
Exhibit B. The Landlord will not be liable to the tenant for damages nor
will Tenant be relieved from any obligations under this Lease if the
Landlord is prevented from completing the Premises ready for the Tenants
occupancy on the date the term commences because of strikes, lockouts,
labor controversies, accidents, inability to obtain fuel or supplies, the
holding over or retention of possession of the Premises by a prior tenant
or any other cause beyond the reasonable control of the Landlord. In such
event, however, the rent [and all Operating expenses and taxes] hereunder
shall abate on a perdiem basis until the Premises are so completed, unless
the cause for the delay is the result of the Tenant's request for
materials, finishes, or installations other than the Landlord's standards,
the Tenant's changes in the work to be performed by the Landlord and not
approved by the Landlord, the performance by the Tenant or any person
employed by the Tenant of any work in the Premises, or any other cause
within the reasonable control of the Tenant. [As described in the
Addendum.]
IV. SERVICES TO BE PROVIDED BY THE LANDLORD. The landlord shall provide the
following services to the Premises during reasonable business hours:
A. Janitorial Services and customary cleaning in and about the Premises.
The Tenant may not provide any janitorial service of its own without
the Landlord's prior written consent, and then only subject to such
additional conditions as the Landlord may reasonably impose.
B. Heat and air conditioning to provide, in the Landlord's [reasonable]
judgment, comfortable occupancy, within government regulations, of the
Premises under normal business operations, daily from 6:00 a.m. to
5:30 p.m. Monday through Friday, Saturday from 8:00 a.m. to 1:00 p.m.,
but Sundays and holidays excepted. Wherever heat-generating machines
or equipment are used or business operations are conducted in the
Premises which, in the judgment of the Landlord, affect the
temperature otherwise maintained by the air conditioning system, the
Landlord reserves the right to modify said system, including the
installation of supplementary air conditioning units in the Premises,
and the cost and maintenance thereof shall be paid by the Tenant to
the Landlord [except where computers affect the temperature].
C. Water from city mains, drawn through fixtures installed by the
Landlord for drinking, lavatory, and toilet purposes, including a
reasonable amount of hot water.
D. Automatic passenger elevator service in common with other tenants at
all times.
E. Electrical wiring system in the Premise for standard electrical
receptacles and lighting fixtures. Such electricity will be used only
for equipment and accessories normal to office usage. Replacement
lighting tubes, lamps, bulbs, and ballasts required for the overhead
lighting fixtures in the Premises will be installed at the Tenant's
expense.
F. Outdoor parking facilities in common with other tenants and visitors
in and to the Building and adjacent buildings. The Landlord shall
provide snow removal service for such parking facilities, related
driveways, and sidewalks at all times.
G. Lavatories for the use of the Tenant's employees and invitees in
common with other tenants in the Building.
[H. Telephone connections and wiring.]
The Landlord does not warrant that any of the services above mentioned will
be free from interruptions caused by repairs, renewals, improvements,
alterations, strikes, lockouts, accidents, inability of the Landlord to
obtain fuel or supplies, or any other cause beyond the reasonable control
of the Landlord. Any such interruption of service will not constitute an
eviction or disturbance of the Tenant's use and possession of the Premises,
or any part thereof, or render the Landlord liable to the Tenant for
damages, or relieve the Tenant from performance of the Tenant's obligations
under this Lease. The Landlord will use reasonable efforts to promptly
remedy any situation which has interrupted such services. [If landlord is
unable to repair in 24 hours, rent will abate. If not fixed in 21 days,
Tenants has option to terminate the lease.]
V. LANDLORD'S TITLE. The Landlord's title is and always shall be paramount to
the title of the Tenant, and nothing contained herein empowers the Tenant
to do any act which may encumber the title of the Landlord. This Lease is
subject and subordinate to all ground and underlying leases, and to all
mortgages and deeds of trust which may now or hereafter affect such ground
and underlying leases, or the real property or Building, of which the
Premises form a part, and to all renewals, modifications, consolidations,
replacements, and extensions thereof, and to all advances made or hereafter
to be made on the security of any such mortgages and deeds of trust.
Notwithstanding the foregoing, any mortgagee or beneficiary of a deed of
trust shall have the right to recognize this Lease and, in the event of a
foreclosure sale under such mortgage or deed of trust or conveyance by deed
in lieu of foreclosure, this Lease shall continue in full force and effect
at the option of such mortgagee, beneficiary or purchaser under any such
foreclosure sale or deed in lieu thereof, and the Tenant covenants and
agrees that it will, upon the written request of such mortgagee,
beneficiary or such purchaser, attorn thereto and execute, acknowledge, and
deliver any instrument reasonably required to document such attornment.
[See Addendum.]
<PAGE>
VI. ASSIGNMENT AND SUBLETTING. Tenant may not:
A. Assign or convey this Lease or any interest hereunder:
B. Allow any transfer of this Lease or any lien upon the Tenant's
interest by operation of law;
C. Permit the use or occupancy of the Premises, or any part thereof, by
anyone other than the Tenant and its employees, or
D. Notwithstanding anything to the contrary contained in this Article or
elsewhere in this lease, Tenant may not sublet the demised premises
without Landlord's prior written consent, which Landlord, in its sole
discretion, may grant or withhold, subject to the following further
conditions and limitations:
1. There shall not be more than 2 sublettings during the term
hereof;
2. Any subletting shall cover the entire demised premises;
3. The subtenant shall not be a then-existing tenant or occupant of
the building of which the demised premises are a part, or a
person or entity with whom Landlord is then dealing with regard
to leasing space in the building, or with whom Landlord has had
any dealings within the past six months with regard to leasing
space in the building;
4. Tenant agrees to use Landlord or, at Landlord's option, the then
managing agent of the building as so designated by owner, as
Tenant's exclusive renting agent to effectuate any such sublet,
and Tenant shall pay to Landlord or such managing agent, as the
case may be, the applicable fee or commission of Landlord or said
managing agent upon execution of any such sublet agreement;
5. If Tenant shall enter into any sublease as may be permitted under
this lease, Tenant shall, in consideration therefor, pay to
Landlord as additional rent, the entire amount of any and all
rents, additional charges, or other consideration payable under
or in connection with the sublease to Tenant by the subtenant
(including, but not limited to, sums paid for the sale or rental
of Tenant's fixtures, leasehold improvements, equipment,
furniture, or other personal property) which is in excess of the
rent and additional rent accruing under the lease during the term
of the sublease in respect of the subleased space (at the rate
per square foot payable by Tenant under the lease) pursuant to
the terms hereof. The sums payable under this subdivision shall
be paid to Landlord as and when payable by the subtenant to
tenant. [Tenant may assign, convey, transfer or sublease this
lease or any interest thereunder with Landlord's consent which
shall not be unreasonably withheld].
VII. UNTENANTABILITY. If the Premises or the Building are made untenantable by
fire or other cause, the Landlord may elect:
A. to terminate this Lease as of the date of such casualty by notice to
the Tenant within 30 days after that date, or
B. to repair all damage to the Premises or the Building so that the same
shall be restored to such condition as existed immediately prior to
such damage.
If the Landlord elects to terminate this Lease, the rent [and all
operating expenses and taxes] shall be abated on a per-diem basis and
be paid to the date of the fire or casualty. If the Landlord elects to
restore the Premises and Building, such restoration shall be completed
with reasonable promptness. If the Premises are unusable during such
restoration, or if the Tenant is then reasonably required to close its
operation while such repairs are made, the rent [and all operating
expenses and taxes] shall abate during such period of repair while
such operations have ceased and the Premises are completely closed. If
<PAGE>
the Tenant continues to operate on the premises during such repairs,
but is unable to use a substantial portion thereof, then the rent
shall be prorated in the proportion which the area unusable leased
space bears to the total Premises for the period that said space is
unusable. The Landlord will not be liable for business losses to the
Tenant by reason of damage to the Premises. If such untenantability is
caused by the fault of the Tenant, there will be no apportionment or
abatement of rent. Notwithstanding anything contained in this
paragraph to the contrary, if the Premises [or substantial portion
thereon], are not or cannot be made tenantable within 120 days after
said damage for any reason whatsoever, the Tenant may terminate this
Lease. [Landlord, or its insurer, if untenantability is not Tenant's
fault, will pay all costs associated with business interruption and
relocation until space is tenantable].
VIII.SlGNS. No sign, advertisement, or notice may be inscribed, painted, or
affixed on any part of the outside or inside of the Premises or Building by
the Tenant except adjacent to the doors of the portion of the Premises
leased by the Tenant, and on the directory board, and then only of such
color, size, style, material and location as is specified by the Landlord
in writing. The Landlord reserves the right to remove all other signs at
the expense of the Tenant. At the expiration of the lease term, the Tenant
shall remove such of its signs as the Landlord may direct.
IX. ALTERATIONS. No alterations or additions may be made and no fixtures may be
affixed to the Premises or the Building, without prior written consent of
the Landlord. All such alterations, additions, and fixtures, except the
Tenant's trade fixtures and business machines, shall remain and be the
property of the Landlord unless otherwise agreed in writing by the
Landlord.
X. LANDLORD'S RIGHT TO PERFORM BUILDING RENOVATIONS
A. Tenant understands and agrees that Landlord may, at any time or from
time to time during the term of this Lease, perform substantial
renovation work in and to the Building or the mechanical systems
serving the Building (which work may include, but need not be limited
to, the repair or replacement of the Building's exterior facade,
exterior window glass, elevators, electrical systems, air conditioning
and ventilating systems, plumbing system, common hallways, or lobby),
any of which work may require access to the same from within the
Premises.
B. Tenant agrees that:
1. Landlord shall have access to the Premises at all reasonable
times, upon reasonable notice, for the purpose of performing such
work, and
2. Landlord shall incur no liability to Tenant, nor shall Tenant be
entitled to any abatement of rent on account of any noise,
vibration, or other disturbance to Tenant's business at the
Premises (provided that Tenant is not denied access to said
Premises) which shall arise out of said access by Landlord or by
the performance by Landlord of the aforesaid renovations at the
Building.
C. Landlord shall use reasonable efforts (which shall not include any
obligation to employ labor at overtime rates) to avoid disruption of
Tenant's business during any such entry upon the Premises by the
Landlord.
D. It is expressly understood and agreed by and between Landlord and
Tenant that if Tenant shall commence any action or proceeding seeking
injunctive, declatory, or monetary relief in connection with the
rights reserved to Landlord under this provision, or if Landlord shall
commence any action or proceeding to obtain access to the Premises in
accordance with this provision, and if Landlord [or Tenant] in any
such action, then Tenant [or Landlord] shall pay to Landlord, as
additional rent under this Lease, a sum equal to all legal fees,
costs, and disbursements incurred by Landlord [or Tenant] in any way
related to or arising out of such action or proceeding.
<PAGE>
XI. USE OF THE PREMISES. The Tenant:
A. Shall occupy and use the Premises during the term for the purposes
specified above and none other;
B. May not use, store, or maintain any prohibited substance, nor permit
any use of the Premises which, directly or indirectly, is forbidden by
public law, ordinance, or governmental regulations which may be
dangerous to health, life, limb, or property, or which may invalidate
or increase the premium cost of any policy of insurance carried on the
Building or covering its operations;
C. May not obstruct or use for storage or for any purpose other than
ingress and egress the sidewalks, entrances, courts, corridors,
vestibules, halls, elevators, and stairways of the Building;
D. May not make or permit any noise or odor that is objectionable to
other occupants of the Building to emanate from the Premises, may not
create or maintain a nuisance thereof, may not disturb, solicit or
canvass any occupant of the Building and may not do any act tending to
interfere with the quiet enjoyment by other tenants of their leased
space in the Building;
E. May not install any piano, phonograph or other musical instrument or
radio or television set in the Building, or any antennae, aerial wires
or other equipment inside or outside the Building without, in each and
every instance, prior written approval by the Landlord so that other
occupants of the Building will not be disturbed or annoyed;
F. May not place, or permit to be placed, any article of any kind on the
window ledges or on the exterior walls and may not throw, or permit to
be thrown or dropped, any article from any window of the Building;
G. May not attach additional locks or similar devices to any door or
window and, upon the termination of this Lease or of the Tenant's
possession, shall surrender all keys to the Premises and shall explain
to the Landlord all combination locks on safes, cabinets, and vaults;
H. Shall be responsible for locking the doors and closing the windows in
and to the Premises;
I. May not install any blinds, shades, awnings, or other form of inside
or outside window covering or window ventilators or similar devices
without the proper written consent of the Landlord;
J. May not overload any floor, shall route and locate safes and other
heavy articles as the Landlord may direct, shall bring safes,
furniture, and all large articles through the Building and onto the
Premises at such times and in such manner as the Landlord directs and
at the Tenant's sole risk and responsibility, and shall list all
furniture, equipment, and similar articles to be removed from the
building for approval at the office of the Management before the
removal of such articles;
K. May not install in the Premises any equipment which uses a substantial
amount of electricity [except computers] without the advance written
consent of the Landlord, shall ascertain from the Landlord the maximum
amount of electrical current which can safely be used in the Premises,
taking into account the capacity of the electric wiring in the
Building and the Premises and the needs of the other tenants in the
building and, notwithstanding the Landlord's consent to such
installation, may not use more electricity than such safe capacity.
The Landlord reserves the right to separately meter such installation
and the Tenant shall be responsible for the electric service charges
incurred.
L. The number of Tenant's employees will not exceed 1 for every 250
square feet of leased space.
XII. BUILDING SECURITY. All persons entering or leaving the Building between the
hours of 6:00 p.m. and 6:00 a.m., Monday through Friday, or at any time on
Saturdays, Sundays or holidays, may be required to identify themselves to
watchman, by registration or otherwise, and to establish their rights to
enter or leave the Building. The Landlord may exclude or repel any peddler,
solicitor, or beggar. In addition to all other liabilities for breach of
any covenant of Article 10 or 11, the Tenant shall pay to the Landlord, as
additional rent hereunder, an amount equal to any increase in insurance
premiums caused by such breach. The violation of any covenant of this Lease
may be restrained by injunction.
<PAGE>
XIII.REPAIRS. The Tenant shall take good care of the Premises and the fixtures
therein and shall keep the Premises in good order, condition, and repair at
the Tenant's expense during the term of this Lease, including the
replacement of all interior broken glass and exterior glass broken by the
Tenant with glass of the same size and quality. If the Tenant does not make
necessary repairs within a reasonable time and adequately, the Landlord
may, but need not, make such repairs and the Tenant shall promptly pay the
Landlord for the costs thereof as additional rent. On the expiration, early
termination or cancellation of this Lease, the Tenant shall surrender the
Premises and the Landlord's fixtures in as good condition as of the time of
delivery, in and out of the Building and any and all breakage or any other
injury whatsoever to the Building, fixtures, steam, electricity, tire, or
other substance to the building, or fixtures, or to the property of other
tenants in the building due to the negligence of the Tenant may be repaired
by the Landlord at the expense of the Tenant, and the cost thereof shall
become due and payable by the Tenant as additional rent upon the delivery
of a statement of such costs by the Landlord to the Tenant, or mailing the
same, postage prepaid, to the Tenant at its last known address. [Subject to
landlord and Tenant's mutual agreement as to how and when.]
XIV.EMINENT DOMAIN. If the Building, or any portion thereof which includes a
substantial part of the Premises shall be taken or condemned by any
authority, and prevents the operation of the Tenant's business, the term of
this Lease shall end upon [ninety (90) days notice], and not before, the
date when the possession of the part is taken by such authority. The Tenant
may not share in the condemnation award, except for its personal property
and relocation awards if any. [In the event less substantial portion is
taken rent shall be adjusted accordingly.]
XV. RIGHTS RESERVED TO LANDLORD. The Landlord reserves all rights incident to
its ownership of the building, including, but not limited to, the right
A. to change the name or street address of the Building without notice or
liability;
B. to install and maintain signs on the exterior of the building;
C. to designate all sources furnishing sign painting and lettering, ice,
drinking water, towels, and toilet supplies used on the Premises;
D. to decorate, remodel, repair, alter, or otherwise prepare the Premises
for reoccupancy, if, during or prior to the termination of this Lease,
the Tenant vacates the Premises;
E. to have and use pass keys to the Premises;
F. to exhibit the Premises during the last 90 days of the lease term,
[with reasonable notice to Tenant].
G. to take any and all measures, including inspections, repairs,
alterations, additions, and improvements to the Premises or to the
Building as may be necessary or desirable for the safety, protection,
or preservation of the Premises or the Building or the Landlord's
interest therein, or as may be necessary or desirable in the operation
of the building, [after reasonable notice to Tenant].
H. to approve all movers employed by the Tenant to move the Tenant's
furnishings, fixtures, and equipment in or out of the Premises. The
landlord may enter upon the Premises and may exercise any or all of
the foregoing rights hereby reserved without being deemed guilty of an
eviction or disturbance of the Tenant's use or possession and without
being liable in any manner to the Tenant. [Except that all rent and
operation expenses and taxes shall abate for any period during which
Landlord unreasonably interferes with Tenant's operation of its
business. Landlord will provide Tenant 24 hour notice of need for
access to file room except in an emergency. Except in an emergency,
Landlord will not have access to the file room without Tenant
approval.]
XVI. FAlLURE TO SURRENDER POSSESSION.
A. The parties recognize and agree that the damage to Landlord resulting
from any failure by Tenant to timely surrender possession of the
Premises will be substantial, will exceed the amount of the monthly
installments of the Rent payable hereunder, and will be impossible to
measure accurately.
<PAGE>
B. Tenant therefore agrees that if possession of the Premises is not
surrendered to Landlord upon the Expiration Date or sooner termination
of the Lease, in addition to any other rights or remedies Landlord may
have hereunder or at law, Tenant shall pay to Landlord, as liquidated
damages, for each month and for each portion of any month during which
Tenant holds over in the Premises after the Expiration Date or sooner
termination of this Lease, a sum equal to 1.5 times the aggregate of
that portion of the Base Annual Rent and Additional Rent that was
payable under this Lease during the last month of the Term.
C. Nothing herein contained shall be deemed to permit Tenant to retain
possession of the Premises after the Expiration Date or sooner
termination of the Lease.
D. The provisions of this Paragraph shall survive the Expiration Date or
sooner termination of this Lease.
XVII.NOTICES. Any notice which, the Landlord may desire or be required to give
the Tenant shall be deemed sufficiently given or rendered if delivered in
writing to the Tenant personally or sent by certified or registered mail,
addressed to the Tenant at the Premises, return receipt requested. Any
notice which the Tenant may desire or be required to give the Landlord
personally or sent by certified or registered mail, return receipt
requested, addressed to the Landlord at Suite A150, 12600 West Colfax,
Lakewood, CO 80215 or at such other place as the Landlord may from time to
time designate in writing.
XVIII. DEFAULT BY TENANT: In the event of a default by the Tenant under this
Lease, the Landlord will have the following remedies:
A. If any voluntary or involuntary petition or similar pleading under any
section of any bankruptcy is filed by or against the Tenant or any
voluntary or involuntary proceedings in any court or tribunal is
instituted to declare the Tenant insolvent or unable to pay its debts
and, in the case of an involuntary petition or proceedings, if it is
not dismissed within 30 days from the date it is filed, then the
Landlord, at its election and without further notice or demand and
either with or without entry upon the Premises, may forthwith cancel
this Lease and be thereafter entitled to recover damages in an amount
equal to the unpaid balance of the rental obligation herein stated,
including increases in rent as provided in this Lease.
B. If default is made by the Tenant at any time in the payment of rent
upon the day it is due or within three [business] days after service
of a demand for payment of rent [within 30 days after notice], or in
the performance of any of the other terms, conditions, or covenants of
this Lease by the Tenant to be performed, then the Landlord may enter
into and upon the Premises, or any part thereof, and repossess the
same, with or without terminating this Lease and without prejudice to
any of its remedies for rent or breach of covenant and may, at its
option, terminate this Lease by giving written notice of its election
to do so or may, at its option, lease the Premises, or any part
thereof, as the agent of the Tenant, or otherwise [Landlord shall use
reasonable efforts to release space]. The Tenant shall, without demand
or further process of law, pay to the Landlord at the end of each
month during the full term of this Lease the difference between the
rent due the Landlord from the Tenant under this Lease, including any
increases in rent due under this Lease, and the net receipts, if any,
being received by the Landlord incurred by the Landlord in connection
with the reletting of the Premise and performing the Tenant's
obligations hereunder). In the event the rent for reletting the
Premises is higher than the monthly rent under the term of this Lease,
then such excess rent shall belong to the Landlord and the Tenant
shall have no claim thereto.
C. The Tenant [or Landlord as case may be] shall pay upon demand all the
Landlord's [or Tenant's] costs, charges, and expenses, including
reasonable fees of attorneys, agents, and other retained bv the
Landlord/ [or Tenant] incurred in enforcing the Tenant's [or
Landlord's] obligations hereunder or incurred by the Landlord [or
Tenant] in any litigation, negotiation, or transaction in which the
Tenant [or Landlord] causes the Landlord [or Tenant] to become
involved or concerned, without the Landlord's [or Tenant's] fault. The
Landlord shall have at all times a valid first lien for all rentals
due or to become due hereunder from the Tenant upon all of the
personal property [except computers] of the said Tenant situated in
the said leased premises, and said property shall not be removed
therefrom without the consent of the Landlord until all arrearages in
rent shall have first been paid and discharged.
D. In the event tenant fails to pay rent, the entire balance of rental
due under the terms of this lease will be due in full within [60] days
of the demand for rent or possession
<PAGE>
XIX. DEFAULT BY LANDLORD. [Tenant may terminate lease at any time if default is
made by Landlord which default is not cured by Landlord within 30 days
after notice thereof, notwithstanding. Except with respect to default under
the last paragraph of IV.] If the Premises, or any part thereof, are at any
time subject to a mortgage, deed of trust, or similar lien instrument, and
this Lease or the rentals are assigned to such mortgagee or beneficiary
therein, and the Tenant is given written notice thereof, including the post
office address of such assignee, then the Tenant may not terminate this
Lease for any default on the part of the Landlord without first giving
written notice by certified or registered mail, return receipt requested,
to such assignee, to the attention of the Mortgage Loan Department,
specifying the default in reasonable detail, and affording such assignee
[ten calendar days] to make performance at its election for and on behalf
of the Landlord.
XX. INDEMNITY, LOSS AND DAMAGES. The Tenant shall maintain, and provide to the
Landlord acceptable evidence of liability insurance of not less than
$1,000,000 per occurrence for bodily injury and not less than $100,000 per
occurrence for property damage. The Landlord shall be designated as a named
insured with the right to notice of cancellation or amendment 10 days prior
to the effective date thereof. Said insurance shall be maintained during
the term of this lease.
The Tenant [and Landlord] will pay and discharge and will indemnify and
save harmless the Landlord [and Tenant] against and from all losses,
liabilities, costs, damages, and expenses, including reasonable architects'
and attorney's fees, which may be incurred by or asserted against the
Landlord [or tenant] by reason of or in respect to any of the following
occurring during the term of this Lease:
A. Any [negligent] work or thing done by the Tenant [or Landlord] in, on,
or about the Premises, or any part thereof;
B. Any [negligent] use-nonuse possession, occupation, condition,
operation, maintenance, or management by the Tenant [or Landlord] of
the Premises, or any part thereof;
C. Any negligence on the part of the Tenant [or Landlord] occurring in or
about the Building structure and its real property [which adversely
affects Tenant's use of the property.]
If any action or proceeding is brought against the Landlord [as it pertains
to Tenant's occupancy] or the real estate by reason of any losses,
liabilities, costs, damages or expenses incurred by or asserted against the
Landlord, [or Tenant] by reason of or in respect to any of the matters or
things set forth this Article 20, the Tenant [or Landlord], upon written
notice from the Landlord will, at the Tenant's expense, resist or defend
such action or proceeding. To the extent permitted by law, the Landlord
will not be liable for any damage, either to person or property (except
damage willfully or wantonly caused by the Landlord), sustained by the
Tenant or by other persons due to the building, or any part thereof, or any
appurtenances thereof, being out of repair or due to the happening of any
accident in or about said Building or due to any act of neglect of any
tenant or occupant of said Building or of any other person. This limitation
as to liability shall apply only to the Landlord or representative thereof.
[Landlord's liability to Tenant extends to matters about which Landlord has
notice and a reasonable time to cure the situation.]
XXI. ESTOPPEL CLAUSE. The Tenant agrees at any time and from time to time, upon
not less than 20 days' prior written request by the Landlord, to execute,
acknowledge, and deliver to the Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or, if there
have been modifications, stating the modifications, and that the Lease, as
so modified, is in full force and effect), the commencement and termination
dates of this Lease, that the Tenant has accepted the Premises, and the
date to which the rental and other have been paid in advance, if any, and
that the Tenant has no claims against the Landlord or offsets against
rentals [or there have been claims or offsets stating same]. It is intended
that such statement may be relied upon by prospective purchasers of the
Landlord's interest in the land and building, or by a mortgage or assignee
of any mortgage upon the Landlord's interest in the land and building. If
Tenant fails to execute and deliver to the Landlord within 30 days of the
written request a completed certificate as required under this Section, the
Tenant hereby appoints the Landlord as his attorney-in-fact to execute and
deliver such certificate for and on behalf of the Tenant.
XXII.LIENS. The Tenant may not do any act which in any way encumbers the title
of the Landlord in and to the Premises and the Building, nor shall the
interest or estate of the Landlord in said Premises and Building be in any
<PAGE>
way subject to any claim by way of lien or encumbrance, whether by
operation of law or by virtue of any express or implied contract by the
Tenant. The Tenant will not permit the Premises and the Building to become
subject to any mechanics', laborers', or materialsmen's liens on account of
labor or material furnished, or claimed to have been furnished, to the
Tenant for or on the Premises and Building. At its election, the Landlord
may (but is not required to) remove or discharge such lien, or claim for
lien (with the right, in its discretion, to settle or compromise the same),
and any amounts advanced by the Landlord for such purpose and for any
attorney's fees and costs, incurred in connection therewith shall be
additional rent immediately due from the Tenant to the Landlord, [if unpaid
after thirty (30) days] with interest at the rate of 18% per annum from the
date of payment thereof by the Landlord.
XXIII. SUBSTITUTION OF PREMISES. Landlord shall have the right, [subject to
Tenant's approval, which may be withheld by Tenant in its sole discretion
for any or no reason] upon 30 days prior written notice to Tenant, to
substitute other premises within the Building for the premises demised
herein for all uses and purposes and subject to the same terms and
conditions as though originally leased to Tenant at the time of execution
and delivery of this Lease; provided, however, that the substituted
premises shall contain at least the same usable area as the originally
leased premises without increase of rental. Landlord agrees to pay all
reasonable moving expenses of Tenant, including the reasonable removal and
replacement of Tenant improvements, incidental to such substitution of
premixes.
XXIV.SECURITY DEPOSIT. Concurrently with the execution hereof, Tenant has
deposited with the Landlord sum of $4,235.83 as security for the payment of
the rent and lease obligations reserved herein and the performance of the
convenants contained herein. In the event that the Tenant shall fail to
make the payment of the basic rental or additional rental when due or shall
fail to perform in accordance with the covenants and conditions herein set
forth, said sum shall be retained by the Landlord and applied towards
Landlord's damages as a result of Tenants' default.
XXV. MISCELLANEOUS.
A. The invalidity of any provision, clause, or phrase herein contained
will not serve to render the balance of this lease ineffective or
void.
B. If the Landlord or Tenant, institutes legal proceedings against the
other for breach of any of the covenants or conditions herein
contained, then the successful party shall recover reasonable
attorney's tees and expenses from the other.
C. This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, their heirs, executors, administrators,
devisees, successors, and assigns. Any reference to the Tenant or the
Landlord herein shall, for the purpose of determining liability for
property damage, personal injury, and the like, be deemed to include
the Tenant, the Landlord, by his or its respective agents, employees,
servants, partners, independent contractors, Licensees, invitees,
guests, or visitors.
D. This Agreement supersedes and cancels all prior negotiations and
agreements whatsoever, and these presents shall be amended only upon
the joint written undertaking of the panics hereto.
E. Except as elsewhere herein expressly provided, all amounts owed by the
Tenant to the Landlord hereunder shall be deemed to be additional rent
and shall be deemed payable within 10 days from the date the Landlord
renders a statement of account therefor to the Tenant and shall bear
interest at the rate of 18% per annum thereafter until paid, [if not
paid within five days of notice thereof].
F. The Tenant shall abide by all reasonable rules and regulations adopted
by the Landlord pertaining to the operation and management of the
Building. If any rules and regulations adopted by the Landlord are
contrary to the terms of this Lease, the terms of this Lease shall
govern.
XXVI.ADDITIONAL PROVISIONS. Additional paragraphs numbered see Addendum ,
attached to this Lease Agreement, are part of this agreement and the terms
and provisions thereof are binding upon the Landlord and the Tenant.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day and
year first above written.
Landlord: GOLDEN HILL SUCCESSOR Tenant: National MRO, Inc.
LIMITED PARTNERSHIP a Colorado Corporation
a Colorado Limited Partnership
By: /S/ DARYLL PROPP, GP By: /S/ MICHAEL RUXIN, President
------------------------------- -------------------------------
<PAGE>
[FLOOR PLAN OF LEASES PREMISES - OMITTED]
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
The rules and regulations set forth in this Exhibit shall be and hereby are made
a part of the lease to which they are attached. Whenever the term "Tenant" is
used in these rules and regulations, it shall be deemed to include Tenant, its
employees or agents and any other persons permitted by Tenant to occupy or enter
the Premises. The following rules and regulations may from time to time be
modified by Landlord.
1. OBSTRUCTION.
The sidewalks, entries, passages, corridors, halls, lobbies, stairways,
elevators and other common facilities of the building shall be controlled
by Landlord and shall not be obstructed by Tenant or used for any purpose
other than ingress or egress to and from the Premises. Tenant shall not
place any item in any of such locations, whether or not any such item
constitutes an obstruction, without the prior written consent of Landlord.
Landlord shall have the right to remove any obstruction or any such item
without notice to Tenant and at the expense of Tenant.
2. DELIVERIES.
Tenant shall insure that all deliveries of supplies to the Premises shall
be made only during the ordinary business hours of the Building. If any
person delivering supplies to Tenant damages the elevator or any other part
of the Building, Tenant shall pay to Landlord upon demand the amount
required to repair such damages.
3. MOVING.
Furniture and equipment shall be moved in or out of the Building only upon
the elevator designated by Landlord for deliveries and then only during
such hours and in such manner as may be prescribed by Landlord. Landlord
shall have the right to approve or disapprove the movers or moving company
employed by Tenant and Tenant shall cause such movers to use only the
loading facilities and elevator designated by Landlord. If Tenant's movers
damage the elevator or any other part of the building. Tenant shall pay to
Landlord upon demand the amount required to repair such damage.
4. HEAVY ARTICLES.
No safe or article, the weight of which may, in the reasonable opinion of
Landlord, constitute a hazard or damage to the Building or its equipment,
shall be moved into the Premises. Safes and other heavy equipment, the
weight of which will not constitute a hazard or damage the Building or its
equipment shall be moved into, from or about the Building only during such
hours and in such manner as shall be prescribed by Landlord, and Landlord
shall have the right to designate the location of such articles in the
Premises.
5. NUISANCE.
Tenant shall not do or permit anything to be done in the Premises, or bring
or keep anything therein which would in any way constitute a nuisance or
waste, or obstruct or interfere with the rights of other tenants of the
Building, or in any way injure or annoy them, or conflict with the laws
relating to fire, or with any regulations of the fire department, or with
any insurance policy upon the Building or any part thereof, or conflict
with any of the rules or ordinances of any governmental authority having
jurisdiction over the Building.
6. BUILDING SECURITY.
Landlord may restrict access to and from the Premises and the Building
outside of the ordinary business hours of the Building for reasons of
building security. Landlord may require identification of persons entering
and leaving the Building during this period and, for this purpose, may
issue building passes to tenants of the Building.
7. PASS KEY.
The janitor of the Building may at all times keep a pass key to the
Premises, and he and other agents of Landlord shall at all times be allowed
admittance to the Premises.
8. LOCKS AND KEYS FOR PREMISES.
No additional lock or locks shall be placed by Tenant on any door in the
Building and no existing lock shall be changed unless written consent of
Landlord shall first have been obtained. A reasonable number of keys to the
Premises and to the locker facilities, if locked by Landlord, will be
furnished by Landlord. At the termination of this tenancy, Tenant shall
promptly return to Landlord all keys to offices and locker facilities.
<PAGE>
9. USE OF WATER FIXTURES.
Water closets and other water fixtures shall not be used for any purpose
other than that for which the same are intended, and any damage resulting
to the same from misuse on the part of the Tenant shall be paid for by
Tenant. No person shall waste water by tying back or wedging the faucets or
in any other manner.
10. NO ANIMALS: EXCESSIVE NOISE.
No animals shall be allowed in the offices, halls, corridors and elevators
in the Building. No person shall disturb the occupants of this or adjoining
buildings or space by the use of any radio or musical instrument or by the
making of loud or improper noises.
11. BICYCLES.
Bicycles or other vehicles shall not be permitted anywhere inside or on the
sidewalks outside of the Building, except in those areas designated by
Landlord for bicycle parking.
12. TRASH.
Tenant shall not allow anything to be placed on the outside of the
Building, nor shall anything be thrown by Tenant out of the windows or
doors, or down the corridors, elevator shafts, or ventilating ducts or
shafts of the Building. All trash shall be placed in receptacles provided
by Tenant on the Premises or in any receptacles provided by Landlord for
the Building.
13. WINDOWS.
No window shades, blinds, screens or draperies will be attached or detached
by Tenant and no awnings shall be placed over the windows without
Landlord's prior written consent. Tenant agrees to abide by Landlord's
rules with respect to maintaining uniform curtains, draperies and linings
at all windows and hallways so that the building will present a uniform
exterior appearance.
14. HAZARDOUS OPERATIONS AND ITEMS.
Tenant shall not install or operate any steam or gas engine or boiler, or
carry on any mechanical business in the Premises without Landlord's prior
written consent, which consent may be withheld in Landlord's absolute
discretion. The use of oil, gas or inflammable liquids for heating,
lighting or any other purpose is expressly prohibited. Explosives or other
articles deemed extra hazardous shall not be brought into the Building.
15. HOURS FOR REPAIRS, MAINTENANCE AND ALTERATION.
Any repairs, maintenance and alterations required or permitted to be done
by Tenant under the lease shall be done only during the ordinary business
hours of the Building unless Landlord shall have first consented to such
work being done outside of such times. If Tenant desires to have such work
done by Landlord's employees on Saturday, Sundays, holidays or weekdays
outside of ordinary business hours, Tenant shall pay the extra cost of such
labor.
16. NO DEFACING OF PREMISES.
Except as permitted by Landlord, Tenant shall not mark upon, paint signs
upon, cut, drill into, drive nails or screws into, or in any way deface the
walls, ceilings, partitions or floors of the Premises or of the Building,
and any defacement, damage or injury caused by Tenant shall be paid for by
Tenant.
17. SOLICITATION: FOOD AND BEVERAGES.
Landlord reserves the right to restrict, control or prohibit canvassing,
soliciting and peddling within the Building. Tenant shall not grant any
concessions, licenses or permission for the sale or taking of orders for
food or services or merchandise in the Premises, nor Install or permit the
installation or use of any machine or equipment for dispensing goods or
foods or beverages in the Building, nor permit the preparation, serving
distribution or delivery of food or beverages in the Premises without the
approval of Landlord and in compliance with arrangements prescribed by
Landlord. Only persons approved by Landlord shall be permitted to serve,
distribute, or deliver food and beverages within the Building, or to use
the elevators or public areas of the Building for that purpose.
18. CAPTIONS.
The caption for each of these rules and regulations is added as a matter of
convenience only and shall be considered of no effect on the construction
of any provision or provisions of these rules and regulations.
<PAGE>
ADDENDUM
To that certain lease between GOLDEN HILL SUCCESSOR LIMITED PARTNERSHIP,
Landlord, and NATIONAL MRO, Inc. a Colorado Corporation, dated 15 April 1992 for
the lease of A500 at 12600 West Colfax, Lakewood, CO 80215.
Addendum to II Rent, A Base Rent, 1:
FOR THE EXISTING SPACE: 1 May 1992 thru May 15 1992 rental is $3,176.87, from 15
May 1992 thru 15 August 1992 rental is $6,353.7S per month, from 15 August 1992
thru 15 November 1992 the rental is $5,294.79 per month, from 15 November thru
31 December 1992 the rental is $7,306.81.
FOR THE EXPANSION SPACE: 1 May 1992 thru 31 December 1992 rental is $2,337.37
per month.
FOR THE COMBINED SPACE: From 1 January 1993 thru 31 December 1995 the rental is
$7,208.58 per month.
Addendum to II Rent A Base Rent, 2: 3 covered parking spaces are included in the
rental.
Addendum to XXVI Additional Provisions:
a) Upon the execution of this lease, the previous lease dated 20 October
1992 is terminated;
b) Landlord, at its expense, will move the security cipher pad to the new
file room (522). Tenant may add a phone system, buzzer release system
to entry door and access use recorder at Tenant's own expense;
c) Increases in Tenant's share of operating expenses and taxes will be
limited to 10% per annum;
d) If Landlord cannot accommodate Tenant's request to expand into
contiguous space, Tenant may cancel the lease with 90 days notice.
Addendum to V Landlord's Title:
provided, however, that the mortgagee, beneficiary, or trustee named in the
mortgage or trust deed shall agree with Tenant in writing that Tenant's
peaceable possession of Premises shall not be impaired or disturbed on account
thereof. Landlord agrees to use his best efforts to obtain a non-disturbance and
attornment agreement from its current lender in a form reasonably satisfactory
to Tenant within a reasonable time after the execution of this lease and loan
documents. Landlord covenants that it has full power, right and authority to
make this lease and that Tenant and any permitted assignee or sublessee, upon
payment of the rentals and performance of the covenants hereunder shall and may
peaceably have, hold and enjoy the premises.
Landlord will provide:
1) access to Room 522 and secure it as part of Suite A500 and relocate
cipher lock from Room 520;
2) access from A500 into A510 thru the present copy room in corridor 518;
3) add 2 lites fixtures in Room 520, with an option for 2 more if
necessary;
4) relocated door between Room 521 & 520 to Room 522;
5) provide at least 2 duplex outlets on the west, north and east wall of
Room 520;
6) add lites in A510 in corridor and SW corner office;
7) add doorways between Room 516 & 515 and 515 & 514;
<PAGE>
Tenant at its expense may designate additional duplex outlets to be installed in
A510 at $60 each. Landlord will install a double row of shelves (similar to
those in Room 520) which will be installed on the east, north and west walls in
Room 522 at a cost to Tenant not to exceed $200.
Landlord will paint all construction scars, Room 522 and A510 with color to
match A500.
Tenant shall have the option to terminate its obligation to lease A510 for a
period of 30 days after 1 May 1993.
Tenant shall have a final walk thru inspection of the expansion premises prior
to taking occupancy for the purposes of assuring completion of the tenant finish
work in quality workmanship.
GOLDEN HILL SUCCESSOR LIMITED PARTNERSHIP NATIONAL MRO, INC.
a Colorado Limited Partnership a Colorado corporation
by /s/ DARYLL PROPP by /S/ MICHAEL RUXIN, President
--------------------------------------- ----------------------------
Date 8 April 1992
---
<PAGE>
PROPP REALTY, INC.
12600 W. Colfax Ave., Suite B-130
Lakewood, Colorado 80215
Tel: (303) 233-4000
Fax: (303) 233-3100
LEASE ADDENDUM
NATIONAL MRO
12600 W. COLFAX AVENUE
SUITE A-500
This is intended to amend the current lease between Golden Hill Partnership
and National MRO. The following are the particulars:
SQUARE FOOTAGE: 7,522 (current) Rentable Square Feet
4,986 (expansion) Rentable Square Feet
To include Suite A-550.
TERM: December 1, 1994 through December 31, 2000
RATE: 7,522 current space at $11.50/sq. ft.
4,986 expansion space at $11.50
$4,778.25 per month increase
December 1, 1994 through December 31,1995
January 1, 1996 through December 31,
1998 12,508 rentable square feet at
$12.00 $12,508.00 per month.
January 1, 1999 through December 31,
2000 $13,550.34.
TENANT FINISH: Landlord will contribute $28,228.00 towards Tenant
Finish for current space and expansion space.
Allowance may be used at Tenant's timing and
discretion.
At the Tenant's discretion Landlord
will provide the additional tenant
finish and amortize the additional
costs over the term of the lease.
Carrying charges will be assessed at
that time.
PARKING: Tenant will be granted four (4) additional covered
parking spaces at no charge.
CANCELLATION: Landlord may cancel this lease, in on or before
Monday, October 24, 1994. Subject to current
Tenant's relocation only.
All other terms and conditions of the original lease will remain the same.
ACKNOWLEDGMENT:
By: /S/ DARYLL PROPP 10/21/94
-------------------------------------------------------------------------
Golden Hill Partnership Date
By: /S/ MICHAEL RUXIN 10/21/94
-------------------------------------------------------------------------
National MRO Date
This Lease Addendum must be executed no later than Monday, October 24,
1994, after which time this offer shall be null and void.
EXHIBIT 10.2
STANDARD OFFICE LEASE - FULL SERVICE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Lease Provisions {"Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only, July 19, 1995
is made by and between Rancho Cordova Associates II, by D. C. Peek &
Associates, Inc. It's General Partner. (herein called "Lessor") and
The Wyndgate Group Ltd. Doing business under the name of
________________, (herein called "Lessee").
1.2 Premises: Suite Number(s) B,C, D, K, J, H, and I floors, consisting of
approximately 7627 feet, more or less, as defined in paragraph 2 and
as shown on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located 11121 Sun Center Drive
in the City of Rancho Cordova, County of Sacramento, State of
California, as more particularly described in Exhibit A hereto, and as
defined in paragraph 2.
1.4 Use: General Office, or any legally permissible use. See Addendum 50
to 53, subject to paragraph 6.
1.5 Term: Three years (3) commencing September 1, 1995 ("Commencement
Date") and ending August 31, 1998, as defined in paragraph 3.
1.6 Base Rent: Seven Thousand Ninety-Three and 00/100 per month, payable
on the 1st day of each month, per paragraph 1.6 above shall be
adjusted as provided in paragraph 4.3 below.
1.7 Base Rent Increase: On See Addendum #50 the monthly Base Rent payable
under paragraph 1.6 above shall be adjusted as provided in paragraph
4.3 below.
1.8 Rent Paid Upon Execution: __________ for __________.
1.9 Security Deposit: $3,150.70 added to $3,942.30 presently held by
lessor brings the total security deposit to $7,093.00.
1.10 Lessee's Share of Operating expense Increase: _____% as defined in
paragraph 4.2.
2. Premises, Parking and Common Areas. 7,627/14,485 square feet = 52.65
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" Identified in paragraph 1.3 of the Basic
Lease Provisions. "Building" shall include adjacent parking structures
used in connection therewith. The Premises, the Building, the Common
Areas, the land upon which the same are located, along with all other
buildings and Improvements thereon or thereunder, are herein
collectively referred to as the "Office Building Project". Lessor
hereby leases to Lessee and Lessee leases from Lessor for the term, at
the rental, and upon all of the conditions set forth herein, the real
property referred to in the Basic Lease provisions, paragraph 1.2, as
the "Premises". Including rights to the Common Areas as hereinafter
specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by
Lessor from time to time, Lessee shall be entitled to rent and use a
pro-rata share of 52.65% parking spaces in the Office Building Project
at the monthly rate applicable from time to time for monthly parking
as set by Lessor and/or its licensee.
<PAGE>
2.21 If Lessee commits, permits or allows any of the prohibited
activities described in the lease or the rules then in effect,
then Lessor shall have the right, without notice, in addition, to
such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
22.2 The monthly parking rate per parking space will be N/A per month
at the commencement of the term of this Lease, and is subject to
change upon five (5) days prior written notice to Lessee Monthly
parking fees shall be payable one month in advance prior to the
first day of each calendar month.
2.3 Common Areas-Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior
boundary line of the Office Building Project that are provided and
designated by the Lessor from time to time for the general
non-exclusive use of lessor, Lessee and of other lessees of the Office
Building Project and their respective employees, suppliers, shippers,
customers and invitees, including but not limited to common entrances,
lobbies, corridors, stairways and stairwells, public restrooms,
elevators,, escalators, parking areas to the extent not otherwise
prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped
areas and decorative walls.
2.4 Common Areas-Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with
respect to the Office Building Project and Common Areas, and to cause
its employees, suppliers, customers, and invitees to so abide and
conform. Lessor or such other person(s) as Lessor may appoint shall
have the exclusive control and management of the common Areas and
shall have the right, from time to time, to modify, amend and enforce
said rules and regulations. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other
lessees, their agents, employees and invitees of the Office Building
Project.
<PAGE>
2.5 Common Areas--Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
a) To make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the
location, size, shape, number, and appearance thereof,
including but not limited to the lobbies, windows,
stairways, air shafts, elevators, escalators, restrooms,
driveways, entrances, parking spaces, parking areas, loading
and unload areas, ingress, egress, direction of traffic,
decorative walls, landscaped areas and walkways, provided,
however, Lessor shall at all times provide the parking
facilities required by applicable law;
b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises
remains available;
c) To designate other land and improvements outside the
boundaries of the Office Building Project to be a part of
the Common Areas, provided that such other land and
improvements have a reasonable and functional relationship
to the Office Building Project;
d) To add additional buildings and improvements to the Common
Areas;
e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building
Project, or any portion thereof;
f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and
Office Building Project as Lessor may, in the exercise of
sound business judgment deem to be appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if
for any reason Lessor cannot deliver possession of the Premises
to Lessee on said date and subject to paragraph 3.2.2., Lessor
shall not be subject to any liability therefor, nor shall such
failure affect the validity of this lease or the obligations of
Lessee hereunder or extend the term hereof; but, in such case,
Lessee shall not be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease, except as may
by otherwise provided in this Lease, until possession of the
Premises is tenured to Lessee, as hereinafter defined; provided,
however, that if Lessor shall not have delivered possession of
the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work
Letter executed by Lessor and Lessee, Lessee may, at Lessee's
option, by notice in writing to lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall
be discharged from all obligations hereunder, provided, however,
that, as to lessee's obligations. Lessee first reimburses Lessor
for all costs incurred for Non Standard improvements and, as to
Lessor's obligations, Lessor shall return any money previously
deposited by lessee (less any offsets due lessor for Non Standard
Improvements), and provided further, that if such written notice
by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this lease hereunder shall
terminate and be of no further force or effect.
<PAGE>
3.2.1 Possession Tendered-Defined. Possession of the Premises
shall be deemed tendered to lessee ("Tender of
Possession") when (1) the improvements to be provided by
Lessor under this Lease are substantially completed, (2)
the building utilities are ready for use in the Premises.
3.2.2 Delays Caused by Lessee. There shall be no abatement of
rent, and the sixty (60) day period following the
Commencement Date before which Lessee's right to cancel
this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or
omissions of Lessee, Lessee's agents, employees and
contractors.
3.3 Early Possession. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all
provisions of this Lease, such occupancy shall not change the
termination date, and Lessee shall pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease
term is defined as the completion of the improvements, lessee and
Lessor shall execute an amendment to this Lease establishing the
date of Tender of Possession (as defined in paragraph 3.21) or
the actual taking of possession by Lessee, whichever first
occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in
paragraph 4.3 and except as may be otherwise expressly provided
in this Lease, Lessee shall pay to Lessor the Base Rent for the
Premises set forth in paragraph 1.6 of the Basic Lease
Provisions, without offset or deduction. Lessee shall pay Lessor
upon execution hereof the advance Base Rent described in
paragraph 1.8 of the Basic Lease Provisions Rent for any period
during the term hereof which is for less than one month shall be
prorated based upon the actual number of days of the calendar
month involved. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to such
other persons or at such other places as Lessor may designate in
writing.
4.2 Operating Expense Increase. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as
hereinafter defined, of the amount by which all Operating
Expenses, as hereinafter defined, for each Comparison Year
exceeds the amount of all Operating Expenses for the Base Year,
such excess being hereinafter referred to as the "Operating
Expense Increase" in accordance with the following provisions:
<PAGE>
a) "Lessee's Share" is defined, for purposes of this Lease, as
the percentage set forth in paragraph 1.10 of the Basic
Lease provisions, which percentage has been determined by
dividing the approximated square footage of the Premises by
the total approximate square footage of the rentable space
contained in the Office Building Project. It is understood
and agreed that the square footage figures set forth in the
Basic Lease Provisions are approximations which Lessor and
Lessee agree are reasonable and shall not be subject to
revisions except in connection with an actual change in the
size of the Premises or a change in the space available for
lease in the Office Building Project.
b) "Base Year" is defined [1995].
c) "Comparison Year" is defined as each calendar year during
the term of this Lease subsequent to the Base Year;
provided, however, Lessee shall have no obligation to pay a
share of the Operating Expense Increase applicable to the
first twelve (12) months of the Lease Term (other than such
as are mandated by a governmental authority, as to which
government mandated expenses Lessee shall pay Lessee's
Share, notwithstanding they occur during the first twelve
(12) months). Lessee's Share of the Operating Expense
Increase for the first and last Comparison Years of the
Lease Term shall be prorated according to that portion of
such Comparison Year as to which Lessee is responsible for a
share of such increase.
d) "Operating Expenses" is defined, for purposes of this Lease,
to include all costs, if any, incurred by Lessor in the
exercise of its reasonable discretion, for:
i) The operations, repair, maintenance, and replacement,
in neat, clean, safe, good order and condition, of the
Office Building Project, including but not limited to,
the following:
aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and
window coverings, and including parking areas,
loading and unloading areas, trash areas,
roadways, sidewalks, walkways, stairways,
parkways, driveways, landscaped areas, striping,
bumpers, irrigation systems, Common Area lighting
facilities, building exteriors and roofs, fences
and gates;
bb) All heating, air conditioning, plumbing,
electrical systems, life safety equipment,
telecommunication and other equipment used in
common by, or for the benefit of Lessees or
occupants of the Office Building Project,
including elevators and escalators, tenant
directories, fire detection systems including
sprinkler system maintenance and repair.
ii) Trash disposals, janitorial and security services;
iii) Any other service to be provided by lessor that is
elsewhere in this Lease stated to be an "Operating
Expense";
iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under
paragraph 8 hereof;
v) The amount of the real property taxes to be paid by
Lessor under paragraph 10 thereof;
<PAGE>
vi) The cost of water, sewer. Gas, electricity, and other
publicly mandated services to the Office Building
Project;
vii) Labor, salaries and applicable fringe benefits and
costs, materials, supplies and tools, used in
maintaining and/or cleaning the Office Building Project
and accounting and a management fee attributable to the
operation of the Office Building Project;
viii)Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals
necessitated thereby amortized over its useful life
according to Federal Income tax regulations or
guidelines for depreciation thereof (including interest
on the unamortized balance as is then reasonable in the
judgment of Lessor's accountant(s);
ix) Replacements of equipment or improvements that have a
useful life for depreciation purposes according to
Federal Income tax guidelines of five (5) years or
less, as amortized over such life.
e) Operating Expenses shall not include the costs of
replacements of equipment or improvements that have a useful
life for Federal Income tax purposes in excess of five (5)
years unless it is of the type described in paragraph
4.2(d)(viii), in which case their cost shall be included as
above provided.
f) Operating Expenses shall not include any expenses paid by
any lessee directly to third parties, or as to which Lessor
is otherwise reimbursed by any third party, other tenant, or
by insurance proceeds.
g) Lessee's Share of Operating Expense Increase shall be
payable by Lessee within ten (10) days after a reasonably
detailed statement of actual expenses is presented to Lessee
by Lessor. At Lessor's option, however, an amount may be
estimated by Lessor from time to time in advance of Lessee's
Share of the Operating Expense increase for any Comparison
Year, and the same shall be payable monthly or quarterly, as
lessor shall designate, during each Comparison Year of the
Lease term, on the same day as the Base Rent is due
hereunder in the event that Lessee pays Lessor's estimate of
Lessee's share of Operating Expense Increase as aforesaid.
Lessor shall deliver to Lessee within sixty (60) days after
the expiration of each Comparison Year a reasonably detailed
statement showing Lessee's Share of the actual Operating
Expense Increase incurred during such year. If Lessee's
payments under this paragraph 4.2(g) during said Comparison
<PAGE>
Year exceed Lessee's Share as indicated on said statement,
Lessee shall be entitled to credit the amount of such
overpayment against Lessee's Share of Operating Expense
Increase net falling due. If Lessee's payments under this
paragraph during said Comparison year were less than
Lessee's Share as indicated on said statement, Lessee shall
pay to Lessor the amount of the deficiency within ten (10)
days after delivery by Lessor to Lessee of said statement.
Lessor and Lessee shall forthwith adjust between them by
cash payment any balance determined to exist with respect to
that portion of the last Comparison year for which Lessee is
responsible as to Operating Expense Increases,
notwithstanding that the Lease term may have terminated
before the end of such Comparison Year.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease
Provisions as security for Lessee's faithful performance of lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of said deposit
for the payment of any rent or other charge in default for the payment of
any other sum to which lessor may become obligated by reason of Lessee's
default, or to compensate Lessor for any loss or damage which Lessor may
suffer thereby. If Lessor so uses or applies all or any portion of said
deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to
the full amount then required of Lessee. If the monthly Base Rent shall,
from time to time, increase during the term of this Lease, Lessee shall, at
the time of such increase, deposit with Lessor additional money as a
security deposit so that the total amount of the security deposit held by
Lessor shall at all times bear the same proportion to the then current Base
Rent as the initial security deposit bears to the initial Base Rent set
forth in paragraph 1.6 of the Basic Lease Provisions. Lessor shall not be
required to keep said security deposit separate from its general accounts.
If Lessee performs all of Lessee's obligations hereunder, said deposit, or
so much thereof as has not heretofore been applied by Lessor, shall be
returned, without payment of interest or other increment for its use, to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee
has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use
which is reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without
regard to alterations or improvements made Lessee or the use for
which lessee will occupy the Premises, does not violate any
covenants or restrictions of record, or any applicable building
code, regulation or ordinance in effect on such Lease term
Commencement Date. In the event it is determined that this
warranty has been violated, then it shall be the obligation of
the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation.
<PAGE>
b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes,
ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance
underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change
in policy from that now existing, during the term or any part of
the term hereof, relating in any manner to the Premises and the
occupation and use by Lessee of the Premises. Lessee shall
conduct its business in a lawful manner and shall not use or
permit the use of the Premises or the Common Areas in any manner
that will tend to create waste or a nuisance or shall tend to
disturb other occupants of the Office Building Project.
6.3 Condition of Premises.
a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing,
lighting, air conditioning, and heating system in the Premises
shall be in good operating condition. In the event that it is
determined that this warranty has been violated, then it shall be
the obligation of Lessor, after receipt of written notice from
Lessee setting forth with specificity the nature of the
violation, to promptly, at Lessor's sole cost, rectify such
violation.
b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that
Lessee takes possession of the Premises, whichever is earlier,
subject to all applicable zoning, municipal, county and state
laws, ordinances and regulations governing and regulating the use
of the Premises, and any easements, covenants or restrictions of
record, and accepts this Lease subject hereto and to all matters
disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that it has satisfied itself by its own independent
investigation that the Premises are suitable for its intended
use, and that neither Lessor nor Lessor's agent or agents has
made any representation or warranty as to the present of future
suitability of the Premises, Common Areas, or Office Building
Project for the conduct of Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common
areas, and the equipment whether used exclusively for the Premises or
in common with other premises, in good condition and repair, provided,
however, Lessor shall not be obligated to paint, repair or replace
wall coverings, or to repair or replace any improvements that are not
ordinarily a part of the Building or are above then Building
standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project
or any part thereof. Lessee expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford Lessee
the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Premises in good order,
condition and repair.
<PAGE>
7.2 Lessee's Obligations.
a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of
the cost thereof to Lessor as additional rent for that portion of
the cost of any maintenance and repair of the Premises, or any
equipment (wherever located) that serves only Lessee or the
Premises, to the extent such cost is attributable to causes
beyond normal wear and tear. Lessee shall be responsible for the
cost of painting, repairing or replacing wall coverings, and to
repair or replace any Premises Improvements that are not
ordinarily a part of the Building or that are above then Building
standards. Lessor may, at its option, upon reasonable notice,
elect to have Lessee perform any particular such maintenance or
repairs the cost of which is otherwise Lessee's responsibility
hereunder.
b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and
free of debris. Any damage or deterioration of the premises shall
not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices by Lessee. Lessee shall
repair any damage to the Premises occasioned by the installation
or removal of Lessee's trade fixtures, alterations, furnishings
and equipment. Except as otherwise stated in this Lease, Lessee
shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, air conditioning, window coverings,
wall coverings, carpets, wall paneling, ceilings and plumbing on
the Premises and in good operating condition.
7.3 Alterations and Additions.
a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or
repairs in, on or about the Premises, or the Office Building
Project. As used in this paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window and wall coverings,
power panels, electrical distribution systems, lighting fixtures,
air conditioning, plumbing, and telephone and telecommunication
wiring and equipment. At the expiration of the term, Lessor may
require the removal of any, or all of said alterations,
improvements, additions or utility Installations, and the
restoration of the Premises and the Office Building Project to
their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements, additions or
utility Installations, Lessee shall use only such contractor as
has been expressly approved by Lessor, and Lessor may require
Lessee to provide lessor, at Lessee's sole cost and expense, a
lien and completion bond in an amount equal to one and one half
times the estimated cost of such improvements, to insure Lessor
against any liability for mechanic's and materialmen's liens and
to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations
without the prior approval of Lessor, or use a contractor not
expressly approved by Lessor, Lessor may, at any time during the
term of this Lease, require that Lessee remove any part or all of
the same.
b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in
written form, with proposed detailed plans. If Lessor shall give
its consent to Lessee's making such alteration, improvement,
addition, or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to
Lessor prior to the commencement of the work, and compliance by
Lessee with all conditions of said permit in a prompt and
expeditious manner.
<PAGE>
c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for lessee at
or for use in the premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises, the
Building or the Office Building Project, or any interest therein.
d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee,
and Lessor shall have the right post notices of
non-responsibility in or on the Premises or the Building as
provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then lessee shall, at
its sole expense defend itself and Lessor against the same and
shall pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the
lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee
shall furnish to lessor a surely bond satisfactory to Lessor in
an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding
the premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's reasonable attorneys' fees and
costs in participating in such action if Lessor shall decide it
is to Lessor's best interest so to do.
e) All alterations, improvements, additions, and utility
Installations (whether or not such Utility Installations
constitute trade fixtures of Lessee), which may be made to the
Premises by Lessee, including but not limited to floor coverings,
paneling, doors, drapes, built-ins, moldings, sound attenuation,
and lighting and telephone or communication systems, conduit \,
wiring and outlets, shall be made and done in a good and
workmanlike manner and of good and sufficient quality and
materials and shall be the property of Lessor and remain upon and
be surrendered with the Premises at the expiration of the Lease
term, unless Lessor requires their removal pursuant to paragraph
7.3(a). Provided Lessee is not in default, notwithstanding the
provisions of this paragraph 7.3(e), Lessee's personal property
and equipment, other than that which is affixed to the Premises
so that it cannot be removed without material dame to the
Premises or the Building, and other than utility Installations,
shall remain the property of Lessee and may be removed by lessee
subject to the provisions of paragraph 7.2.
f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or
Utility Installations.
<PAGE>
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project
for the benefit of Lessor or Lessee, or any other lessee of the Office
Building Project, including, but not by way of limitation, such
utilities as plumbing, electrical systems, communication systems, and
fire protection and detection systems, so long as such installations
do not unreasonably interfere with Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability Insurance utilizing and Insurance
Services Office standard form with Broad Form General Liability
endorsement (GLO-101), or equivalent, in an amount of not less than
$1,000,000 per occurrence of bodily injury and property damage
combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional insured against
liability arising out of the use, occupancy or maintenance of the
Premises. Compliance with the above requirement shall not, however,
limit the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in force
during the term of the Lease a policy of Combined Single Limit Bodily
Injury and Broad Form Property Damage Insurance, plus coverage against
such other risks Lessor deems advisable from time to time, insuring
Lessor, but not Lessee, against liability arising out of the
ownership, use, occupancy or maintenance of the Office Building
Project in an amount not less than $5,000,000.00 per occurrence.
8.3 Property Insurance - Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with
vandalism and malicious mischief, sprinkler leakage and earthquake
sprinkler leakage endorsements, in an amount sufficient to cover not
less than 100% of the full replacement cost, as the same may exist
from time to time, of all of Lessee's personal property, fixtures,
equipment and tenant improvements.
8.4 Property Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance
covering loss or damage tot he Office Building Project Improvements,
but not Lessee's personal property, fixtures, equipment or tenant
improvements, in the amount of the full replacement cost thereof, as
the same may exist from time to time, utilizing insurance Services
Office standard form, or equivalent, providing protection against all
perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, plate glass and such other perils as
Lessor deems advisable or may be required by a lender having a lien on
the Office Building Project. In addition, Lessor shall obtain and keep
in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor,
which insurance shall also cover all Operating Expenses for said
period. Lessee will not be named in any such policies carried by
Lessor and shall have no right to any proceeds therefrom. The policies
required by these paragraphs 8.2 and 8.4 shall contain such
deductibles as Lessor or the aforesaid lender may determine. In the
event that the Premises shall suffer an insured loss as defined in
paragraph 9.1(f) hereof, the deductible amounts under the applicable
insurance polices shall be deemed an Operating Expense. Lessee shall
not d or permit to be done anything which shall invalidate the
insurance policies carried by Lessor, Lessee shall pay the entirety of
any increase in the property insurance premium for the Office Building
Project over what is was immediately prior to the commencement of the
term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act
or omission of Lessee.
<PAGE>
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven
(7) days after the Commencement Date of this Lease. No such policy
shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days prior written notice to
Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against
the other, for direct or consequential loss or damage arising out of
or incident to the perils covered by property insurance carried by
such party, whether due to the negligence of Lessor or Lessee or their
agents, employees, contractors and/or invitees. If necessary all
property insurance policies required under this Lease shall be
endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from
and against any and all claims for damage to the person or property of
anyone or any entity arising from Lessee's use of the Office Building
Project, or from the conduct of Lessee's business or from any
activity, work or things done, permitted or suffered by Lessee in or
about the Premises or elsewhere and shall further indemnify and hold
harmless Lessor from and against any and all claims, costs and
expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this
Lease, or arising from any act or omission of Lessee, or any of
Lessee's agents, contractors, employees, or invitees, and from and
against all costs, attorney's fees, expenses and liabilities incurred
by Lessor as the result of any such use, conduct, activity, work,
things done, permitted or suffered, breach, default or negligence, and
in dealing reasonably therewith, including but not limited to the
defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against
Lessor by reason of any such matter, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably
satisfactory t Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be
so indemnified. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property of Lessee or
injury to persons, in, upon or about the Office Building Project
arising from any cause and Lessee hereby waives all claims in respect
thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury for injury to Lessee's business or any
loss of income therefrom or for loss of or damage to the goods, wares,
merchandise or other property of Lessee, Lessee's employees, invitees,
customers, or any other person in or about the Premises or the Office
Building Project, nor shall Lessor be liable for injury to the person
of Lessee, Lessee's employees, agents or contractors, whether such
damage or injury is caused by or results from theft, fire, steam,
electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said damage or injury results from conditions arising
upon the Premises or upon other portions of the Office Building
Project, or from other sources or places, or from new construction or
the repair, alteration or improvement of any part of the Office
Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible, Lessor
shall not be liable for any damages arising from any act or neglect of
any other lessee, occupant or user of the Office Building project, nor
from the failure of Lessor to enforce the provisions of any other
lease of any other lessee of the Office Building Project.
<PAGE>
8.9 No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified in this
paragraph 8 are adequate to cover Lessee's property or obligations
under this Lease.
9. Damage or Destruction.
9.1 Definitions.
a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is less than fifty percent (50%)
of the then Replacement Cost of the Building.
c) "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the
extent that the cost of repair is fifty percent (50%) or more of
the then replacement Cost of the Building.
d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed
to the extent that the cost of repair is fifty percent (50%) or
more of the then Replacement Cost of the Office Building Project
buildings.
f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in
paragraph 8. The fact that an insured Loss has a deductible
amount shall not make the loss an uninsured loss.
g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring,
excluding all improvements made by lessees, other than those
installed by Lessor at Lessee's expense.
9.2 Premises Damage; Premises Building Partial Damage.
a) Insured Loss. Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage
which is an insured Loss and which falls into the classification
of either Premises Damage or Premises Building Partial Damage,
then Lessor shall, as soon as reasonably possible and to the
extent the required materials and labor are readily available
through usual commercial channels, at Lessor's expense, repair
such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee) to its condition
existing at the time of the damage, and this Lease shall continue
in full force and effect.
b) Uninsured Loss. Subject to the provisions of paragraph 9.4 and
9.5, if at any time during the term of this Lease there is damage
which is not an insured Loss and which falls within the
classification of Premises Damage or Premises Building Partial
Damage, unless caused by a negligent or willful act of Lessee (in
which event Lessee shall make the repairs at Lessee's expense),
which damage prevents Lessee from making any substantial use of
the Premises, Lessor may at Lessor's option either (I) repair
such damage as soon as reasonably possible at Lessor's expense,
in which event this Lease shall continue in full force and
effect, or (ii) give written notice to Lessee within thirty (30)
days after the date of the occurrence of such damage of Lessor's
intention to cancel and terminate this Lease as of the date of
the occurrence of such damage, in which event this Lease shall
terminate as of the date of the occurrence of such damage.
<PAGE>
9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if
at any tie during the term of this Lease there is damage, whether or
not it is an insured Loss, which falls into the classifications of
either (I) Premises Building Total Destruction, or (ii) Office
Building Project Total Destruction, then Lessor may at Lessor's option
either (I) repair such damage or destruction as soon as reasonably
possible at Lessor's expense (to the extent the required materials are
readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements, and this Lease shall continue in
full force and effect, or (Ii) give written notice to Lessee within
thirty (30) days after the date of occurrence of such damage of
Lessor's intention to cancel and terminate this Lease, in which case
this Lease shall terminate as of the date of the occurrence of such
damage.
9.4 Damage Near End of Term.
a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial
damage to the Premises, Lessor may at Lessor's option cancel and
terminate this Lease as of the date of occurrence of such damage
by giving written notice to Lessee of Lessor's election to do so
within 30 days after the date of occurrence of such damage.
b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall
exercise such option, if it is to be exercised at all, no later
than twenty (20) days after the occurrence of an Insured Loss
falling within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly
exercises such option during said twenty (20) day period, Lessor
shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably
possible and this Lease shall continue in full force and effect.
If Lessee fails to exercise such option during said twenty (20)
day period, then Lessor may at Lessor's option terminate and
cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Lessee of Lessor's election to
do so within ten (10) days after the expiration of said twenty
(20) day period, notwithstanding any term or provision in the
grant of option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
a) In the even Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of
the Premises are not usable (including loss of use due to loss of
access or essential services), the rent payable hereunder
(including Lessee's Share of Operating Expense Increase) for the
period during which such damage, repair or restoration continues
shall be abated, provided (1) the damage was not the result of
the negligence of Lessee, and (2) such abatement shall only be to
the extent the operation and profitability of Lessee's business
as operated from the Premises is adversely affected. Except for
said abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
b) If Lessor shall be obligated to repair or restore the Premises or
the Building under the provisions of this Paragraph and shall not
commence such repair or restoration within ninety (90) days after
such occurrence, or if Lessor shall not complete the restoration
and repair within six (6) months after such occurrence, Lessee
may at Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any time
prior to the commencement or completion, respectively, of such
repair or restoration. In such event this Lease shall terminate
as of the date of such notice.
c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the
approval and/or execution of plans and specifications required.
<PAGE>
9.6 Termination--Advance Payments. Upon termination of this Lease pursuant
to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor
shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject
to reimbursement by Lessee of Lessee's Share of such taxes in
accordance with the provisions of paragraph 4.2, except as otherwise
provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor"
records and work sheets as being caused by additional improvements
placed upon the Office Building Project by other lessees or by Lessor
for the exclusive enjoyment of any other lessee. Lessee shall,
however, pay to Lessor at the time that Operating Expenses are payable
under paragraph 4.2c) the entirety of any increase in real property
tax if assessed solely by reason of additional improvements place upon
the Premises by lessee or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other
than inheritance, personal income or estate taxes) imposed on the
Office Building Project or any portion thereof by any authority having
the direct or indirect power to tax, including any city, county, state
or federal government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project
or in any portion thereof, as against Lessor's right to rent or other
income therefrom, and as against Lessor's business of leasing the
Office Building Project. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution
of, partiality or totally, any tax fee, levy, assessment or charge
hereinabove included within the definition of "real property tax," or
(ii)the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously
charged, has been increased since June 1, 1978, or (iv) which is
imposed as a result of a change in ownership as defined by applicable
local statutes for property tax purposes, of the Office Building
Project or which is added to a tax or charge hereinbefore included
within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
<PAGE>
10.4 Joint Assessment. If the improvements or property, the taxes for which
are to be paid separately by Lessee under paragraph 10.2 or 10.5 are
not separately assessed, Lessee's portion of that tax shall be
equitably determined by Lessor from the respective valuations assigned
in the assessors work sheets or such other information (which may
include the cost of construction) as may be reasonably available.
Lessor's reasonable determination thereof, in good faith, shall be
conclusive.
10.5 Personal Property Taxes.
a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures furnishings, equipment and all
other personal property of Lessee contained in the Premises or
elsewhere.
b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Lessee's
property.
11. Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably
required, reasonable amounts of electricity for normal lighting and
office machines, water for reasonable and normal drinking and lavatory
use, and replacement light bulbs and/or fluorescent tubes and
ballast's for standard overhead fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all telephone
services.
11.3 Hours of Service. Said services and utilities shall be provided during
generally accepted business days and hours or such other days or hours
as may hereafter be set forth. Utilities and services required at
other times shall be subject to advance request and reimbursement by
Lessee to Lessor of the cost thereof.
11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install
or use machinery or equipment in or about the Premises that uses
excess water, lighting or power, or suffer or permit any act that
causes extra burden upon the utilities or services, including but not
limited to security services, over standard office usage for the
Office Building Project. Lessor shall require Lessee to reimburse
Lessor for any excess expenses or costs that may arise out of a breach
of this subparagraph by lessee. Lessor may, in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate
metering applicable to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy stoppage
interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause
beyond Lessor's reasonable control or in cooperation with governmental
request or directions.
<PAGE>
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise
transfer or encumber all or any part of Lessee's interest in the Lease
or in the Premises without Lessor's prior written consent, which
Lessor shall not unreasonably withhold. Lessor shall respond to
Lessee's request for consent hereunder in a timely manner and any
attempted assignment, transfer, mortgage, encumbrance or subletting
without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee
under paragraph 13.1 "Transfer" within the meaning of this paragraph
12 shall include the transfer or transfers aggregating (a) if Lessee
is a corporation, more than twenty-five percent (25%) of the voting
stock of such corporation, or (b) if Lessee is a partnership, more
than twenty-five percent (25%) of the profit and loss participation in
such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessor's consent, to any corporation which controls,
is controlled by or is under common control with Lessee, or to any
corporation resulting from the merger or consolidation with lessee, or
to any person or entity which acquires all the assets of Lessee as a
going concern of the business that is being conducted on the Premises,
all of which are referred to as "Lessee Affiliate"; provided that
before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b)
Lessor shall be given written notice of such assignment and
assumption. Any such assignment shall not, in any way, affect or limit
the liability of Lessee under the terms of this Lease even if after
such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom
shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the
primary liability of Lessee to pay the rent and other sums due
Lessor hereunder including Lessee's Share of Operating Expense
Increase, and to perform other obligations to be performed by
lessee hereunder.
b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
c) Neither a delay in the approval or disapproval of such assignment
or subletting, not the acceptance of rent, shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for
the breath of any of the terms or conditions of this paragraph 12
or this Lease.
<PAGE>
d) I Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's
consent thereto shall not be effective unless said guarantors
give their written consent to such sublease and the terms
thereof.
e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting
by lessee or to any subsequent or successive assignment or
subletting by the subleasee. However, Lessor may consent to
subsequent sublettings and assignments of the sublease or any
amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining
their consent and such action shall not relieve such persons from
liability under this Lease or said sublease, however, such
persons shall not be responsible to the extent any such amendment
or modification enlarges or increases the obligations of the
Lessee or subleasee under this Lease or such sublease.
f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or anyone else
responsible for the performance of this lease, including the
subleasee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no
default then exists under this lease of the obligations to be
performed by Lessee nor shall such consent be deemed a waiver of
any then existing default, except as may be otherwise stated by
Lessor at the time.
h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or
subletting was materially false shall, at Lessor's election,
render Lessor's said consent null and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless
of Lessor's consent, the following terms and conditions hall apply to
any subletting by Lessee of all or any art of the Premises and shall
be deemed included in all subleases under this lease whether or not
expressly incorporated therein.
a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease
heretofore, or hereafter made by Lessee, and lessor may collect
such rent and income and apply same toward Lessee's obligations
under this Lease, provided, however, that until a default shall
occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor not by reason of the
collection of the rents from a subleasee, be deemed liable to the
subleasee for any failure of Lessee to perform and comply with
any of Lessee's obligations to such subleasee under such
sublease. Lessee hereby irrevocably authorizes and directs any
such subleasee, upon receipt of written notice from Lessor
stating that a default exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents due and
to become due under the sublease. Lessee agrees that such
subleasee shall have the right to rely upon any such statement
and request from lessor and that such subleasee shall pay such
rents to Lessor without any obligation or right to inquire as to
whether such default exists and notwithstanding any notice from
or claim from Lessee to the contrary. Lessee shall have no right
or claim again said subleasee or lessor for any such rents so
paid by said subleasee to lessor.
<PAGE>
b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into
any sublease, Lessee shall use only such form of subleasee as is
satisfactory to Lessor, and once approved by Lessor, such
sublease shall not be changed or modified without Lessor's prior
written consent. Any sublease shall by reason of entering into a
sublease under this Lease, be deemed, for the benefit of Lessor,
to have assume and agreed to conform and comply with each and
every obligation herein to be performed by lessee other than such
obligations as are contrary to or inconsistent with provisions
contained in a sublease to which Lessor has expressly consented
in writing.
c) In the event Lessee shall default in the performance of its
obligations under this Lease. Lessor at its option and without
any obligation to do so, may require any subleasee to attorn to
Lessor, in which event Lessor shall undertake the obligations of
Lessee under such sublease from the time of the exercise of said
option to the termination of such sublease, provided, however,
Lessor shall not be liable for any prepaid rents or security
deposit paid by such subleasee to Lessee nor for any other prior
defaults of Lessee under such sublease.
d) No subleasee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by
Lessee to the subleasee. Such subleasee shall have the right to
cure a default of Lessee within three (3) days after service of
said notice of default upon such subleasee, and the subleasee
shall have a right of reimbursement and offset from and against
Lessee for any such defaults cured by the subleasee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or
subletting or if Lessee shall request the consent of Lessor for any
act Lessee proposes to do then Lessee shall pay Lessor's reasonable
costs and expenses incurred in connection therewith, including
attorneys', architects', engineers' or other consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the
proposed assignee or subleasee shall conduct a business on the
Premises of a quality substantially equal to that of Lessee and
consistent with the general character of the other occupants of the
Office building Project and not in violation of any exclusives or
rights then held by other tenants, and (b) the proposed assignee or
subleasee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such
assignment of subletting, whichever is greater.
<PAGE>
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises
for a continuous period of sixty (60) days or more, whether or
not the rent is paid.
b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1
(assignment or subletting), 13.1(a) (vacation or abandonment),
13.1(e) (insolvency), 13.1(f) (false statement), 16(a) (estoppel
certificate), 30(b) (subordination), 3 (auctions), or 41.1
(easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by
lessor to Lessee thereof.
c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of three (3) days
after written notice there of from Lessor to Lessee. In the event
that Lessor serves Lessee with a Notice to Pay Rent or quit
pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or quit shall also constitute the notice required by
this subparagraph.
d) The failure by Lessee to observe of perform any of the covenants,
conditions or provisions of this Lease to be observed or
performed by Lessee other than those referenced in subparagraphs
(b) and (c ), above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from
Lessor to Lessee; provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days
are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently pursues such
cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice
required to be given to Lessee under applicable Unlawful Detainer
statutes.
e) (I) The making by Lessee of any general arrangement of general
assignment for the benefit of creditors; (ii) Lessee becoming a
"debtor" as defined in 11USC - 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee,
the same is dismissed within sixty (60) days; (iii) the
appointment of a trustee of receiver to take possession of
substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially
all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged
within thirty (30) days. In the event that any provision of this
paragraph 13.1(e) is contrary to any applicable law, such
provision shall be of no force of effect.
f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, of its successor in interest or by any
guarantor of Lessee's obligation hereunder, was materially false.
<PAGE>
13.2 Remedies. In the event of any material default or breach of this Lease
by Lessee, Lessor may at any time thereafter, with or without notice
of demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default:
a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of
the Premises to Lessor. In such event Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting,
including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and any real estate commission
actually paid; the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the
amount of such rental loss for the same period that Lessee proves
could be reasonably avoided; that portion of the leasing
commission paid by Lessor pursuant to paragraph 15 applicable to
the unexpired term of this Lease.
b) Maintain Lessee's right to possession in which case this lease
shall continue in effect whether or not Lessee shall have vacated
of abandoned the Premises. In such event Lessor shall be entitled
to enforce all of Lessor's rights and remedies under this Lease,
including the right to recover the rent as it becomes due
hereunder.
c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the
Premises are located. Unpaid installments of rent and other
unpaid monetary obligations of Lessee under the terms of this
Lease shall bear interest from the date due at the maximum rate
then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligation required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee
to Lessor and to the holder of any first mortgage or deed of trust
covering the Premises whose name and address shall have theretofore
been furnished to Lessee in writing, specifying Lessor has failed to
perform such obligation; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are
required for performance than Lessor shall not be in default if Lessor
commences performance within such 30 day period and thereafter
diligently pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense Increase
or other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which
may be imposed on Lessor by the terms of any mortgage or trust deed
covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten
(10) days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a late
charge equal to 6% of such overdue amount. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lease. Acceptance
of such late charge by Lessor shall in no event constitute a waiver of
Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted
hereunder.
<PAGE>
14. Condemnation. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of
the date the condemning authority takes title or possession, whichever
first occurs; provided that if so much of the Premises or the Office
Building Project are taken by such condemnation as would substantiality and
adversely affect the operation and profitability of Lessee's business
conducted from the Premises. Lessee shall have the option, to be exercised
only in writing within thirty (30) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice,
within thirty (30) days after the condemning authority shall have taken
possession), to terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the rent
and Lessee's Share of Operating Expense Increase shall be reduced in the
proportion that the floor area of the Premises taken bears to the total
floor area of the Premises. Common Areas taken shall be excluded from the
Common Areas usable by Lessee and no reduction of rent shall occur with
respect thereto or by reason thereof. Lessor shall have the option in its
sole discretion to terminate this Lease as of the taking of possession by
the condemning authority, by giving written notice to Lessee of such
election within thirty (30) days after receipt of notice of a taking by
condemnation of any part of the Premises or the Office Building Project.
Any award for the taking of all or any part of the premises or the Office
Building Project under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of
the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any separate award for
loss of or damage to Lessee's trade fixtures, removable personal property
and unamortized tenant improvements that have been paid for by Lessee. For
that purpose the cost of such improvements shall be amortized over the
original term of this Lease excluding any options. In the event that the
Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the
condemning authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair.
15. Broker's Fee.
a) The brokers involved in this transaction are NONE as "listing
broker" and N/A as "cooperating broker," licensed real estate
broker(s). A "cooperating broker" is defined as any broker other
than the listing broker entitled to a share of any commission
arising under this Lease. Upon execution of this Lease by both
parties, Lessor shall pay to said brokers jointly, or in such
separate shares as they may mutually designate in writing, a fee
as set forth in a separate agreement between Lessor and said
broker(s), or in the event there is no separate agreement between
Lessor and said broker(s), the sum of $ ______, for brokerage
services rendered by said broker(s) to Lessor in this
transaction.
c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other
entity having an ownership interest in said real property or any
part thereof, when such fee is due hereunder. Any transferee of
Lessor's interest in this Lease, whether such transfer is by
agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the
provisions of this paragraph 15 to the extent of their interest
in any commission arising under this Lease and may enforce that
right directly against Lessor; provided, however, that all
brokers having a right to any part of such total commission shall
be a necessary party to any suit with respect thereto.
<PAGE>
d) Lessee and Lessor each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or
finder (other than the person(s), if any, whose names are set
forth in paragraph 15(a), above) in connection with the
negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other
person, firm or entity is entitle d to any commission or finder's
fee in connection with said transaction and Lessee and Lessor do
each hereby indemnify and hold the other harmless from and
against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed
broker, finder or other similar part by reason of any dealings or
actions of the indemnifying party.
16. Estoppel Certificate.
a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice form the other
party ("requesting party") execute, acknowledge and deliver to
the requesting party a statement in writing (I) certifying that
this Lease in unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and
the date to which the rent and other charges are paid in advance,
if any, and (ii) acknowledging that there are not, to the
resending party's knowledge, any uncured defaults on the part of
the requesting party, or specifying such defaults if any are
claimed. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrance of the Office Building
Project or of the business of Lessee.
b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this
Lease by the party who is to respond, without any further notice
to such party, or it shall be conclusive upon such party that (I)
this Lease is in full force and effect without modification
except as may be represented by the requesting party, (ii) there
are no uncured defaults in the requesting party's performance and
(iii) if Lessor is the requesting party, not more than one
month's rent has been paid in advance.
<PAGE>
c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to
deliver to any lender or purchaser designated by Lessor such
financial statements of Lessee as may be reasonably required by
such lender or purchases. Such statements shall include the past
three (3) years' financial statements of Lessee. All such
financial statements shall be received by lessor and such lender
and such lender or purchaser in confidence and shall be used only
for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a Lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such
title or interest, Lessor herein name (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the date of
such transfer of all liability as respects Lessor's obligations thereafter
to be performed, provided that any funds in the hands of Lessor or the then
grantor at the time of such transfer, in which Lessee has an interest,
shall be delivered to the grantee. The obligations contained in this Lease
to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of
any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law or judgments from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease,
provided, however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid by
Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of
Operating Expense Increase and any other expenses payable by Lessee
hereunder shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification. Except
as otherwise stated in this Lease, Lessee hereby acknowledges that without
the real estate broker listed in paragraph 15 hereof nor any cooperating
broker on this transaction or the Lessor or any employee or agents of any
of said persons has made any oral or written warranties or representations
to Lessee relative to the condition or use by Lessee of the Premises of the
Office Building Project and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use
and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to
Lessee or to Lessor at the address noted below or adjacent to the signature
of the respective parties, as the case may be. Mailed notices shall be
deemed given upon actual receipt at the address required, or full eight
hours following deposit in the mail, postage prepaid, whichever first
occurs. Either party may by notice to the other specify a different address
for notice purposes except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for notice
purposes. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at
such address as Lessor may from time to time hereafter designate by notice
to Lessee.
<PAGE>
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breath by Lessee
of the same or any other provision. Lessor's consent to, or approval of,
any act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of
rent hereunder by Lessor shall not be a waiver of any proceeding breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of
this Lease for recording purposes.
26. Holding Over. If Lessee, with lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Lessee, except
that all Options if any, granted under the terms of this Lease shall be
deemed terminated and be of no further effect during said month to month
tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, whenever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a Covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment of subletting by Lessee and subject to the provisions of
paragraph 17, this lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by
the laws of the State where the Office Building Project is located and any
litigation concerning this Lease between the parties hereto shall be
indicated in the county in which the Office Building Project is located.
<PAGE>
30. Subordination.
a) This Lease, and any Option or right of first refusal granted
hereby, at Lessor[`s option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or
security now or hereafter placed upon the Office Building Project
and to any and all advances made on the security thereof and to
all renewals, modifications, consolidations, replacements and
extensions thereof. Notwithstanding such subordination, Lessee's
right to quiet possession of the Premises shall not be disturbed
if Lessee is not in default and so long as Lessee shall pay the
rent and observe and perform all of the provisions of this Lease,
unless this Lease is otherwise terminated pursuant to its terms.
If any mortgagee, trustee of ground lessor shall elect to have
this Lease and any Options granted hereby prior to the lien of
its mortgage, deed of trust or ground lease, and shall give
written notice thereof to Lessee, this Lease and such Options
shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or
subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lessee or any Option
granted herein prior to the lien of any mortgage, deed of trust
or ground lease, as the case may be. Lessee's failure to execute
such documents within ten (10) days after written demand shall
constitute a material default by Lessee hereunder without further
notice to Lessee or, at Lessor's option, Lessor shall execute
such document s on behalf of Lessee as Lessee's attorney-in-fact.
Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place
and stead, to execute such documents in accordance with this
paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, trail or appeal thereon, shall be entitled
to his reasonable attorneys' fees to be paid by the losing party as
fixed by the court in the same or a separate suit, and whether or not
such action is pursued to decision or judgment. The provisions of this
paragraph shall inure to the benefit of the broker named herein who
seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notice
of default and consultations in connection therewith, whether or not a
legal transaction is subsequently commenced in connection with such
default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspection the same, performing
any services required of Lessor, showing the same to prospective
purchasers, lenders, or lessees, taking such safety measures, erecting
such scaffolding or other necessary structures, making such
alterations, repairs, improvements or additions to the Premises or to
the Office Building Project as Lessor may reasonably deem necessary or
desirable and the erecting,, using and maintaining of utilities,
services, pipes, and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's
use of the Premises. Lessor may at any time place on or about the
Premises any ordinary "For Lease" signs.
<PAGE>
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for
the same.
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults
and safes, and in the case of emergency to enter the Premises by any
reasonably appropriate means, and any such entry shall not be deemed a
forcible or unlawful entry or detainer of the Premises or an eviction.
Lessee waives any charges for damages or injuries or interference with
Lessee's property or business in connection therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent. Not
withstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent. The holding of any auction on the Premises or Common
Areas in violation of this paragraph shall constitute a material default of
this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Office Building
Project.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of
the other party such consent shall not be unreasonably withheld or delayed.
<PAGE>
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have
quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease. The individuals executing this Lease on
behalf of Lessor represent and warrant to Lessee that they are fully
authorized and legally capable of executing this Lease on behalf of Lessor
and that such execution is binding upon all parties holding an ownership
interest in the Office Building Project.
39. Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this
Lease or to renew this Lease or to extend or renew any lease that
Lessee has on other property of Lessor; (2) the option of right of
first refusal to lease the Premises or the right of first offer to
lease the Premises of the right of first refusal to lease other space
within the Office Building Project or other property of Lessor or the
right of first offer to lease other space within the Office Building
Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of
first refusal to purchase the Premises or the Office Building Project,
or the right of first offer to purchase the Premises or the Office
Building Project, or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of
Lessor or the right of first offer to purchase other property of
Lessor.
39.2 Option Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the
original Lessee while occupying the Premises who does so without the
intent of thereafter assigning this Lease or subletting the Premises
or any portion thereof, and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than
Lessee; provided, however, that an Option may be exercised by or
assigned to any Lessee Affiliate as defined in paragraph 12.2 of this
Lease. The Options, if any, herein granted to Lessee are not
assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or
otherwise
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice
of default pursuant to paragraph 13.1 c) or 13.1 d) and
continuing until the noncompliance alleged in said notice of
default is cured, or (ii) during the period of time commencing on
the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee)
and continuing until the obligation is paid, or (iii) in the
event that Lessor has given to Lessee three or more notices of
default under paragraph 13.1 c) or paragraph 13.1 d), whether or
not the defaults are cured, during the 12 month period of time
immediately prior to the time that Lessee attempts to exercise
the subject Option, (iv) if Lessee has committed any non curable
breach, including without limitation those described in paragraph
13.1 b), or is otherwise in default of any of the terms,
covenants or conditions of this Lease.
b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of paragraph 39.4
a).
<PAGE>
c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force of effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such
exercise and during the term of this Lease, (i) Lessee fails to
pay to Lessor a monetary obligation of Lessee for a period of
thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph
13.1 d) within thirty (303) days after the date that Lessor gives
notice to Lessee of such default and/or Lessee fails thereafter
to diligently prosecute said cure to completion, or (iii) Lessor
gives to Lessee three or more notices of default under paragraph
13.1 c), or paragraph 13.1 d), whether or not the defaults are
cured, or (iv) if Lessee has committed any non-curable breach,
including without limitation those described in paragraph 13.1
b), or is otherwise in default of any of the terms, covenants or
conditions of this Lease.
40. Security Measures - Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for
the benefit of the Premises or the Office Building Project. Lessee
assumes all responsibility for the protection of Lessee, its agents,
and invitees and the property of Lessee and of Lessee's agents and
invitees from acts of third parties. Nothing herein contained shall
prevent Lessor, at Lessor's sole option, from providing security
protection for the Office Building Project or any part thereof, in
which event the cost thereof shall be included within the definition
of Operation Expenses, as set forth in paragraph 4.2 b).
40.2 Lessor shall have the following rights:
a) To change the name, address or title of the Office Building
Project of building in which the Premises are located upon not
less than 90 days prior written notice;
b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the
Common Areas as Lessor shall reasonably deem appropriate;
<PAGE>
c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights
expressly given herein;
d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the
buildings or the Office Building Project or on pole signs in the
Common Areas;
40.3 Lessee shall not:
a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection
with Lessee's business;
b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedication that Lessor deems necessary of
desirable, and to cause the recordation of Parcel Maps and
restriction, so long as such easement, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the
Premises by Lessee. Lessee shall sign any of the aforementioned
documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the
need for further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third
parties, shall in no way affect this Lease or impose any liability
upon Lessor.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money
is asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment, and there shall
survive the right on the part of said party to institute suit for recovery
of such sum. If it shall be adjusted that there was no legal obligation on
the part of said party to pay such sum of any part thereof, said party
shall be entitled to recover such sum or so much thereof as it was not
legally required to pay under the provisions of this Lease.
43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of
such entity represent and warrant that such individual is duly authorized
to execute and deliver this Lease on behalf of said entity. If Lessee is a
corporation, trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall
be controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to
lease. This Lease shall become binding upon Lessor and Lessee only when
fully executed by both parties.
<PAGE>
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the
Office Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee, respectively.
48. Work Letter. This Leas is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
SEE ADDENDUM #50-53
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE.
<PAGE>
LESSOR LESSEE
RANCHO CORDOVA ASSOCIATES II, THE WYNDGATE GROUP, LTD.
BY D.C. PEEK & ASSOCIATES, INC.,
ITS GENERAL PARTNER
By /S/ DONALD C. PEEK By /S/ WILLIAM J. COLLARD
------------------------------- --------------------------------
Donald C. Peek
Its President Its
------------------------------ -------------------------------
By By
------------------------------- -------------------------------
Its Its
------------------------------- -------------------------------
Executed at Placerville, CA Executed at
----------------------- ------------------------
on 8-16-96 on
------------------------------ --------------------------------
Address 1166 BROADWAY, SUITE K Address RANCHO CORDOVA, CA 95670
------------------------- ----------------------------
PLACERVILLE, CA 95667
- ----------------------------------
<PAGE>
STANDARD OFFICE LEASE
FLOOR PLAN
EXHIBIT A
[GRAPHICS OF FLOOR PLAN OMITTED]
<PAGE>
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Exhibit B
Dated: July 19, 1995
By and Between Rancho Cordova Associates II, By D.C. Peek & Associates, Inc.,
It's General Partner, as Lessor and the Wyndgate Group, Ltd., as Lessee
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Office Building
Project.
4. Lessee shall not keep animals or birds within the Office Building Project,
and shall not bring bicycles, motorcycles or other vehicles into areas not
designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
boils.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out of
the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work to
be performed in the building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of P.M. and
A.M. of the following day. If Lessee uses the Premises during such periods,
Lessee shall be responsible for securely locking any doors it may have
opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and shall be
responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
<PAGE>
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars or
cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other than
as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines upon the
Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking or
food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as any be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants.
Lessee agrees to abide by these and such rules and regulations.
<PAGE>
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein called" Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as
"Oversized Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
or invitees to be loaded, unloaded, or parked in areas other than those
designated by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of Lessor
and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces from
floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard
size spaces, as long as the same complies with applicable laws, ordinances
and regulations.
6. Users of the parking area will obey all posted signs and park only in the
areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be reasonable
for any damage to vehicles, injury to persons or loss of property, all of
which risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method or
methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees, agents
and invitees comply with the applicable parking rules, regulations, laws
and agreements.
11. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a license only
and no ballment is intended or shall be created hereby.
<PAGE>
WORK LETTER TO STANDARD OFFICE LEASE
Exhibit C
Dated: July 19, 1995
By and between : Rancho Cordova Associates II
The Premises shall be constructed in accordance with Lessor's Standard
Improvements, as follows:
1. Partitions:
Suite K - one partition.
Suite C - one partition.
2. Wall Surfaces:
Paint Grade include restroom area.
3. Draperies:
New Blinds.
4. Carpeting
New except Suite H and Kitchen area of Suite K. New linoleum Kitchen area.
5. Doors
Two - to Suite H and Reception area. Close off door (exit) in computer
room.
6 Electrical and telephone Outlets - N/A
7. Ceiling - N/A
8. Lighting - N/A
9. Heating and Air Conditioning Ducts - N/A
10. Sound Proofing - Completed.
11. Plumbing - Move Dishwasher.
12. Security System
New to include motion detection in halls and ceilings All exterior door.
13. New Counter
All existing counters.
14. Soundproofing
One office designated by the Lessee will be soundproofed.
15. Lessor agrees that there might be additional items to be added which will
be considered upon submission
16. Add window looking into the computer room.
14. Entrance Doors
15. Completion of Improvements
Lessor shall construct and complete improvements to the Premises in
accordance with the plans and specifications prepared by..................,
dated ..................consisting of sheets ......... (the "Improvements")
16. Preparation of Plans and Specifications
Within days after the date of this Lease, Lessor shall prepare at its cost
and deliver to Lessee for its approval copies of preliminary plans and
specifications for the completion of the improvements, which plans and
specifications shall itemize the work to be done by each party including a
cost estimate of any work required of Lessor in excess of Lessor's Standard
improvements. Lesser shall approve said preliminary plans and
specifications and preliminary cost estimate or specify with particularity
its objections thereto within days following receipt thereof, Failure to do
so approve or disapprove within said period of time shall constitute
approval thereof. If Lessor shall reject said preliminary plans and
specifications either partially or totally, and they cannot in good faith
be modified within ten (10) days after such rejection to be acceptable to
Lessor and Lessee, this Lease shall terminate and neither party shall
thereafter be obligated to the other party for any reason whatsoever having
to do with this Lease, except that Lessee shall be refund any security
deposit or prepaid rent. The plans and specifications, when approved by
Lessee, shall supersede any prior agreement concerning the Improvements.
17. Construction
If Lessor's cost of constructing the Improvements to the premises exceeds
the cost of Lessor's standard improvements Lessee shall pay to Lessor in
cash before the commencement of such construction a sum equal to such
excess. (N/A)
<PAGE>
If the final plans and specifications are approved by Lessor and Lessee,
and Lessee pays Lessor for such excess, than Lessor shall, at its sole cost
and expense, construct the improvements in accordance with said approved
final plans and specifications and all applicable rules, regulations, laws
or ordinances.
18. Completion
16.1 Lessor shall obtain a building permit to construct the improvements as
soon as possible.
16.2 Lessor shall complete the construction of the improvements as soon as
reasonably possible after obtaining of necessary building permits.
16.3 The term "Completion," as used in this Work Letter, is hereby defined
to mean the date the building department of the municipality having
jurisdiction of the Premises shall have made a final inspection of the
improvements and authorized a final release of restrictions on the use
of public utilities in connection therewith and the same are in a
clean condition.
16.4 Lessor shall use its best efforts to achieve Completion of the
Improvements on or before the Commencement Date set forth in paragraph
1.5 of the Basic Lease Provisions or within one hundred eighty (180)
days after the Lessor obtains the building permit from the applicable
building department, whichever is later.
16.5 In the event that the Improvements or any portion thereof have not
reached Completion by the Commencement Date, this Lessee shall not be
invalid, but rather Lessor shall complete the same as soon thereafter
as is possible and Lessor shall not be able to Lease for damages in
any respect whatsoever.
16.6 If Lessor shall be delayed at any time in the progress of the
construction of the Improvements or any portion of by extra work
changes in construction ordered by Lessee, or by strikes, lockouts,
fire, delay in transportation, unavoidable causalities, rain or
weather condition, governmental procedures or delay, or by any other
cause beyond Lessor's control, then the Commencement Date established
in paragraph 1.5 of the Lessee shall be extended by the period of such
delay.
19. Term
Upon Completion of the Improvements as defined in paragraph 16.3 above,
Lessor and Lessee shall execute an amendment to the Lease setting forth the
date of Tender of Possession as defined in paragraph 3.21 of the Lease or
of actual taking of possession, whichever first occurs, as the commencement
Date of this Lease.
20. Work Done by Lesser
Any work done by Lesser shall be done only with Lessor's prior written
consent and in conformity with a valid building permit and all applicable
rules, regulations, laws and ordinances, and be done in a good and
workmanlike manner with good and sufficient materials. All work shall be
done only with union labor and only by contractors approved by Lessor, it
begin understood that all plumbing , mechanical, electrical wiring and
ceiling work are to be done only by contractors designated by Lessor.
21. Taking of Possession of Premises
Lessor shall notify Lessee of the Estimated Completion Date at lease ten
(10 ) days before said date. Lessee shall thereafter have the right to
enter the Premises to commence construction of any Improvements Lessee is
to construct and to equip and texture the Premises, as long as such entry
does not interfere with Lessor's work. Lessee shall take possession of the
Premises upon the tender thereof as provided in paragraph 3.21 of the Lease
to which this Work Letter is attached. Any entry by Lessee of the Premises
under this paragraph shall be under all of the terms and provisions of the
lease to which this Work Letter is attached.
22. Acceptance of Premises
Lessee shall notify Lessor in writing of any items that Lesser deems
incomplete or incorrect in order for the Premises to be acceptable to
Lessee within ten (10 days following Tender of Possession as set forth in
paragraph, 3.31 of the Lease to which this Work Letter is attached. Lessee
shall be deemed to have accepted the Premises and approved construction if
Lessee does not deliver such a list to Lessor within said number of days.
<PAGE>
ADDENDUM TO STANDARD OFFICE LEASE--FULL SERVICE
DATED July 19, 1995
BY AND BETWEEN RANCHO CORDOVA ASSOCIATES II
BY D.C. PEEK & ASSOCIATES, INC., ITS GENERAL PARTNER, AS LESSOR,
AND THE WYNDGATE GROUP, LTD., AS LESSEE
50. LESSEE'S RIGHT TO TERMINATE LEASE:
Lessee shall have the right to terminate this Lease at any time after the
"Tender of Possession" of the spaces being improved, by giving written
notice to lessor of a date on which it wishes the lease to terminate early,
which notice shall be given to lessor not less than ninety (90) days prior
to said date; provided, however, that if such termination date shall be
prior to August 31, 1998, said notice shall be accompanied by a check in
reimbursement of the unamoritized portion of certain improvement expenses
that Lessor has agreed to incur in connection with this lease extension and
expansion. Said expenses shall be amortized on a straight-line basis, over
the period beginning with the "Tender of Possession" and ending August 31,
1998. The amount to be amortized shall be itemized on a statement compiled
by Lessor and delivered to Lessee shortly after the "Tender of Possession"
*it is estimated that $45,000 will be the sum to be expended by Lessor for
said improvements. It is understood that until "Tender of Possession" as
defined in this Lease, Lessee shall continue to occupy its current premises
on a month to month basis under a prior lease agreement, which prior lease
agreement shall be superseded by this Lease upon "Tender of Possession" as
is defined in this Lease.
51. TENANT IMPROVEMENTS:
Lessor shall, at Lessor's sole cost and expense, complete certain Tenant
Improvements per Work Letter (Exhibit C).
52. COMPUTER ROOM TEMPERATURE:
Lessor shall make every effort to maintain HVAC equipment in such a manner
that it is capable of producing a moderate temperature in the computer room
indicated in attached Exhibit "A". Said temperature to be maintained is a
range from 75 to 85 degrees Fahrenheit.
53. OPTION TO RENEW:
Provided Lessee is not in default concerning any of the terms and
conditions of the existing Lease, Lessor shall grant Lessee an option to
extend said Lease for one (1) additional three (3) year term. Lessee shall
notify Lessor in writing no later than March 1, 1998, of Lessee's exercise
of said option. The lease rate for said three-year term shall be at the
then-current fair market lease rate for comparable space within the general
area, to be determined by mutual agreement of the parties within two months
after the exercise of said option. If the parties are unable to agree in
writing within such period of time as to the then-current fair market lease
rate, then the Lessee shall have ten (10) business days to notify Lessor in
writing that it wishes to submit the matter for binding arbitration (with
arbitration expenses to be shared equally), and if Lessee does not do so
within said time period, all Lessee's rights under this option shall lapse.
There shall be no additional option to extend at the end of said additional
three-year term in the absence of an amendment to this Lease that
specifically so states.
AGREED AND ACCEPTED
LESSOR: RANCHO CORDOVA ASSOCIATES, II LESSEE: THE WYNDGATE GROUP
By D.C. PEEK & ASSOCIATES, INC.,
ITS GENERAL PARTNER
By /S/ DONALD C. PEEK By /S/ William J. Collard
------------------------------ ------------------------
Donald C. Peek, President
Date:
----------------------------
EXHIBIT 10.3
Exhibit C
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 24th day of May, 1995, between National
MRO, Inc., a Colorado corporation (the "Employer") and Michael I. Ruxin (the
"Employee").
WHEREAS, Employee presently is employed by Employer;
WHEREAS, Employer has entered into an Agreement of Merger and Plan of
Reorganization with The Wyndgate Group, Ltd., a California corporation (the
"Merger Agreement") which requires Employer to enter into an Employment
Agreement with Employee;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
------------------
1.1 Employment. The Employer agrees to employ the Employee and the Employee
agrees to be employed by the Employer upon the terms and conditions hereinafter
set forth.
1.2 Term. The employment of the Employee by the Employer as provided herein
shall commence on the Closing Date as defined in the Merger Agreement and shall
end five years from such date, unless sooner terminated by mutual agreement or
in accordance with the provisions of Article IV; provided, however, that at the
close of the second year of this Agreement the initial term hereof shall be
automatically extended for an additional two years beyond the initial term (for
a new initial term of seven years from the Closing Date) unless Employer or
Employee provides notice of the contrary to the other party at least 90 days
prior to the close of the second year.
1.3 Office and Support. Employee shall be provided an office and support
staff, including but not limited to secretarial services, at Employer's
principal place of business. Such office and services shall be comparable to the
office and support services provided at the time of commencement of this
Agreement.
1.4 Place of Performance. In connection with Employee's employment by
Employer, Employee shall be based at Employer's office in Lakewood, Colorado,
except for required travel on Employer's business to an extent substantially
consistent with Employee's customary business travel obligations heretofore.
Employee shall not be required to relocate as a requirement of continued
employment.
<PAGE>
ARTICLE II
DUTIES OF THE EMPLOYEE
----------------------
2.1 Duties. The Employee shall be employed with the title of Chairman,
Chief Executive Officer and President, with responsibilities and authority as
are customarily performed by such an officer including, but not limited to those
duties described in Schedule 2.1 and as may from time to time be assigned to
Employee by the Board of Directors of Employer. Employee will continue to have
for the term of this Agreement all authority and responsibility that Employee
had at the time this Agreement commenced.
2.2 Extent of Duties. Employee shall devote substantially his full time,
attention and energies to the business of the Employer.
2.3 Disclosure of Information.
2.3.1 The Employee recognizes and acknowledges that the information,
processes, developments, experimental work, work in progress, business, list of
the Employer's customers and any other trade secret or other secret or
confidential information relating to Employer's business as they may exist from
time to time are valuable, special and unique assets of Employer's business.
Therefore, Employee agrees that:
(i) Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to his
employment, without the express authorization of the Board of Directors of the
Employer, any information, process, development or experimental work, work in
process, business, customer lists, trade secret or any other secret or
confidential matter relating to any aspect of the Employer's business, except as
such disclosure or use may be required in connection with Employee's work for
the Employer.
(ii) Upon request or at the time of leaving the employ of the
Employer, the Employee will deliver to the Employer, and not keep or deliver to
anyone else, any and all notes, memoranda, documents and, in general, any and
all material relating to the Employer's business.
2.3.2 In the event of a breach or threatened breach by the Employee of
the provisions of this section 2.3, the Employer shall be entitled to an
injunction (i) restraining the Employee from disclosing, in whole or in part,
any information as described above or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed; and/or
(ii) requiring that Employee deliver to Employer all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Employer. Nothing herein shall
be construed as prohibiting the Employer from pursuing other remedies available
to the Employer for such breach or threatened breach, including the recovery of
damages from the Employee.
-2-
<PAGE>
ARTICLE III
COMPENSATION OF THE EMPLOYEE
----------------------------
3.1 Compensation. As compensation for services rendered under this
Agreement, the Employee shall receive a salary at the rate of $190,000 per annum
to be paid in accordance with Employer's normal practices. This salary shall be
increased for cost-of-living at the rate of 2 1/2% per annum, plus any other
increase which may be determined from time to time in the discretion of the
Employer's Board of Directors. If increased, this salary shall not be decreased
thereafter during the term of this Agreement without the consent of the
Employee. The salary provided in this subsection shall in no way be deemed
exclusive and shall not prevent Employee from participating in any other
compensation or benefit plan of Employer.
3.2 Benefits. Employee shall be entitled to the benefits as set forth in
Schedule 3.2. Employee shall be entitled to participate in all of Employer's
employee benefit plans and employee benefits, including any retirement, pension,
profit-sharing, stock option, insurance, hospital or other plans and benefits
which now may be in effect or which may hereafter be adopted, it being
understood that Employee shall have the same rights and privileges to
participate in such plans and benefits as any other executive employee during
the term of this Agreement. Participation in any benefit plans shall be in
addition to the compensation provided for in Section 3.1. Employer shall pay
premiums on two life insurance policies for Employee, each with a death benefit
of at least $1 million. The owner and beneficiary of the first policy shall be
Employer and the beneficiary of the second policy shall be designated by the
Employee. The annual combined premium on these policies shall not exceed $5,000,
except for any normal premium increases due to increases in age. Employee shall
be entitled to receive any and all benefits that he was entitled to receive at
the time this Agreement commenced as set forth in Schedule 3.2. Employee shall
be provided with a car by Employer on such lease terms to be determined by
Employer, provided that the monthly operating costs (including the lease
payment) to be paid by Employer shall not exceed $1,200. The total operating
costs on the vehicle shall be paid 80% by Employer and 20% by Employee.
3.3 Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder. Employer shall advance reasonable estimates of such expenses upon
request of the Employee. Employee shall not incur more than $20,000 per year in
total expenses without prior approval by Employer's Board of Directors.
-3-
<PAGE>
ARTICLE IV
TERMINATION OF EMPLOYMENT
-------------------------
4.1 Termination. The Employee's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
4.1.1 By Employee. Upon the occurrence of any of the following events
this Agreement may be terminated by the Employee by written notice to Employer:
(i) the sale by Employer of substantially all of its assets;
(ii) the sale, exchange or other disposition, in one transaction
or a series of related transactions, of at least 40% percent of the outstanding
voting shares of Employer;
(iii) a decision by Employer to terminate its business and
liquidate its assets;
(iv) the merger or consolidation of Employer with another entity
or an agreement to such a merger or consolidation or any other type of
reorganization;
(v) Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more, or Employer seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer or any material party of its assets; or
(vi) there are material changes in Employee's duties and
responsibilities without his written consent.
4.1.2 Death. This Agreement shall terminate upon the death of
Employee.
4.1.3 Disability. This Agreement shall not terminate upon the
temporary disability of the Employee, but the Employer may terminate this
Agreement upon the permanent disability of the Employee. Employee shall be
considered permanently disabled if: (1) he is disabled as defined in a
disability insurance policy purchased by or for the benefit of the Employee; or
(2) if no such policy is in effect, he is incapacitated to such an extent due to
a medically determinable physical or mental condition that he is unable to
perform substantially all of his duties for 9 consecutive months for Employer
that he performed prior to such incapacitation.
-4-
<PAGE>
4.1.4 Cause. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the Employer shall have
"Cause" to terminate the Employee's employment hereunder upon the following: (1)
the willful and continued failure by the Employee substantially to perform his
duties hereunder (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after demand for substantial
performance is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Employee has not substantially performed his
duties; or (2) the willful engaging by the Employee in misconduct which is
materially injurious to the Employer, monetarily or otherwise; or (3) the
willful violation by the Employee of the provisions of this Agreement. For
purposes of this paragraph, no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief by him that his action or omission
was in the best interest of the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause without (i) reasonable notice to the Employee setting
forth the reasons for the Employer's intention to terminate for Cause and
granting Employee 90 days to cure or remedy (if possible) the reasons for
termination; (ii) an opportunity for the Employee, together with his counsel, to
be heard before the Board, and (iii) delivery to the Employee of a Notice of
Termination as defined in section 4.2 hereof from the Board finding that in the
good faith opinion of the Board the Employee was guilty of conduct set forth
above in clause (1), (2) or (3) of the preceding paragraph and was unable to
cure or remedy the reasons for termination, and specifying the particulars
thereof in detail.
4.2 Notice of Termination. Any termination of the Employee's employment by
the Employer or by the Employee (other than termination pursuant to subsection
4.1.2 above) shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of employment under the provision so
indicated.
4.3 Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the date
on which a Notice of Termination is received by Employer or Employee.
4.4 Payment of Salary/Severance Pay Following Termination.
4.4.1 In the event of temporary or permanent disability of the
Employee as described in subsection 4.1.3 hereof Employee shall be entitled to
receive all compensation payable up to the Date of Termination notwithstanding
his temporary or permanent disability; any such payment, however, shall be
reduced by disability insurance benefits, if any, paid to Employee under
policies (other than group policies) for which Employer pays all premiums and
Employee is the beneficiary.
-5-
<PAGE>
4.4.2 Following the termination of this Agreement by the Employer for
Cause as provided in subsection 4.1.4 hereof, the Employee shall be entitled
only to compensation through the Date of Termination.
4.4.3 Following the termination of this Agreement by Employer for any
reason other than Cause or permanent disability, Employer shall pay Employee a
lump sum severance payment of $2.5 million, which amount shall be paid within
five business days of the date the Notice of Termination is delivered to
Employee.
4.5 Remedies. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at law,
equity, or under this Agreement.
ARTICLE V
INDEMNIFICATION
---------------
5.1 Indemnification. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including, without
limitation, reasonable attorneys' fees, hereafter or heretofore arising out of
or in connection with activities of Employer or its employees, including
Employee, or other agents in connection with and within the scope of this
Agreement or by reason of the fact that he is or was a director or officer of
Employer or any affiliate of Employer. To the fullest extent permitted by
applicable law, Employer shall advance to Employee expenses of defending any
such action, claim or proceeding. However, Employer shall not indemnify Employee
or defend Employee against, or hold him harmless from any claims, damages,
expenses or liabilities, including attorneys' fees, resulting from the gross
negligence or willful misconduct of Employee. The duty to indemnify shall
survive the expiration or early termination of this Agreement as to any claims
based on facts or conditions which occurred or are alleged to have occurred
prior to expiration or termination.
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
6.2 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the City
and County of Denver, Colorado in accordance with the rules then existing of the
American Arbitration Association and judgment upon the award may be entered in
any court having jurisdiction thereof.
-6-
<PAGE>
6.3 Entire Agreement. This Agreement supersedes any and all other
Agreements, whether oral or in writing, between the parties with respect to the
employment of the Employee by the Employer.
6.4 Successors and Assigns. This Agreement, all terms and conditions
hereunder, and all remedies arising herefrom, shall inure to the benefit of and
be binding upon Employer, any successor in interest to all or substantially all
of the business and/or assets of Employer, and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be assigned
or transferred by either party without the prior written consent of the other
party.
6.5 Notices. For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: Michael I. Ruxin, M.D.
7558 S. Turkey Creek
Morrison, CO 80465
If to Employer: National MRO, Inc.
12600 W. Colfax Avenue
Suite A-500
Lakewood, Colorado 80215
Attn: William Collard, Secretary/ Treasurer
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
6.6 Severability. If any provision of this Agreement is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction as to
such jurisdiction, such provision shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions hereof.
6.7 Section Headings. The section headings used in this Agreement are for
convenience only and shall not affect the construction of any terms of this
Agreement.
6.8 Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Employer or Employee of any obligation accruing or arising
prior to such termination.
6.9 Amendments. This Agreement may be amended only by written agreement of
both Employer and Employee.
-7-
<PAGE>
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument. This Agreement shall
become effective when copies hereof, when taken together, shall bear the
signatures of both parties hereto. It shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
6.11 Fees and Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled.
"EMPLOYER"
NATIONAL MRO, INC.
By /S/ WILLIAM J. COLLARD
--------------------------------------
William J. Collard, Secretary/Treasurer
"EMPLOYEE"
/S/ MICHAEL I. RUXIN
-----------------------------------------
Michael I. Ruxin, M.D.
-8-
<PAGE>
Schedule 2.1
Dr. Mick Ruxin
The Chief Executive Officer of Global Data Technologies (GDT) is responsible
for:
Ensuring that WT's activities are consistent with the objectives outlined
by the corporation's Board of Directors.
Ensuring that the company meets all of its financial obligations to the
employees and outside firms and contributors.
Ensuring the close coordination and communication among the divisions of
GDT.
Ensuring that the moral, legal, professional, and contractual commitments
and obligations of GDT and its employees is beyond reproach.
Interfacing with the board of directors and stockholders.
Developing strategic marketing and financial plans both short-term and
long-term for the company.
Raising the capital to meet GDT's short-term and long-term financial
obligations.
Using GDT's financial resources in the best interest of the company.
Ensuring tthat the divisions of GDT closely follow ISO 9000 principles.
<PAGE>
Schedule 3.2
Employer shall pay 100% of the cost of health insurance and dental
insurance for Employee, Employee's spouse and Employee's two dependents.
Employee also will be entitled to all paid holidays as customarily are extended
to executive employees. Employee will be entitled to the following vacation and
sick leave:
Accrued vacation as of April 30, 1995 960 hours
Accrued sick leave as of April 30, 1995 60 hours
Employee will accrue vacation time at the rate of 16 hours per month, 192
hours per year. Employee will accrue sick leave at the rate of 8 hours per
month, 96 hours per year.
-10-
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 8th day of July,
1995, between Global Med Technologies, Inc., a Colorado Corporation (the
"Employer") and Michael I. Ruxin (the "Employee").
WHEREAS, Employer and Employee entered into an Employment Agrement dated
May 24, 1995 (the "Employment Agreement"); and
WHEREAS, Employer and Employee now desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby amend the Employment Agreement and
agree as follows:
1. The following new section 3.5 hereby is added to the Employment
Agreement:
3.5 Expenses. Employment Agreement is amended to eliminate
the requirements imposed by section 3.3. Employee will not
be required to receive prior board approval for expenses
incurred in excess of $20,000 per year.
In witness whereof, this Amendment to the Employment Agreement is effective
as of the date first written above.
"EMPLOYER"
By /S/ WILLIAM J. COLLARD
------------------------------
William J. Collard
Secretary Treasurer
"EMPLOYEE"
By /S/ MICHAEL I. RUXIN
------------------------------
Michael I. Ruxin, M.D.
Chairman and CEO
<PAGE>
AMENDMENT TWO TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TWO TO EMPLOYMENT AGREEMENT is executed this 17th day of
January, 1996, to be effective as of the 1st day of August, 1995, between Global
Data Technologies, Inc., a Colorado corporation (the "Employer") and Michael I.
Ruxin (the "Employee").
WHEREAS, Employer and Employee entered into an Employment Agreement dated
May 24, 1995 (the "Employment Agreement"); and
WHEREAS, Employer and Employee entered into an Amendment to Employment
Agreement dated September 21, 1995 ("Amendment One"); and
WHEREAS, Employer and Employee again desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby amend the Employment Agreement and
agree as follows:
1. Section 2.4 hereby is amended to read as follows:
2.4 Restrictive Covenant. Effective commencing August 1, 1995 and
continuing for a period of the longer of five years from the date of this
Agreement, or the term of this Agreement, the Employee will not, within the
States of Colorado and California (or, even though the parties agree that such
limitation is reasonable, if such locations are determined by a court to be too
broad, such geographic area as such court may determine is reasonable) directly
or indirectly, own, manage, operate, control, be employed on a full time basis
in a managerial capacity by, participate in or be connected in any manner with
the ownership, management, operation or control of any business in direct
competition with the type of business conducted by the Employer. In the event of
an actual or threatened breach by the Employee of the provisions of this
paragraph, the Employer shall be entitled to seek an injunction restraining the
Employee from owning, managing, operating, controlling, being employed by,
participating in or being in any way so connected with any business in direct
competition with the type of business conducted by the Employer during the term
of this Agreement. Nothing herein stated shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach.
2. Section 3.3 hereby is amended to read as follows:
3.3 Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder. Employer shall advance reasonable estimates of such expenses upon
request of the Employee.
<PAGE>
3. Section 3.4 hereby is amended to read as follows:
3.4 Payment for Employee's Restrictive Covenant. Effective commencing
August 1, 1995, as consideration for Employee's entering into this Agreement,
and the restrictive covenant set forth in Section 2.4 above, Employer shall pay
Employee the sum of ONE HUNDRED FIFTEEN THOUSAND AND NO/100 DOLLARS
($115,000.00) (hereinafter the "Covenant Payment"). The Covenant Payment shall
be paid on January 1, 1996; provided, however, that such payment shall be made
only if and when sufficient cash flow is available, as determined by the Board
of Directors. Notwithstanding the above, upon termination of this Agreement for
any reason, or upon the happening of any event listed in Section 4.1.1 of this
Agreement without termination by Employee, any then remaining unpaid balance of
the Covenant Payment shall become immediately due and shall be immediately paid
by Employer to Employee.
IN WITNESS WHEREOF, this Amendment Two to Employment Agreement is effective
as of the date written above.
"EMPLOYER"
GLOBAL DATA TECHNOLOGIES, INC.
By /S/ WILLIAM J. COLLARD
---------------------------------------
William J. Collard, Secretary/Treasurer
"EMPLOYEE"
/S/ MICHAEL I. RUXIN
---------------------------------------
Michael I. Ruxin, M.D.
2
<PAGE>
GLOBAL DATA
TECHNOLOGIES (TM)
July 8, 1996
Mick Ruxin
Chairman and CEO
Global Med Technologies, Inc.
12600 W. Colfax, Suite A500
Lakewood, CO 80215
Dear Mick,
This letter is to confirm your acknowledgement of the delayed payment for your
Non Compete Agreement. The reason for the delay in payment on the Non Compete
Agreement is outlined in the Amendment to the Employment Agreement, which was
approved by the Board on September 21, 1995. Though the Non Compete Agreement
requires payment of the $115,000 on January 1, 1996, there is an allowance such
that "payment shall be made only if and when sufficient cash flow is available,
as determined by the Board of Directors". As of this date, the company does not
have sufficient cashflows to make payment on this agreement.
After reviewing this memo, please sign below indicating that you acknowledge
that the payment for your Non Compete Agreement will be made only when the
company provides sufficient cash flow, as determined by the Board of Directors.
Please let me know if you have any questions.
Best Regards,
/S/ BART VALDEZ
- -----------------------------------
Bart Valdez
Director of Finance and Operations
I have read and understand the contents of this letter and further acknowledge
that payment will be delayed per the terms of the Amendment to Employment
Agreement.
/S/ MICK RUXIN
- -----------------------------------
Mick Ruxin
Chairman and CEO
Global Data Technologies, (TM) Inc. 12600 West Colfax, Suite A500
Lakewood, CO 80215-3734
(303) 238-2000 PHONE (800) 873-8718 (303) 238-2009 FAX
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 21st day of
September, 1995, between Global Data Technologies, Inc., a Colorado corporation
(the "Employer") and Michael I. Ruxin (the "Employee").
WHEREAS, Employer and Employee entered into an Employment Agreement dated
May 24, 1995 (the "Employment Agreement"); and
WHEREAS, Employer and Employee now desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby amend the Employment Agreement and
agree as follows:
1. The following new section 2.4 hereby is added to the Employment
Agreement:
2.4 Restrictive Covenant. For a period of the longer of five years from the
date of this Agreement, or the term of this Agreement, the Employee will not,
within the States of Colorado and California (or, even though the parties agree
that such limitation is reasonable, if such locations are determined by a court
to be too broad, such geographic area as such court may determine is reasonable)
directly or indirectly, own, manage, operate, control, be employed on a full
time basis in a managerial capacity by, participate in or be connected in any
manner with the ownership, management, operation or control of any business in
direct competition with the type of business conducted by the Employer. In the
event of an actual or threatened breach by the Employee of the provisions of
this paragraph, the Employer shall be entitled to seek an injunction restraining
the Employee from owning, managing, operating, controlling, being employed by,
participating in or being in any way so connected with any business in direct
competition with the type of business conducted by the Employer during the term
of this Agreement. Nothing herein stated shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach.
2. The following new section 3.4 hereby is added to the Employment
Agreement:
3.4 Payment for Employee's Restrictive Covenant. As consideration for
Employee's entering into this Agreement, and the restrictive covenant set forth
in Section 2.4 above, Employer shall pay Employee the sum of ONE HUNDRED FIFTEEN
THOUSAND AND NO/100 DOLLARS ($115,000.00) (hereinafter the "Covenant Payment").
The Covenant Payment shall be paid on January 1, 1996; provided, however, that
such payment shall be made only if and when
1
<PAGE>
sufficient cash flow is available, as determined by the Board of Directors.
Notwithstanding the above, upon termination of this Agreement for any reason, or
upon the happening of any event listed in Section 4.1.1 of this Agreement
without termination by Employee, any then remaining unpaid balance of the
Covenant Payment shall become immediately due and shall be immediately paid by
Employer to Employee.
IN WITNESS WHEREOF, this Amendment to Employment Agreement is effective as
of the date first written above.
"EMPLOYER"
GLOBAL DATA TECHNOLOGIES, INC.
By /S/ WILLIAM J. COLLARD
----------------------------------------
William J. Collard, Secretary/Treasurer
"EMPLOYEE"
/S/ MICHAEL I. RUXIN
-------------------------------------------
Michael I. Ruxin, M.D.
2
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is made July 15, 1996 effective as
of the 28th day of June, 1995 between Global Med Technologies, Inc., formerly
MRO, Inc. and Global Data Technologies, Inc., a Colorado corporation (the
"Employer") and Michael I. Ruxin, (the "Employee").
WHEREAS, Employee presently is employed by Employer;
WHEREAS, Employer has entered into an Employment Agreement with Joseph
Dudziak, effective June 28, 1995, employing said Joseph Dudziak as president of
the Employer.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Amendment to Employment Agreement and the Employment Agreement, dated May 24,
1995, the Employer and Employee hereby agree as follows:
Paragraph 2.1 of Article II entitled "Duties of the Employee" is amended to
read as follows:
2.1 - Duties: The employee shall be employed with the title
of Chairman, and Chief Executive Officer, with
responsibilities and authority as are customarily performed
by such an officer, including but not limited to those
duties described in Schedule 2.1 and as may from time to
time be assigned to Employee by the Board of Directors of
Employer. Employee will continue to have for the term of
this Agreement, all authority and responsibility that
Employee had at the time this Agreement commenced, except
those duties as President of the organization.
IN WITNESS WHEREOF, this Amendment to Employment Agreement is effective as
of June 28, 1995.
EMPLOYER,
GLOBAL MED TECHNOLOGIES, INC.
By: /S/ JOSEPH DUDZIAK
------------------------------------
Joseph Dudziak, President
EMPLOYEE
By: /S/ MICHAEL I. RUXIN
------------------------------------
Michael I. Ruxin, M..D.
EXHIBIT 10.4
Exhibit D
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 24th day of May, 1995, between National
MRO, Inc., a Colorado corporation (the "Employer") and William J. Collard (the
"Employee").
WHEREAS, Employer has entered into an Agreement of Merger and Plan of
Reorganization with The Wyndgate Group, Ltd., a California corporation (the
"Merger Agreement") which requires Employer to enter into an Employment
Agreement with Employee;
WHEREAS, Employee previously was employed by Wyndgate and presently shall
be employed by Employer;
WHEREAS, Employer desires that Employee grant a restrictive covenant to
Employer as part of the Merger;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
------------------
1.1 Employment. The Employer agrees to employ the Employee and the Employee
agrees to be employed by the Employer upon the terms and conditions hereinafter
set forth.
1.2 Term. The employment of the Employee by the Employer as provided herein
shall commence on the Closing Date as defined in the Merger Agreement and shall
end five years from such date, unless sooner terminated by mutual agreement or
in accordance with the provisions of Article IV; provided, however, that at the
close of the second year of this Agreement the initial term hereof shall be
automatically extended for an additional two years beyond the initial term (for
a new initial term of seven years from the Closing Date) unless Employer or
Employee provides notice of the contrary to the other party at least 90 days
prior to the close of the second year.
1.3 Office and Support. Employee shall be provided an office and support
staff, including but not limited to secretarial services, at the principal place
of business for the Wyndgate division office in Rancho Cordova, California. Such
office and services shall be the same or comparable to the office and support
services provided at the time of commencement of this Agreement.
1.4 Place of Performance. In connection with Employee's employment by
Employer, Employee shall be based at the Wyndgate division office in Rancho
Cordova, California except for required travel on Employer's business to an
<PAGE>
extent substantially consistent with Employee's customary business travel
obligations heretofore with Wyndgate. Employee shall not be required to relocate
as a requirement of continued employment under this Agreement.
ARTICLE II
DUTIES OF THE EMPLOYEE
----------------------
2.1 Duties. The Employee shall be employed with the title of
Secretary/Treasurer of Employer and President of Employer's Wyndgate division,
with responsibilities and authority as are customarily performed by such an
officer including, but not limited to those duties described in Schedule 2.1 and
as may from time to time be assigned to Employee by the Board of Directors of
Employer. Employee will continue to have for the term of this Agreement all
authority and responsibility that Employee had at the time this Agreement
commenced and while employed by Wyndgate.
2.2 Extent of Duties. Employee shall devote substantially his full time,
attention and energies to the business of the Employer.
2.3 Disclosure of Information.
2.3.1 The Employee recognizes and acknowledges that the information,
processes, developments, experimental work, work in progress, business, list of
the Employer's customers and any other trade secret or other secret or
confidential information relating to Employer's business as they may exist from
time to time are valuable, special and unique assets of Employer's business.
Therefore, Employee agrees that:
(i) Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to his
employment, without the express authorization of the Board of Directors of the
Employer, any information, process, development or experimental work, work in
process, business, customer lists, trade secret or any other secret or
confidential matter relating to any aspect of the Employer's business, except as
such disclosure or use may be required in connection with Employee's work for
the Employer.
(ii) Upon request or at the time of leaving the employ of the
Employer, the Employee will deliver to the Employer, and not keep or deliver to
anyone else, any and all notes, memoranda, documents and, in general, any and
all material relating to the Employer's business.
2.3.2 In the event of a breach or threatened breach by the Employee of
the provisions of this section 2.3, the Employer shall be entitled to an
injunction (i) restraining the Employee from disclosing, in whole or in part,
any information as described above or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
-2-
<PAGE>
whole or in part, has been disclosed or is threatened to be disclosed; and/or
(ii) requiring that Employee deliver to Employer all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Employer. Nothing herein shall
be construed as prohibiting the Employer from pursuing other remedies available
to the Employer for such breach or threatened breach, including the recovery of
damages from the Employee.
2.4 Restrictive Covenant. For a period of the longer of five years from the
date of this Agreement, or the term of this Agreement, the Employee will not,
within the States of Colorado and California (or, even though the parties agree
that such limitation is reasonable, if such locations are determined by a court
to be too broad, such geographic area as such court may determine is reasonable)
directly or indirectly, own, manage, operate, control, be employed on a full
time basis in a managerial capacity by, participate in or be connected in any
manner with the ownership, management, operation or control of any business in
direct competition with the type of business conducted by the Employer. In the
event of an actual or threatened breach by the Employee of the provisions of
this paragraph, the Employer shall be entitled to seek an injunction restraining
the Employee from owning, managing, operating, controlling, being employed by,
participating in or being in any way so connected with any business in direct
competition with the type of business conducted by the Employer during the term
of this Agreement. Nothing herein stated shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach.
ARTICLE III
COMPENSATION OF THE EMPLOYEE
----------------------------
3.1 Compensation. As compensation for services rendered under this
Agreement, the Employee shall receive a salary at the rate of $100,000 per annum
to be paid in accordance with Employer's normal practices. This salary shall be
increased for cost-of-living at the rate of 2 1/2% per annum, plus any other
increase which may be determined from time to time in the discretion of the
Employer's Board of Directors. If increased, this salary shall not be decreased
thereafter during the term of this Agreement without the consent of the
Employee. The salary provided in this subsection shall in no way be deemed
exclusive and shall not prevent Employee from participating in any other
compensation or benefit plan of Employer.
3.2 Benefits. Employee shall be entitled to the benefits as set forth in
Schedule 3.2. Employee shall be entitled to participate in all of Employer's
employee benefit plans and employee benefits, including any retirement, pension,
profit-sharing, stock option, insurance, hospital or other plans and benefits
which now may be in effect or which may hereafter be adopted, it being
understood that Employee shall have the same rights and privileges to
participate in such plans and benefits as any other executive employee during
the term of this Agreement. Participation in any benefit plans shall be in
addition to the compensation provided for in Section 3.1. Employee shall be
entitled to receive any and all benefits that he was entitled to receive at the
time this Agreement commenced and while employed by Wyndgate as set forth in
Schedule 3.2.
-3-
<PAGE>
3.3 Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder. Employer shall advance reasonable estimates of such expenses upon
request of the Employee; provided, however, that any such advance cannot exceed
$2,500 without prior approval of Employer's Board of Directors.
3.4 Payment for Employee's Restrictive Covenant. As consideration for
Employee's entering into this Agreement, and the restrictive covenant set forth
in Section 2.4 above, Employer shall pay Employee the sum of TWO HUNDRED
THOUSAND AND NO/100 DOLLARS ($200,000.00) (hereinafter the "Covenant Payment").
The Covenant Payment shall be paid as follows: (i) $100,000 on 1/1/96; and (ii)
$100,000 12 months from the date of this Agreement. Notwithstanding the above,
upon termination of this Agreement for any reason, or upon the happening of any
event listed in Section 4.1.1 of this Agreement without termination by Employee,
any then remaining unpaid balance of the Covenant Payment shall become
immediately due and shall be immediately paid by Employer to Employee. This
obligation shall be secured by a Security Agreement and Financing Statement with
assets of Employer's Wyndgate division.
ARTICLE IV
TERMINATION OF EMPLOYMENT
-------------------------
4.1 Termination. The Employee's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
4.1.1 By Employee. Upon the occurrence of any of the following events
this Agreement may be terminated by the Employee by written notice to Employer:
(i) the sale by Employer of substantially all of its assets;
(ii) the sale, exchange or other disposition, in one transaction
or a series of related transactions, of at least 40% percent of the outstanding
voting shares of Employer;
(iii) a decision by Employer to terminate its business and
liquidate its assets;
(iv) the merger or consolidation of Employer with another entity
or an agreement to such a merger or consolidation or any other type of
reorganization;
(v) Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more, or Employer seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer or any material party of its assets; or
-4-
<PAGE>
(vi) there are material changes in Employee's duties and
responsibilities without his written consent.
4.1.2 Death. This Agreement shall terminate upon the death of
Employee.
4.1.3 Disability. This Agreement shall not terminate upon the
temporary disability of the Employee, but the Employer may terminate this
Agreement upon the permanent disability of the Employee. Employee shall be
considered permanently disabled if: (1) he is disabled as defined in a
disability insurance policy purchased by or for the benefit of the Employee; or
(2) if no such policy is in effect, he is incapacitated to such an extent due to
a medically determinable physical or mental condition that he is unable to
perform substantially all of his duties for 9 consecutive months for Employer
that he performed prior to such incapacitation.
4.1.4 Cause. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the Employer shall have
"Cause" to terminate the Employee's employment hereunder upon the following: (1)
the willful and continued failure by the Employee substantially to perform his
duties hereunder (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after demand for substantial
performance is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Employee has not substantially performed his
duties; or (2) the willful engaging by the Employee in misconduct which is
materially injurious to the Employer, monetarily or otherwise; or (3) the
willful violation by the Employee of the provisions of this Agreement. For
purposes of this paragraph, no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief by him that his action or omission
was in the best interest of the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause without (i) reasonable notice to the Employee setting
forth the reasons for the Employer's intention to terminate for Cause and
granting Employee 90 days to cure or remedy (if possible) the reasons for
termination; (ii) an opportunity for the Employee, together with his counsel, to
be heard before the Board, and (iii) delivery to the Employee of a Notice of
Termination as defined in section 4.2 hereof from the Board finding that in the
good faith opinion of the Board the Employee was guilty of conduct set forth
above in clause (1), (2) or (3) of the preceding paragraph and was unable to
cure or remedy the reasons for termination, and specifying the particulars
thereof in detail.
4.2 Notice of Termination. Any termination of the Employee's employment by
the Employer or by the Employee (other than termination pursuant to subsection
4.1.2 above) shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
-5-
<PAGE>
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under the
provision so indicated.
4.3 Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the date
on which a Notice of Termination is received by Employer or Employee.
4.4 Payment of Salary/Severance Pay Following Termination.
4.4.1 In the event of temporary or permanent disability of the
Employee as described in subsection 4.1.3 hereof Employee shall be entitled to
receive all compensation payable up to the Date of Termination notwithstanding
his temporary or permanent disability; any such payment, however, shall be
reduced by disability insurance benefits, if any, paid to Employee under
policies (other than group policies) for which Employer pays all premiums and
Employee is the beneficiary.
4.4.2 Following the termination of this Agreement by the Employer for
Cause as provided in subsection 4.1.4 hereof, the Employee shall be entitled
only to compensation through the Date of Termination.
4.4.3 Following the termination of this Agreement by Employer for any
reason other than Cause or permanent disability, Employer shall pay Employee a
lump sum severance payment of $2.5 million, which amount shall be paid within
five business days of the date the Notice of Termination is delivered to
Employee.
4.5 Remedies. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at law,
equity, or under this Agreement.
ARTICLE V
INDEMNIFICATION
---------------
5.1 Indemnification. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including, without
limitation, reasonable attorneys' fees, hereafter or heretofore arising out of
or in connection with activities of Employer or its employees, including
Employee, or other agents in connection with and within the scope of this
Agreement or by reason of the fact that he is or was a director or officer of
Employer or any affiliate of Employer. To the fullest extent permitted by
applicable law, Employer shall advance to Employee expenses of defending any
such action, claim or proceeding. However, Employer shall not indemnify Employee
or defend Employee against, or hold him harmless from any claims, damages,
-6-
<PAGE>
expenses or liabilities, including attorneys' fees, resulting from the gross
negligence or willful misconduct of Employee. The duty to indemnify shall
survive the expiration or early termination of this Agreement as to any claims
based on facts or conditions which occurred or are alleged to have occurred
prior to expiration or termination.
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
6.2 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the City
and County of Sacramento, California in accordance with the rules then existing
of the American Arbitration Association and judgment upon the award may be
entered in any court having jurisdiction thereof.
6.3 Entire Agreement. This Agreement supersedes any and all other
Agreements, whether oral or in writing, between the parties with respect to the
employment of the Employee by the Employer.
6.4 Successors and Assigns. This Agreement, all terms and conditions
hereunder, and all remedies arising herefrom, shall inure to the benefit of and
be binding upon Employer, any successor in interest to all or substantially all
of the business and/or assets of Employer, and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be assigned
or transferred by either party without the prior written consent of the other
party.
6.5 Notices. For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: William J. Collard
11375 Gold Country Blvd.
Gold River, CA 95670
If to Employer: National MRO, Inc.
12600 W. Colfax Avenue
Suite A-500
Lakewood, Colorado 80215
Attn: Michael I. Ruxin, Chairman
-7-
<PAGE>
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
6.6 Severability. If any provision of this Agreement is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction as to
such jurisdiction, such provision shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions hereof.
6.7 Section Headings. The section headings used in this Agreement are for
convenience only and shall not affect the construction of any terms of this
Agreement.
6.8 Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Employer or Employee of any obligation accruing or arising
prior to such termination.
6.9 Amendments. This Agreement may be amended only by written agreement of
both Employer and Employee.
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument. This Agreement shall
become effective when copies hereof, when taken together, shall bear the
signatures of both parties hereto. It shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
6.11 Fees and Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled.
"EMPLOYER"
NATIONAL MRO, INC.
By /S/ MICHAEL I. RUXIN
----------------------------------
Michael I. Ruxin, President
"EMPLOYEE"
/S/ WILLIAM J. COLLARD
----------------------------------
William J. Collard
-8-
<PAGE>
Schedule 2.1
Duties of Employee
William J. Collard
The President of Wyndgate Technologies (WT) is responsible for:
Ensuring that WT's activities are consistent with the objectives outlined
by the corporation's Board of Directors.
Ensuring that WT meets all of its client commitments, both implied and
contractual.
Ensuring and encouraging the close coordination and communication between
Wyndgate Technologies and Global Data Technologies (GDT).
Conveying the high moral, ethical, non-discriminatory, legal, and
professional image of GDT, WT, and its employees.
Serving as the primary liaison with various national and state
organizations involved in the design and delivery of data processing
systems and services.
Being a highly-visible and available contact for all education and blood
center customers in order to illustrate the partnering nature of
business-customer relationships on which Wyndgate is built.
Providing an open communication channel within WT for all directors,
managers, and employees.
Resolving any day-to-day activities that require high-level management
participation and decision making.
Planning and organizing WT-wide staffing requirements.
Ensuring the forward direction of WT in areas such as technology, market
share, and revenue generation.
Directing staffing for consulting assignments.
Recognizing and recommending to GDT any new marketing areas and
opportunities for WT or GDT consideration.
Providing a stabilizing presence of continuity among all WT customers
during the upcoming year of transition.
Controlling budgetary activities within WT in order to absorb and effect an
influx of resources in the most effective manner.
Directing the hiring of resources.
Managing the most efficient and effective organizational structure to
encompass new opportunities and resources as quickly, effectively and as
cost-efficiently as possible.
<PAGE>
Schedule 3.2
William J. Collard
11375 Gold Country Blvd.
Gold River, CA 95670
Vacation/Sick Leave Structure
- -----------------------------
As of April 30, 1995 Vacation Accrued 1048 hours
Sick Leave Accrued 104 hours
Vacation accrual rate 16 hours per month, 192 hours per year. Sick Leave accrual
rate 8 hours per month, 96 hours per year (rollover on
anniversary date 32 hours).
Health Insurance Structure
- ---------------------------
Company pays 100% for employee and either employee's spouse or one dependent.
Other family member can be added at a cost to the employee. The additional
insurance expense is paid by the employee via a payroll deduction.
William J. Collard Self
Holiday Observances
- -------------------
The following are paid holidays observed by the company.
New Years Day
Martin Luther King Jr.'s Birthday
Presidents Day
Memorial Day
Independence Day
Labor Day
Columbus Day
Thanksgiving Day and Day after
Christmas Eve and Christmas Day
New Years Eve
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is executed this 22 day of July,
1996, to be effective as of the 1st day of August, 1995, between Global Data
Technologies, Inc., a Colorado corporation (the "Employer") and William J.
Collard (the "Employee").
WHEREAS, Employer and Employee entered into an Employment Agreement dated
May 24, 1995 (the "Employment Agreement"); and
WHEREAS, Employer and Employee now desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby amend the Employment Agreement and
agree as follows:
1. Section 2.4 hereby is amended to read as follows:
2.4 Restrictive Covenant. Effective commencing August 1, 1995 and
continuing for a period of the longer of five years from the date of
this Agreement, or the term of this Agreement, the Employee will not,
within the States of Colorado and California (or, even though the
parties agree that such limitation is reasonable, if such locations
are determined by a court to be too broad, such geographic area as
such court may determine is reasonable) directly or indirectly, own,
manage, operate, control, be employed on a full time basis in a
managerial capacity by, participate in or be connected in any manner
with the ownership, management, operation or control of any business
in direct competition with the type of business conducted by the
Employer. In the event of an actual or threatened breach by the
Employee of the provisions of this paragraph, the Employer shall be
entitled to seek an injunction restraining the Employee from owning,
managing, operating, controlling, being employed by, participating in
or being in any way so connected with any business in direct
competition with the type of business conducted by the Employer during
the term of this Agreement. Nothing herein stated shall be construed
as prohibiting the Employer from pursuing any other remedies available
to the Employer for such breach or threatened breach.
2. Section 3.4 hereby is amended to read as follows:
3.4 Payment for Employee's Restrictive Covenant. Effective commencing
August 1, 1995, as consideration for Employee's entering into this
Agreement, and the restrictive covenant set forth in Section 2.4
above, Employer shall pay Employee the sum of TWO HUNDRED THOUSAND AND
NO/100 DOLLARS ($200,000.00) (hereinafter the "Covenant Payment"). The
Covenant Payment shall be paid as follows: (i) $100,000 on 1/1/96; and
(ii) $100,000 12 months from the date of this Agreement.
<PAGE>
Notwithstanding the above, upon termination of this Agreement for any
reason, or upon the happening of any event listed in Section 4.1.1 of
this Agreement without termination by Employee, any then remaining
unpaid balance of the Covenant Payment shall become immediately due
and shall be immediately paid by Employer to Employee. This obligation
shall be secured by a Security Agreement and Financing Statement with
assets of Employer's Wyndgate division.
IN WITNESS WHEREOF, this Amendment to Employment Agreement is effective
as of the date written above.
"EMPLOYER"
GLOBAL DATA TECHNOLOGIES, INC.
By /S/ MICHAEL I. RUXIN
------------------------------------
Michael I. Ruxin, Chairman
"EMPLOYEE"
/S/ WILLIAM J. COLLARD
--------------------------------
William J. Collard
2
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 28th day of June, 1995, between Global
Data Technologies, Inc. (f/k/a National MRO, Inc.), a Colorado corporation (the
"Employer") and Joseph F. Dudziak (the "Employee").
WHEREAS, Employee is not presently employed by Employer;
WHEREAS, Employer desires to hire Employee and has negotiated with Employee
with respect to the terms of such employment;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
------------------
1.1 Employment. The Employer agrees to employ the Employee and the Employee
agrees to be employed by the Employer upon the terms and conditions hereinafter
set forth.
1.2 Term. The employment of the Employee by the Employer as provided herein
shall commence June 28, 1995 and shall end two years from such date, unless
sooner terminated by mutual agreement or in accordance with the provisions of
Article IV.
1.3 Office and Support. Employee shall be provided an office and support
staff, including but not limited to secretarial services, at Employer's
principal place of business.
1.4 Place of Performance. In connection with Employee's employment by
Employer, Employee shall be based at Employer's office in Lakewood, Colorado,
except for required travel on Employer's business.
ARTICLE II
DUTIES OF THE EMPLOYEE
----------------------
2.1 Duties. The Employee shall be employed with the title of President and
Chief Operating Officer, with responsibilities and authority as are customarily
performed by such an officer and as may from time to time be assigned to
Employee by Employer's Chairman and Chief Executive Officer or Board of
Directors. Employee shall report directly to the Chairman and Chief Executive
Officer.
2.2 Extent of Duties. Employee shall devote substantially his full time,
attention and energies to the business of the Employer.
<PAGE>
2.3 Disclosure of Information.
2.3.1 The Employee recognizes and acknowledges that the information,
processes, developments, experimental work, work in progress, business, list of
the Employer's customers and any other trade secret or other secret or
confidential information relating to Employer's business as they may exist from
time to time are valuable, special and unique assets of Employer's business.
Therefore, Employee agrees that:
(i) Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to his
employment, without the express authorization of the Board of Directors of the
Employer, any information, process, development or experimental work, work in
process, business, customer lists, trade secret or any other secret or
confidential matter relating to any aspect of the Employer's business, except as
such disclosure or use may be required in connection with Employee's work for
the Employer.
(ii) Upon request or at the time of leaving the employ of the
Employer, the Employee will deliver to the Employer, and not keep or deliver to
anyone else, any and all notes, memoranda, documents and, in general, any and
all material relating to the Employer's business.
2.3.2 In the event of a breach or threatened breach by the Employee of
the provisions of this section 2.3, the Employer shall be entitled to an
injunction (i) restraining the Employee from disclosing, in whole or in part,
any information as described above or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed; and/or
(ii) requiring that Employee deliver to Employer all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Employer. Nothing herein shall
be construed as prohibiting the Employer from pursuing other remedies available
to the Employer for such breach or threatened breach, including the recovery of
damages from the Employee.
ARTICLE III
COMPENSATION OF THE EMPLOYEE
----------------------------
3.1 Compensation. As compensation for services rendered under this
Agreement, the Employee shall receive a salary at the rate of $105,000 per annum
to be paid in accordance with Employer's normal practices. If increased, this
salary shall not be decreased thereafter during the term of this Agreement
without the consent of the Employee. The salary provided in this subsection
shall in no way be deemed exclusive and shall not prevent Employee from
participating in any other compensation or benefit plan of Employer.
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<PAGE>
3.2 Incentive Compensation. Employee shall be entitled to incentive
compensation in the following amounts based upon Employer's pre-tax profits (on
an accrual basis to be determined by Employer's accountants) as reflected in
Employer's audited financial statements for the calendar years ending 1995 and
1996:
Employer 1995 Pre Tax Profit Employee 1995 Bonus
---------------------------- -------------------
up to $ 557,000 $ 0
at least $ 557,000 $25,000
at least $ 750,000 $37,500
at least $1,000,000 $50,000
Employer 1996 Pre Tax Profit Employee 1996 Bonus
---------------------------- -------------------
up to $1,000,000 $ 0
at least $1,000,000 $ 50,000
at least $2,500,000 $100,000
at least $4,000,000 $150,000
3.3 Benefits. Employee shall be entitled to participate in all of
Employer's employee benefit plans and employee benefits, including any
retirement, pension, profit-sharing, stock option, insurance, hospital or other
plans and benefits which now may be in effect or which may hereafter be adopted,
it being understood that Employee shall have the same rights and privileges to
participate in such plans and benefits as any other executive employee during
the term of this Agreement. Participation in any benefit plans shall be in
addition to the compensation provided for in Section 3.1. Employer shall pay
premiums for health insurance covering Employee and his spouse. Employee shall
be provided with a car allowance of $400 per month. Employee shall be reimbursed
for moving expenses to cover the costs of relocating from Rochester, Minnesota
to the metropolitan area of Denver, Colorado, provided, however, that such
reimbursement shall not exceed $25,000.
3.4 Stock Options Employee shall receive incentive stock options (under
Employer's Stock Option Plan) to purchase an aggregate of 100,000 shares of
Employer's common stock at an exercise price of $2.50 per share. Twenty percent
(20%) of the options shall vest and become exercisable upon Employee's
completion of each year of employment with Employer, as follows:
Shares Underlying Option Dates Exercisable
------------------------ -----------------
20,000 6/28/1996 - 6/27/2006
20,000 6/28/1997 - 6/27/2007
20,000 6/28/1998 - 6/27/2008
20,000 6/28/1999 - 6/27/2009
20,000 6/28/2000 - 6/28/2010
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<PAGE>
If Employer: (i) sells substantially all of its assets, or (ii) merges or
consolidates with another entity or otherwise reorganizes whereby the total
market value of Employer's common stock exceeds $28,000,000 as a result of such
transaction; then the entire 100,000 in options granted to Employee shall become
immediately 100% vested and immediately exercisable on the date preceding the
effective date of such sale, merger, consolidation or other reorganization;
provided, however, that Employer and Employee acknowledge that a public offering
of Employer's securities is specifically excluded from this accelerated vesting
provision.
Notwithstanding any other provision in this Agreement, regardless of the
vesting Employee must be employed by Employer at the time of exercise in order
to exercise such options, as required by Employer's Stock Option Plan.
3.5 Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder. Employer shall advance reasonable estimates of such expenses upon
request of the Employee.
ARTICLE IV
TERMINATION OF EMPLOYMENT
-------------------------
4.1 Termination. The Employee's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
4.1.1 By Employee. Upon the occurrence of any of the following events
this Agreement may be terminated by the Employee by written notice to Employer:
(i) the sale by Employer of substantially all of its assets;
(ii) a decision by Employer to terminate its business and
liquidate its assets;
(iii) the merger or consolidation of Employer with another entity
or an agreement to such a merger or consolidation or any other type of
reorganization;
(iv) Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more, or Employer seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer or any material party of its assets; or
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<PAGE>
(vi) there are material changes in Employee's duties and
responsibilities without his written consent.
4.1.2 Death. This Agreement shall terminate upon the death of
Employee.
4.1.3 Disability. The Employer may terminate this Agreement upon the
permanent or temporary disability of the Employee. Employee shall be considered
disabled (whether permanent or temporary) if: (1) he is disabled as defined in a
disability insurance policy purchased by or for the benefit of the Employee; or
(2) if no such policy is in effect, he is incapacitated to such an extent that
he is unable to perform substantially all of his duties for 60 consecutive days
for Employer that he performed prior to such incapacitation.
4.1.4 Cause. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the Employer shall have
"Cause" to terminate the Employee's employment hereunder upon the following: (1)
the willful and continued failure by the Employee substantially to perform his
duties hereunder (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after demand for substantial
performance is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Employee has not substantially performed his
duties; or (2) the willful engaging by the Employee in misconduct which is
materially injurious to the Employer, monetarily or otherwise; or (3) the
willful violation by the Employee of the provisions of this Agreement. For
purposes of this paragraph, no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief by him that his action or omission
was in the best interest of the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause without (i) reasonable notice to the Employee setting
forth the reasons for the Employer's intention to terminate for Cause and
granting Employee 30 days to cure or remedy (if possible) the reasons for
termination; and (ii) delivery to the Employee of a Notice of Termination as
defined in section 4.2 hereof from the Board finding that in the good faith
opinion of the Board the Employee was guilty of conduct set forth above in
clause (1), (2) or (3) of the preceding paragraph and was unable to cure or
remedy the reasons for termination, and specifying the particulars thereof in
detail.
4.2 Notice of Termination. Any termination of the Employee's employment by
the Employer or by the Employee (other than termination pursuant to subsection
4.1.2 above) shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of employment under the provision so
indicated.
-5-
<PAGE>
4.3 Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the date
on which a Notice of Termination is received by Employer or Employee.
4.4 Payment of Salary/Severance Pay Following Termination.
4.4.1 In the event of temporary or permanent disability of the
Employee as described in subsection 4.1.3 hereof Employee shall be entitled to
receive all compensation and benefits payable up to the Date of Termination
notwithstanding his temporary or permanent disability during the 60 day period
preceding the Date of Termination; any such payment, however, shall be reduced
by disability insurance benefits, if any, paid to Employee under policies (other
than group policies) for which Employer pays all premiums and Employee is the
beneficiary.
4.4.2 Following the termination of this Agreement by the Employer for
Cause as provided in subsection 4.1.4 hereof, the Employee shall be entitled
only to compensation through the Date of Termination.
4.4.3 Following the termination of this Agreement by the Employer for
any reason other than Cause or the temporary or permanent disability of
Employee, the Employee shall be entitled to compensation and benefits for the
full two year period commencing June 28, 1995.
4.5 Remedies. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at law,
equity, or under this Agreement.
ARTICLE V
INDEMNIFICATION
---------------
5.1 Indemnification. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including, without
limitation, reasonable attorneys' fees, hereafter or heretofore arising out of
or in connection with activities of Employer or its employees, including
Employee, or other agents in connection with and within the scope of this
Agreement or by reason of the fact that he is or was a director or officer of
Employer or any affiliate of Employer. To the fullest extent permitted by
applicable law, Employer shall advance to Employee expenses of defending any
such action, claim or proceeding. However, Employer shall not indemnify Employee
or defend Employee against, or hold him harmless from any claims, damages,
expenses or liabilities, including attorneys' fees, resulting from the gross
negligence or willful misconduct of Employee. The duty to indemnify shall
survive the expiration or early termination of this Agreement as to any claims
based on facts or conditions which occurred or are alleged to have occurred
prior to expiration or termination.
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<PAGE>
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
6.2 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the City
and County of Denver, Colorado in accordance with the rules then existing of the
American Arbitration Association and judgment upon the award may be entered in
any court having jurisdiction thereof.
6.3 Entire Agreement. This Agreement supersedes any and all other
Agreements, whether oral or in writing, between the parties with respect to the
employment of the Employee by the Employer.
6.4 Successors and Assigns. This Agreement, all terms and conditions
hereunder, and all remedies arising herefrom, shall inure to the benefit of and
be binding upon Employer, any successor in interest to all or substantially all
of the business and/or assets of Employer, and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be assigned
or transferred by either party without the prior written consent of the other
party.
6.5 Notices. For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: Joseph F. Dudziak
1306 Woodland Drive SW
Rochester, Minnesota 55902
If to Employer: Global Data Technologies, Inc.
12600 W. Colfax Avenue
Suite A-500
Lakewood, Colorado 80215
Attn: Michael I. Ruxin, Chairman
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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<PAGE>
6.6 Severability. If any provision of this Agreement is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction as to
such jurisdiction, such provision shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions hereof.
6.7 Section Headings. The section headings used in this Agreement are for
convenience only and shall not affect the construction of any terms of this
Agreement.
6.8 Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Employer or Employee of any obligation accruing or arising
prior to such termination.
6.9 Amendments. This Agreement may be amended only by written agreement of
both Employer and Employee.
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument. This Agreement shall
become effective when copies hereof, when taken together, shall bear the
signatures of both parties hereto. It shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
6.11 Fees and Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled.
"EMPLOYER"
GLOBAL DATA TECHNOLOGIES, INC.
(f/k/a NATIONAL MRO, INC.)
By /S/ MICHAEL I. RUXIN
---------------------------------
Michael I. Ruxin, Chairman
"EMPLOYEE"
/S/ JOSEPH F. DUDZIAK
----------------------------------
Joseph F. Dudziak
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<PAGE>
Schedule 2.1
Duties of Employee
Employee shall be responsible for the day to day operations of Employer as
well as overall management of Employer, including certain policy making
decisions impacting day to day operations. Employee will report to the Chairman
and Chief Executive Officer.
-9-
<PAGE>
Schedule 3.3
Benefits
Employer shall pay 100% of the cost of health insurance under Employer's
health plan for Employee and Employee's spouse. Employee also will be entitled
to all paid holidays as customarily are extended to executive employees.
Employee will accrue vacation time at the rate of 10 hours per month, 120
hours per year. Employee will accrue sick leave at the rate of 3.4 hours per
month, 40 hours per year.
-10-
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 8th day of February, 1996, between Global
Data Technologies, Inc., a Colorado corporation (the "Employer") and L.E. "Gene"
Mundt (the "Employee").
WHEREAS, Employee is not presently employed by Employer;
WHEREAS, Employer desires to hire Employee and has negotiated with Employee
with respect to the terms of such employment;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Employer and Employee hereby agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
------------------
1.1 Employment. The Employer agrees to employ the Employee and the Employee
agrees to be employed by the Employer upon the terms and conditions hereinafter
set forth.
1.2 Term. The employment of the Employee by the Employer as provided herein
shall commence February 8, 1996 and shall end three years from such date, unless
sooner terminated by mutual agreement or in accordance with the provisions of
Article IV.
1.3 Office and Support. Employee shall be provided an office and support
staff, including but not limited to secretarial services, at the principal place
of business for Employer's Wyndgate Technologies division office in Rancho
Cordova, California.
1.4 Place of Performance. In connection with Employee's employment by
Employer, Employee shall be based at the Wyndgate Technologies division office
in Rancho Cordova, California except for required travel on Employer's business.
ARTICLE II
DUTIES OF THE EMPLOYEE
----------------------
2.1 Duties. The Employee shall be employed with the title of Senior Vice
President of Operations of Employer's Wyndgate Technologies division, with
responsibilities and authority as are customarily performed by such an officer
including, but not limited to those duties as may from time to time be assigned
to Employee by the President of Employer's Wyndgate Technologies division or by
Employer's Board of Directors. Employee shall report directly to the President
of Employer's Wyndgate Technologies division.
<PAGE>
2.2 Extent of Duties. Employee shall devote substantially his full time,
attention and energies to the business of the Employer.
2.3 Disclosure of Information.
2.3.1 The Employee recognizes and acknowledges that the information,
processes, developments, experimental work, work in progress, business, list of
the Employer's customers and any other trade secret or other secret or
confidential information relating to Employer's business as they may exist from
time to time are valuable, special and unique assets of Employer's business.
Therefore, Employee agrees that:
(i) Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to his
employment, without the express authorization of the Board of Directors of the
Employer, any information, process, development or experimental work, work in
process, business, customer lists, trade secret or any other secret or
confidential matter relating to any aspect of the Employer's business, except as
such disclosure or use may be required in connection with Employee's work for
the Employer.
(ii) Upon request or at the time of leaving the employ of the
Employer, the Employee will deliver to the Employer, and not keep or deliver to
anyone else, any and all notes, memoranda, documents and, in general, any and
all material relating to the Employer's business.
2.3.2 In the event of a breach or threatened breach by the Employee of
the provisions of this section 2.3, the Employer shall be entitled to an
injunction (i) restraining the Employee from disclosing, in whole or in part,
any information as described above or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed; and/or
(ii) requiring that Employee deliver to Employer all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Employer. Nothing herein shall
be construed as prohibiting the Employer from pursuing other remedies available
to the Employer for such breach or threatened breach, including the recovery of
damages from the Employee.
ARTICLE III
COMPENSATION OF THE EMPLOYEE
----------------------------
3.1 Compensation. As compensation for services rendered under this
Agreement, the Employee shall receive a salary at the rate of $95,000 per annum
to be paid in accordance with Employer's normal practices. If increased, this
salary shall not be decreased thereafter during the term of this Agreement
without the consent of the Employee. The salary provided in this subsection
shall in no way be deemed exclusive and shall not prevent Employee from
participating in any other compensation or benefit plan of Employer.
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<PAGE>
3.2 Incentive Compensation. Employee shall be entitled to incentive
compensation in the following amount for the 1996 calendar year based upon net
profit before taxes ("NPBT") of Wyndgate Technologies (on an accrual basis to be
determined by Employer's accountants) as reflected in Employer's audited
financial statements for the calendar year ending 1996:
NPBT 1996 Bonus
---- ----------
at least $450,000 but less than $500,000 $22,500
at least $500,000 but less than $550,000 $25,000
at least $550,000 $27,500
Employee shall be entitled to incentive compensation for the 1997 and 1998
calendar years in amounts to be mutually agreed upon by Employee and the
President of Employer's Wyndgate Technologies division.
3.3 Benefits. Employee shall be entitled to the benefits set forth in
Schedule 3.3. Employee shall be entitled to participate in all of Employer's
employee benefit plans and employee benefits, including any retirement, pension,
profit-sharing, stock option, insurance, hospital or other plans and benefits
which now may be in effect or which may hereafter be adopted, it being
understood that Employee shall have the same rights and privileges to
participate in such plans and benefits as any other executive employee during
the term of this Agreement. Participation in any benefit plans shall be in
addition to the compensation provided for in Section 3.1. Employer shall pay
premiums for health insurance covering Employee and his spouse. Employee shall
be provided with a car allowance of $400 per month. Employee shall be reimbursed
for moving expenses to cover the costs of relocating from Apple Valley,
Minnesota to the metropolitan area of Sacramento, California; provided, however,
that such reimbursement shall not exceed $25,000, such amount to be grossed up
to allow for payment of federal and state income taxes. In addition, Employee
shall be entitled to reimbursement (which amounts shall not be included in the
$25,000 maximum) for the following expenses incurred by Employee during the
relocation process: Employee's reasonable expenses for motel or apartment; and
reasonable travel for visits to the Sacramento area by Employee's spouse,
including reasonable expenses of Employee's spouse during such visits.
3.4 Stock Options Employee shall receive stock options (under Employer's
Stock Option Plan) to purchase an aggregate of 75,000 shares of Employer's
common stock at an exercise price of $3.75 per share, as follows: (i) Employee
shall receive non-qualified stock options to purchase 25,000 shares, exercisable
for ten years from the date of this Agreement. (ii) Employee shall receive
incentive stock options to purchase 50,000 shares, of which twenty percent (20%)
of the options shall vest and become exercisable upon Employee's completion of
each year of employment with Employer, as follows:
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<PAGE>
Shares Underlying Option Dates Exercisable
------------------------ -----------------
10,000 2/8/1997 - 2/7/2007
10,000 2/8/1998 - 2/7/2008
10,000 2/8/1999 - 2/7/2009
10,000 2/8/2000 - 2/7/2010
10,000 2/8/2001 - 2/7/2011
If Employer: (i) terminates Employee for any reason other than cause, or
(ii) merges or consolidates with another entity or otherwise reorganizes whereby
the total market value of Employer's common stock exceeds $28,000,000 as a
result of such transaction; then the entire 50,000 in incentive stock options
granted to Employee shall become immediately 100% vested and immediately
exercisable on the date preceding the effective date of such termination or
merger, consolidation or other reorganization; provided, however, that Employer
and Employee acknowledge that a public offering of Employer's securities is
specifically excluded from this accelerated vesting provision.
Notwithstanding any other provision in this Agreement, regardless of the
vesting Employee must comply with all terms and provisions of Employer's Stock
Option Plan in order to exercise any options.
3.5 Expenses. Employee shall be entitled to prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his duties
hereunder. Employer shall advance reasonable estimates of such expenses upon
request of the Employee.
ARTICLE IV
TERMINATION OF EMPLOYMENT
-------------------------
4.1 Termination. The Employee's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances:
4.1.1 By Employee. Upon the occurrence of any of the following events
this Agreement may be terminated by the Employee by written notice to Employer:
(i) the sale by Employer of substantially all of its assets;
(ii) a decision by Employer to terminate its business and
liquidate its assets;
(iii) the merger or consolidation of Employer with another entity
or an agreement to such a merger or consolidation or any other type of
reorganization;
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<PAGE>
(iv) Employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more, or Employer seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer or any material party of its assets; or
(vi) there are material changes in Employee's duties and
responsibilities without his written consent.
4.1.2 Death. This Agreement shall terminate upon the death of
Employee.
4.1.3 Disability. The Employer may terminate this Agreement upon the
permanent or temporary disability of the Employee. Employee shall be considered
disabled (whether permanent or temporary) if: (1) he is disabled as defined in a
disability insurance policy purchased by or for the benefit of the Employee; or
(2) if no such policy is in effect, he is incapacitated to such an extent that
he is unable to perform substantially all of his duties for 60 consecutive days
for Employer that he performed prior to such incapacitation.
4.1.4 Cause. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the Employer shall have
"Cause" to terminate the Employee's employment hereunder upon the following: (1)
the willful and continued failure by the Employee substantially to perform his
duties hereunder (other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after demand for substantial
performance is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Employee has not substantially performed his
duties; or (2) the willful engaging by the Employee in misconduct which is
materially injurious to the Employer, monetarily or otherwise; or (3) the
willful violation by the Employee of the provisions of this Agreement. For
purposes of this paragraph, no act, or failure to act, on the part of the
Employee shall be considered "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief by him that his action or omission
was in the best interest of the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause without (i) reasonable notice to the Employee setting
forth the reasons for the Employer's intention to terminate for Cause and
granting Employee 30 days to cure or remedy (if possible) the reasons for
termination; and (ii) delivery to the Employee of a Notice of Termination as
defined in section 4.2 hereof from the Board finding that in the good faith
opinion of the Board the Employee was guilty of conduct set forth above in
clause (1), (2) or (3) of the preceding paragraph and was unable to cure or
remedy the reasons for termination, and specifying the particulars thereof in
detail.
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<PAGE>
4.2 Notice of Termination. Any termination of the Employee's employment by
the Employer or by the Employee (other than termination pursuant to subsection
4.1.2 above) shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of employment under the provision so
indicated.
4.3 Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the date
on which a Notice of Termination is received by Employer or Employee.
4.4 Payment of Salary/Severance Pay Following Termination.
4.4.1 In the event of temporary or permanent disability of the
Employee as described in subsection 4.1.3 hereof Employee shall be entitled to
receive all compensation and benefits payable up to the Date of Termination
notwithstanding his temporary or permanent disability during the 60 day period
preceding the Date of Termination; any such payment, however, shall be reduced
by disability insurance benefits, if any, paid to Employee under policies (other
than group policies) for which Employer pays all premiums and Employee is the
beneficiary.
4.4.2 Following the termination of this Agreement by the Employer for
Cause as provided in subsection 4.1.4 hereof, the Employee shall be entitled
only to compensation through the Date of Termination.
4.4.3 Following the termination of this Agreement by the Employer for
any reason other than Cause or the temporary or permanent disability of
Employee, the Employee shall be entitled to compensation and benefits for the
full three year period commencing February 8, 1996.
4.5 Remedies. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at law,
equity, or under this Agreement.
ARTICLE V
INDEMNIFICATION
---------------
5.1 Indemnification. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including, without
limitation, reasonable attorneys' fees, hereafter or heretofore arising out of
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<PAGE>
or in connection with activities of Employer or its employees, including
Employee, or other agents in connection with and within the scope of this
Agreement or by reason of the fact that he is or was a director or officer of
Employer or any affiliate of Employer. To the fullest extent permitted by
applicable law, Employer shall advance to Employee expenses of defending any
such action, claim or proceeding. However, Employer shall not indemnify Employee
or defend Employee against, or hold him harmless from any claims, damages,
expenses or liabilities, including attorneys' fees, resulting from the gross
negligence or willful misconduct of Employee. The duty to indemnify shall
survive the expiration or early termination of this Agreement as to any claims
based on facts or conditions which occurred or are alleged to have occurred
prior to expiration or termination.
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
6.2 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the City
and County of Denver, Colorado in accordance with the rules then existing of the
American Arbitration Association and judgment upon the award may be entered in
any court having jurisdiction thereof.
6.3 Entire Agreement. This Agreement supersedes any and all other
Agreements, whether oral or in writing, between the parties with respect to the
employment of the Employee by the Employer.
6.4 Successors and Assigns. This Agreement, all terms and conditions
hereunder, and all remedies arising herefrom, shall inure to the benefit of and
be binding upon Employer, any successor in interest to all or substantially all
of the business and/or assets of Employer, and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be assigned
or transferred by either party without the prior written consent of the other
party.
6.5 Notices. For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: L. E. "Gene" Mundt
14428 Holland Court
Apple Valley, Minnesota 55124
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<PAGE>
If to Employer: Global Data Technologies, Inc.
12600 W. Colfax Avenue
Suite A-500
Lakewood, Colorado 80215
Attn: Michael I. Ruxin, Chairman
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
6.6 Severability. If any provision of this Agreement is prohibited by or is
unlawful or unenforceable under any applicable law of any jurisdiction as to
such jurisdiction, such provision shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions hereof.
6.7 Section Headings. The section headings used in this Agreement are for
convenience only and shall not affect the construction of any terms of this
Agreement.
6.8 Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Employer or Employee of any obligation accruing or arising
prior to such termination.
6.9 Amendments. This Agreement may be amended only by written agreement of
both Employer and Employee.
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument. This Agreement shall
become effective when copies hereof, when taken together, shall bear the
signatures of both parties hereto. It shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
6.11 Fees and Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys fees, costs and necessary disbursements in
addition to any other relief to which that party may be entitled.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Employment Agreement
effective as the date first written above.
"EMPLOYER"
GLOBAL DATA TECHNOLOGIES, INC.
By /S/ WILLIAM J. COLLARD
-----------------------------------------
William J. Collard, Secretary-Treasurer
"EMPLOYEE"
/S/ L. E. MUNDT
------------------------------------------
L.E. Mundt
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Schedule 3.3
Benefits
Employer shall pay 100% of the cost of health insurance under Employer's
health plan for Employee and Employee's spouse. Employer shall pay 50% of the
cost of dental insurance for Employee. Employee shall be entitled to include his
spouse and dependents in such dental insurance, the cost of which shall be borne
by Employee. Employer shall pay 100% of the cost of COBRA benefits for Employee
and Employee's spouse for the first 60 days of this Agreement. Employee also
will be entitled to all paid holidays as customarily are extended to executive
employees.
Employee will accrue vacation time at the rate of 10 hours per month, 120
hours per year. Employee will accrue sick leave at the rate of 3.4 hours per
month, 40 hours per year.
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EXHIBIT 10.7
NATIONAL MRO, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
Purposes of and Benefits Under the Plan. This Amended and Restated Stock
Option Plan (the "Plan") amends, restates and consolidates the National MRO,
Inc. Incentive Stock Option Plan and 1990 Non-Qualified Stock Option Plan. The
Plan is intended to encourage stock ownership by employees, officers and
directors (whether or not they are employees) of and consultants to NATIONAL
MRO, INC., its divisions, Subsidiary corporations and Parent corporations (the
"Corporation"), so that they may acquire or increase their proprietary interest
in the Corporation, to (i) induce qualified persons to become employees,
officers or directors of or consultants to the Corporation; (ii) reward
employees, directors, and consultants for past services to the Corporation and
(iii) encourage such persons to remain in the employ of or associated with the
Corporation and to put forth maximum efforts for the success of the business of
the Corporation.
It is intended that options granted by the Committee pursuant to Section
6(a) of this Plan shall constitute "incentive stock options" ("Incentive Stock
Options") within the meaning of Section 422 of the Code, and options granted by
the Committee pursuant to Section 6(b) of this Plan shall constitute
"non-qualified stock options" ("Non-qualified Stock Options").
Any options granted under this Plan prior to this amendment and restatement
and outstanding at the time this Plan is adopted by the Board shall remain in
force and effect but shall be governed by the terms of this Plan.
1. Definitions. As used in this Plan, the following words and phrases shall
have the meanings indicated:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Code" means Internal Revenue Code of 1986, as amended from time
to time.
(c) "Committee" means the Compensation Committee appointed by the
Board, if one has been appointed. If no Committee has been appointed, the term
"Committee" shall mean the Board.
(d) "Common Stock" mean the Corporation's $.01 par value common stock.
(e) "Disability" means a Recipient's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than 12 months, or
such other meaning ascribed in Section 22(e)(3) or any successor provision of
<PAGE>
the Code. If the Recipient has a disability insurance policy, the term
"Disability" shall be as defined therein; provided that said definition is not
inconsistent with the meaning ascribed in Section 22(e)(3) or any successor
provision of the Code.
(f) "Exchange Act" means Securities Exchange Act of 1934, as amended
from time to time.
(g) "Fair Market Value" per share as of a particular date means the
last sale price of the Corporation's Common Stock as reported on a national
securities exchange or on the NASDAQ National Market System or, if the quotation
for the last sale reported is not available for the Corporation's Common Stock,
the average of the closing bid and asked prices of the Corporation's Common
Stock as reported by NASDAQ or on the electronic bulletin board or, if none, the
National Quotation Bureau, Inc.'s "Pink Sheets" or, if such quotations are
unavailable, the value determined by the Committee in accordance with its
discretion in making a bona fide, good faith determination of fair market value.
Fair Market Value shall be determined without regard to any restriction other
than a restriction which, by its terms, never will lapse.
(h) "Option" means either an Incentive Stock Option or a Non-qualified
Stock Option, or either or both of them.
(i) "Option Price" means the purchase price of the shares of Common
Stock covered by an Option determined in accordance with Section 7(c) hereunder.
(j) "Parent" means any corporation which is a "parent corporation" as
defined in Section 424(e) of the Code, with respect to the Corporation.
(k) "Plan" means this Amended and Restated Stock Option Plan.
(l) "Recipient" means any person granted an Option hereunder whether
such grant occurred before or after this amendment and restatement.
(m) "Securities Act" means the Securities Act of 1933, as amended from
time to time.
(n) "Subsidiary" means any corporation which is a "subsidiary
corporation" as defined in Section 424(f) of the Code, with respect to the
Corporation.
2. Administration.
(a) The Plan shall be administered by the Committee. The Committee
shall have the authority in its discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically conferred under
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the Plan or necessary or advisable in the administration of the Plan, including
the authority to grant Options; to determine which Options shall be Incentive
Stock Options and which shall be Non- qualified Stock Options; to determine the
vesting schedules and other restrictions, if any, relating to Options; to
determine the Option Price; to determine the persons to whom, and the time or
times at which, Options shall be granted; to determine the number of shares to
be covered by each Option; to determine Fair Market Value per share; to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Option
agreements (which need not be identical) entered into in connection with Options
granted under the Plan; and to make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such administrative duties as it
may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Committee or such person may have under the Plan.
(b) Options granted under the Plan shall be evidenced by duly adopted
resolutions of the Committee included in the minutes of the meeting at which
they are adopted or in a unanimous written consent.
(c) With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or any successor regulation under the Exchange Act. To
the extent any provision of this Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Any Option granted hereunder which would
subject or subjects the Recipient to liability under Section 16(b) of the
Exchange Act is void ab initio as if it had never been granted.
(d) No member of the Committee or the Board shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Option granted hereunder.
3. Eligibility.
(a) Subject to certain limitations hereinafter set forth, Options may
be granted to employees, officers and directors (whether or not they are
employees) of and consultants to the Corporation. In determining the persons to
whom Options shall be granted and the number of shares to be covered by each
Option, the Committee shall take into account the duties of the respective
persons, their present and potential contributions to the success of the
Corporation and such other factors as the Committee shall deem relevant to
accomplish the purposes of the Plan.
(b) A Recipient shall be eligible to receive more than one grant of an
Option during the term of the Plan, on the terms and subject to the restrictions
herein set forth.
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<PAGE>
4. Stock Reserved.
(a) The stock subject to Options hereunder shall be shares of Common
Stock. Such shares, in whole or in part, may be authorized but unissued shares
or shares that shall have been or that may be reacquired by the Corporation. The
aggregate number of shares of Common Stock as to which Options may be granted
from time to time under the Plan (the "Available Shares") initially shall not
exceed 565,922 shares. The number of Available Shares shall be subject to
adjustment as provided in Section 7(i) hereof.
(b) If any outstanding Option under the Plan for any reason expires or
is terminated without having been exercised in full, the shares of Common Stock
allocable to the unexercised portion of such Option shall become available for
subsequent grants of Options under the Plan, unless the Plan shall have been
terminated.
5. Stock Options
(a) Incentive Stock Options.
(1) Options granted pursuant to this Section 6(a) are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 7 hereof. Only employees of the Corporation (as the term "employees"
is defined for the purposes of the Internal Revenue Code) shall be entitled to
receive Incentive Stock Options.
(2) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Incentive Stock Options granted under this and any other plan
of the Corporation or any Parent corporation or Subsidiary corporation are
exercisable for the first time by an Recipient during any calendar year may not
exceed the amount set forth in Section 422(d) of the Code, as amended from time
to time.
(3) Incentive Stock Options granted under this Plan are intended
to satisfy all requirements for incentive stock options under Section 422 of the
Code and the Treasury Regulations thereunder and, notwithstanding any other
provision of this Plan, the Plan and all Incentive Stock Options granted under
it shall be so construed, and all contrary provisions shall be so limited in
scope and effect and, to the extent they cannot be so limited they shall be
void, except as otherwise provided in Section 14 hereof.
(b) Non-Qualified Stock Options. Options granted pursuant to this
Section 6(b) are intended to constitute Non-qualified Stock Options and shall be
subject only to the general terms and conditions specified in Section 7 hereof.
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<PAGE>
6. Terms and Conditions of Options. Each Option granted pursuant to the
Plan shall be evidenced by a written Option agreement between the Corporation
and the Recipient, which agreement shall be in substantially the form of Exhibit
A hereto as modified from time to time by the Committee in its discretion, and
which shall comply with and be subject to the following terms and conditions:
(a) Number of Shares. Each Option agreement shall state the number of
shares of Common Stock covered by the Option.
(b) Type of Option. Each Option agreement shall specifically identify
the portion, if any, of the Option which constitutes an Incentive Stock Option
and the portion, if any, which constitutes a Non-qualified Stock Option.
(c) Option Price. Each Option agreement shall state the Option Price,
which shall be determined by the Committee subject only to the following
restrictions:
(1) The Option Price of any Incentive Stock Option shall be not
less than 100% of the Fair Market Value per share on the date of grant of the
Option; provided, however, that any Incentive Stock Option granted under the
Plan to a person owning more than ten percent of the total combined voting power
of the Common Stock shall have an Option Price of not less than 110% of the Fair
Market Value per share on the date of grant of the Incentive Stock Option.
(2) Any Non-qualified Stock Option granted under the Plan shall
be at a price no less than 80% of the Fair Market Value per share on the date of
grant thereof.
(3) The Option Price shall be subject to adjustment as provided
in Section 7(i) hereof.
(d) Term of Option. Each Option agreement shall state the period
during and times at which the Option shall be exercisable; provided, however:
(1) The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted,
unless a future date is specified in the resolution; provided, however, the
Recipient shall have no rights under the grant until the Recipient has executed
an Option agreement with respect to such Option.
(2) Except as further restricted in paragraph 7(d)(3), the
exercise period shall not exceed ten years from the date of grant of the Option.
(3) Incentive Stock Options granted to a person owning more than
ten percent of the total combined voting power of the Common Stock of the
Corporation shall be for no more than five years.
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<PAGE>
(4) The Committee shall have the authority to accelerate or
extend the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. No exercise
period may be extended to increase the term of the Option beyond ten years from
the date of the grant.
(5) The exercise period shall be subject to earlier termination
as provided in Sections 7(f) and 7(g) hereof and, furthermore, shall be
terminated upon surrender of the Option by the holder thereof if such surrender
has been authorized in advance by the Committee.
(e) Method of Exercise and Medium and Time of Payment.
(1) An Option may be exercised as to any or all whole shares of
Common Stock as to which it then is exercisable.
(2) Each exercise of an Option granted hereunder, whether in
whole or in part, shall be by written notice to the secretary of the Corporation
designating the number of shares as to which the Option is being exercised, and
shall be accompanied by payment in full of the Option Price for the number of
shares so designated, together with any written statements required by any
applicable securities laws.
(3) The Option Price shall be paid in cash, in shares of Common
Stock having a Fair Market Value equal to such Option Price or in property or in
a combination of cash, shares and property and, subject to approval of the
Committee, may be effected in whole or in part (A) with monies received from the
Corporation at the time of exercise as a compensatory cash payment, or (B) with
monies borrowed from the Corporation pursuant to repayment terms and conditions
as shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of an Option and each Recipient;
provided, however, that each such method and time for payment and each such
borrowing and the terms and conditions of repayment shall be permitted by and be
in compliance with applicable law.
(4) The Committee shall have the sole and absolute discretion to
determine whether or not property other than cash or Common Stock may be used to
purchase the shares of Common Stock hereunder and, if so, to determine the value
of the property received.
(5) Applicable withholding taxes shall be paid in the manner
specified by Section 8 hereof.
(f) Termination. Except as provided herein, an Option may not be
exercised unless the Recipient then is an employee, officer or director of or
consultant to the Corporation or a Subsidiary of or Parent to the Corporation,
and unless the Recipient has remained continuously as an employee, officer or
director of or consultant to the Corporation since the date of grant of the
Option.
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<PAGE>
(1) If the Recipient ceases to be an employee, officer or
director of, or consultant to, the Corporation or a Subsidiary or Parent to the
Corporation (other than by reason of death, Disability or retirement), other
than for cause, all Options theretofore granted to such Recipient but not
theretofore exercised shall terminate three months after the date the Recipient
ceased to be an employee, officer or director of, or consultant to, the
Corporation.
(2) If the Recipient ceases to be an employee, officer or
director of, or consultant to, the Corporation or a Subsidiary or Parent to the
Corporation by reason of termination for cause, all Options theretofore granted
to such Recipient but not theretofore exercised shall terminate thirty days
after the date the Recipient ceases to be an employee, officer or director of,
or consultant to, the Corporation.
(3) Nothing in the Plan or in any Option granted hereunder shall
confer upon an individual any right to continue in the employ of or other
relationship with the Corporation or interfere in any way with the right of the
Corporation to terminate such employment or other relationship between the
individual and the Corporation.
(g) Death, Disability or Retirement of Recipient. If a Recipient shall
die while an employee, officer or director of or a consultant to the
Corporation, or if the Recipient's employment, officer or director status or
consulting relationship, shall terminate by reason of Disability or retirement,
all Options theretofore granted to such Recipient, whether or not otherwise
exercisable, unless earlier terminated in accordance with their terms, may be
exercised by the Recipient or by the Recipient's estate or by a person who
acquired the right to exercise such Options by bequest or inheritance or
otherwise by reason of the death or Disability of the Recipient, at any time
within one year after the date of death, Disability or retirement of the
Recipient; provided, however, that in the case of Incentive Stock Options such
one-year period shall be limited to three months in the case of retirement.
(h) Transferability Restriction. (1) Options granted under the Plan
shall not be transferable other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, or
the rules thereunder. Options may be exercised, during the lifetime of the
Recipient, only by the Recipient and thereafter only by his legal
representative.
(2) Any attempted sale, pledge, assignment, hypothecation or
other transfer of an Option contrary to the provisions hereof and the levy of
any execution, attachment or similar process upon an Option shall be null and
void and without force or effect and shall result in a termination of the
Option.
(3)(A) As a condition to the transfer of any shares of Common
Stock issued upon exercise of an Option granted under this Plan, the Corporation
may require an opinion of counsel, satisfactory to the Corporation, to the
effect that such transfer will not be in violation of the Securities Act or any
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<PAGE>
other applicable securities laws or that such transfer has been registered under
federal and all applicable state securities laws. (B) Further, the Corporation
shall be authorized to refrain from delivering or transferring shares of Common
Stock issued under this Plan until the Committee determines that such delivery
or transfer will not violate applicable securities laws and the Recipient has
tendered to the Corporation any federal, state or local tax owed by the
Recipient as a result of exercising the Option or disposing of any Common Stock
when the Corporation has a legal liability to satisfy such tax. (C) The
Corporation shall not be liable for damages due to delay in the delivery or
issuance of any stock certificate for any reason whatsoever, including, but not
limited to, a delay caused by listing requirements of any securities exchange or
the National Association of Securities Dealers, or any registration requirements
under the Securities Act, the Exchange Act, or under any other state or federal
law, rule or regulation. (D) The Corporation is under no obligation to take any
action or incur any expense in order to register or qualify the delivery or
transfer of shares of Common Stock under applicable securities laws or to
perfect any exemption from such registration or qualification. (E) Furthermore,
the Corporation will not be liable to any Recipient for failure to deliver or
transfer shares of Common Stock if such failure is based upon the provisions of
this paragraph.
(i) Effect of Certain Changes.
(1) If there is any change in the number of shares of Common
Stock through the declaration of stock dividends, or through a recapitalization
resulting in stock splits, or combinations or exchanges of such shares, the
number of shares of Common Stock available for Options and the number of such
shares covered by outstanding Options, and the exercise price per share of the
outstanding Options, shall be proportionately adjusted by the Committee to
reflect any increase or decrease in the number of issued shares of Common Stock;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated.
(2) In the event of the proposed dissolution or liquidation of
the Corporation, or any corporate separation or division, including, but not
limited to, split-up, split-off or spin-off, merger or consolidation of the
Corporation with another corporation, or any sale or transfer by the Corporation
of all or substantially all its assets or any tender offer or exchange offer for
or the acquisition, directly or indirectly, by any person or group for more than
50% of the then outstanding voting securities of the Corporation, the Committee
may provide that the holder of each Option then exercisable shall have the right
to exercise such Option (at its then current Option Price) solely for the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such dissolution, liquidation, corporate
separation or division, merger or consolidation, sale or transfer of assets or
tender offer or exchange offer, by a holder of the number of shares of Common
Stock for which such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, merger or
consolidation, sale or transfer of assets or tender offer or exchange offer; or
in the alternative the Committee may provide that each Option granted under the
Plan shall terminate as of a date fixed by the Committee; provided, however,
that not less than 30 days' written notice of the date so fixed shall be given
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<PAGE>
to each Recipient, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Option to the extent then
exercisable. To the extent that Section 422(d) of the Code would not permit the
provisions of this paragraph (2) to apply to any outstanding Incentive Stock
Options, such Incentive Stock Options shall immediately upon the occurrence of
the event described in this paragraph (2), be treated for all purposes of the
Plan as Non-qualified Stock Options and shall be immediately exercisable as such
as provided in this paragraph (2).
(3) Paragraph (2) of this Section 7(i) shall not apply to a
merger or consolidation in which the Corporation is the surviving corporation
and shares of Common Stock are not converted into or exchanged for stock,
securities of any other corporation, cash or any other thing of value.
Notwithstanding the preceding sentence, in case of any consolidation or merger
of another corporation into the Corporation in which the Corporation is the
surviving corporation and in which there is a reclassification or change
(including a change which results in the right to receive cash or other
property) of the shares of Common Stock (other than a change in par value, or
from par value to no par value, or as a result of a subdivision or combination,
but including any change in such shares into two or more classes or series of
shares), the Committee may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for the kind and
amount of shares of stock and other securities (including those of any new
direct or indirect Parent of the Corporation), property, cash or any combination
thereof receivable upon such reclassification, change, consolidation or merger
by the holder of the number of shares of Common Stock for which such Option
might have been exercised.
(4) If there is a change in the Common Stock of the Corporation
as presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
(5) To the extent that the foregoing adjustments relate to stock
or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to this
Plan shall not be adjusted in a manner that causes such option to fail to
continue to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code, except as otherwise provided in Section 7(i)(2) hereof.
(6) Except as expressly provided in this Section 7(i), the
Recipient shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger, or consolidation or split-up, split-off
or spin-off of assets or stock of another corporation; and any issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to the Option. The grant of an Option under the Plan shall not
affect in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structures or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or part of its business or assets.
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(j) Rights as Shareholder - Non-Distributive Intent.
(1) Neither a person to whom an Option is granted, nor such
person's legal representative, heir, legatee or distributee, shall be deemed to
be the holder of, or to have any rights of a holder with respect to, any shares
of Common Stock subject to such Option until after the Option is exercised and
the shares are issued to the person exercising such Option.
(2) Upon exercise of an Option at a time when there is no
registration statement in effect under the Securities Act relating to the shares
issuable upon exercise, shares may be issued to the Recipient only if the
Recipient represents and warrants in writing to the Corporation that the shares
purchased are being acquired for investment and not with a view to the
distribution thereof and provides the Corporation with sufficient information to
establish an exemption from the registration requirements of the Securities Act.
A form of subscription agreement is attached hereto as Exhibit B.
(3) No shares shall be issued upon the exercise of an Option
unless and until there shall have been compliance with any then applicable
requirements of the Securities and Exchange Commission, or any other regulatory
agencies having jurisdiction over the Corporation.
(4) No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 7(i) hereof.
(k) Other Provisions. Option agreements evidencing Options granted
under the Plan shall contain such other provisions, including, without
limitation, (i) the imposition of restrictions upon the exercise of an Option,
and (ii) in the case of an Incentive Stock Option, the inclusion of any
condition not inconsistent with such Option qualifying as an Incentive Stock
Option, as the Committee shall deem advisable.
7. Agreement by Recipient Regarding Withholding Taxes. Each Recipient
agrees that the Corporation, to the extent permitted or required by law, shall
deduct a sufficient number of shares due to the Recipient upon exercise of the
Option to allow the Corporation to pay federal, state and local taxes of any
kind required by law to be withheld upon the exercise of such Option from any
payment of any kind otherwise due to the Recipient. The Corporation shall not be
obligated to advise any Recipient of the existence of any tax or the amount
which the Corporation will be so required to withhold.
-10-
<PAGE>
8. Term of Plan. Options may be granted under this Plan from time to time
until May 31, 2000, which is ten years from the date the Plan (prior to this
amendment and restatement) was originally adopted by the Board.
9. Amendment and Termination of the Plan. The Committee at any time and
from time to time may suspend, terminate, modify or amend the Plan. Except as
provided in Section 7 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option previously granted, unless
the written consent of the Recipient is obtained.
10. Assumption. Subject to Section 7, the terms and conditions of any
outstanding Options granted under this Plan shall be assumed by, be binding upon
and shall inure to the benefit of any successor corporation to the Corporation
and continue to be governed by, to the extent applicable, the terms and
conditions of this Plan. Such successor corporation may but shall not be
obligated to assume this Plan.
11. Termination of Right of Action. Every right of action arising out of or
in connection with the Plan by or on behalf of the Corporation, or by any
shareholder of the Corporation against any past, present or future member of the
Board, or against any employee, or by an employee (past, present or future)
against the Corporation, irrespective of the place where an action may be
brought and of the place of residence of any such shareholder, director or
employee, will cease and be barred by the expiration of three years from the
date of the act or omission in respect of which such right of action is alleged
to have risen or such shorter period as may be provided by law.
12. Tax Litigation. The Corporation shall have the right, but not the
obligation, to contest, at its expense, any tax ruling or decision,
administrative or judicial, on any issue which is related to the Plan and which
the Committee believes to be important to holders of Options granted under the
Plan and to conduct any such contest or any litigation arising therefrom to a
final decision.
13. Adoption.
(a) This Plan was approved by the Board of Directors of the
Corporation on April 3, 1995.
(b) This Plan was approved by the shareholders of the Corporation on
May 5, 1996.
NATIONAL MRO, INC.
By /S/ MICHAEL I. RUXIN
-------------------------------
Michael I. Ruxin, President
-11-
<PAGE>
Exhibit A
FORM OF
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT made as of this ___ day of _______, 199__, between
NATIONAL MRO, INC., a Colorado corporation (the "Corporation"), and
________________ (the "Recipient").
In accordance with its Stock Option Plan (the "Plan"), a copy of which has
been provided to the Recipient and is incorporated herein by reference, the
Corporation desires, in connection with the services of the Recipient, to
provide the Recipient with an opportunity to acquire $.01 par value common stock
("Common Stock") of the Corporation on favorable terms and thereby increase the
Recipient's proprietary interest in the Corporation and as incentive to put
forth maximum efforts for the success of the business of the Corporation. All
capitalized terms not otherwise defined herein shall be as defined in the Plan.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth and other good and valuable consideration, the Corporation and
the Recipient agree as follows:
Confirmation of Grant of Option. Pursuant to a determination of the
Committee (as defined in the Plan) made on ____________, 19__ (the "Date of
Grant"), the Corporation, subject to the terms of the Plan and of this
Agreement, confirms that the Recipient irrevocably has been granted on the Date
of Grant, as a matter of separate inducement and agreement, and in addition to
and not in lieu of salary or other compensation for services, [an Incentive/a
Non-qualified] Stock Option pursuant to Section 6 of the Plan (the "Option") to
purchase an aggregate of ______ shares of Common Stock on the terms and
conditions herein set forth, subject to adjustment as provided in Paragraph 9
hereof.
1. Option Price. The Option Price per share of Common Stock covered by the
Option will be $_____ (the "Option Price") subject to adjustment as provided in
Paragraph 9 hereof.
2. Vesting of Option. This Option shall vest as to 20% of the shares
covered hereby on the one year anniversary of the Date of Grant. Thereafter,
this Option shall vest as to an additional 20% of the shares covered hereby,
cumulatively, on the second, third, fourth and fifth anniversary dates of the
Date of Grant.
3. Exercise of Option. Except as otherwise provided in Section 7 of the
Plan and Paragraph 3 above, this Option may be exercised in whole or in part at
any time during the term of the Option, provided, however, no portion of this
Option shall be exercisable (i) after the expiration of the term thereof, and
<PAGE>
(ii) unless the holder shall at the time of exercise have been an employee,
officer or director of or a consultant to the Corporation for a period of at
least six months.
The Option may be exercised, as provided in this Paragraph 4, by notice and
payment to the Corporation as provided in Paragraph 9 hereof and Section 7(e) of
the Plan, subject to the limitations of Paragraph 10 below.
4. Term of Option. The term of the Option will be through __________, ____,
subject to earlier termination or cancellation as provided in this Agreement.
Except as otherwise provided in Paragraphs 8 and 9 hereof, the Option will not
be exercisable unless the Recipient shall, at the time of exercise, be an
employee, officer or director of or consultant to the Corporation.
The holder of the Option will not have any rights to dividends or any other
rights of a shareholder with respect to any shares of Common Stock subject to
the Option until such shares shall have been purchased through the exercise of
the Option and has been evidenced on the stock transfer records of the
Corporation maintained by the Corporation's transfer agent.
5. Transferability Restriction. The Option may not be assigned, transferred
or otherwise disposed of, or pledged or hypothecated in any way (whether by
operation of law or otherwise) except in strict compliance with Section 7(h) of
the Plan. Any assignment, transfer, pledge, hypothecation or other disposition
of the Option or any attempt to make any such levy of execution, attachment or
other process will cause the Option to terminate immediately upon the happening
of any such event, provided, however, that any such termination of the Option
under the foregoing provisions of this Paragraph 6 will not prejudice any rights
or remedies which the Corporation may have under this Agreement or otherwise.
6. Exercise Upon Termination. The Recipient's rights to exercise this
Option upon termination of employment or cessation as an officer, director or
consultant shall be as set forth in Section 7(f) of the Plan.
7. Death, Disability or Retirement of Recipient. The Recipient's rights to
exercise this Option upon the death, Disability or retirement of the Recipient
shall be as set forth in Section 7(g) of the Plan.
8. Adjustments. The Option shall be subject to adjustment upon the
occurrence of certain events as set forth in Section 7(i) of the Plan.
9. No Registration Obligation. The Recipient understands that the Option is
not registered under the Securities Act of 1933, as amended (the "Securities
Act") and the Corporation has no obligation to register under the Securities Act
the Option or any of the shares of Common Stock subject to and issuable upon the
exercise of the Option. The Recipient represents that the Option is being
acquired by him for investment and acknowledges that all certificates for the
-2-
<PAGE>
shares issued upon exercise of the Option will bear the following legend unless
such shares are registered under the Securities Act prior to their issuance:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Securities
Act"), and are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. The shares may
not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under
the Securities Act or pursuant to an exemption from
registration under the Securities Act, the availability of
which is to be established to the satisfaction of the
Company.
The Recipient further understands and agrees that the Option may be
exercised only if at the time of such exercise the Recipient and the Corporation
are able to establish the existence of an exemption from registration under the
Securities Act and applicable state laws.
10. Notices. Each notice relating to this Agreement will be in writing and
delivered in person or by certified mail to the proper address. Notices to the
Corporation shall be addressed to the Corporation c/o Michael I. Ruxin,
President, at 12600 W. Colfax, Suite A-500, Lakewood, Colorado 80215. Notices to
the Recipient or other person or persons then entitled to exercise the Option
shall be addressed to the Recipient or such other person or persons at the
Recipient's address below specified. Anyone to whom a notice may be given under
this Agreement may designate a new address by notice to that effect given
pursuant to this Paragraph 11.
11. Approval of Counsel. The exercise of the Option and the issuance and
delivery of shares of Common Stock pursuant thereto shall be subject to approval
by the Corporation's counsel of all legal matters in connection therewith,
including compliance with the requirements of the Securities Act, the Securities
Exchange Act of 1934, as amended, applicable state securities laws, the rules
and regulations thereunder, and the requirements of any national securities
exchange or association upon which the Common Stock then may be listed.
12. Benefits of Agreement. This Agreement will inure to the benefit of and
be binding upon each successor and assign of the Corporation. All obligations
imposed upon the Recipient and all rights granted to the Corporation under this
Agreement will be binding upon the Recipient's heirs, legal representatives and
successors.
13. Governmental and Other Regulations. The exercise of the Option and the
Corporation's obligation to sell and deliver shares upon the exercise of rights
to purchase shares is subject to all applicable federal and state laws, rules
and regulations, and to such approvals by any regulatory or governmental agency
which, in the opinion of counsel for the Corporation, may be required.
14. Conflicts with the Plan. If any provision in this Agreement conflicts
with a provision in the Plan, the Plan shall govern.
-3-
<PAGE>
Executed in the name and on behalf of the Corporation by one of its duly
authorized officers and by the Recipient all as of the date first above written.
NATIONAL MRO, INC.
By
-----------------------------------
Michael I. Ruxin, President
The undersigned Recipient understands the terms of this Option Agreement
and acknowledges receipt of a copy of the Plan and hereby agrees to comply
therewith.
Date __________ ___, 19__ _______________________________
Recipient: _____________________
Tax ID Number:_________________
Address: _____________________
===============================
-4-
<PAGE>
Exhibit B
FORM OF
SUBSCRIPTION AGREEMENT
----------------------
THE SECURITIES OF NATIONAL MRO, INC. BEING SUBSCRIBED FOR HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND ARE RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
This Subscription Agreement is entered for the purpose of the Undersigned
acquiring _____________ shares of the $.01 par value common stock (the
"Securities") of NATIONAL MRO, INC., a Colorado corporation (the "Corporation")
from the Corporation upon the exercise of an Option pursuant to the National
MRO, Inc. Stock Option Plan (the "Plan"). It is understood that exercise of an
Option at a time when no registration statement relating thereto is effective
under the Securities Act of 1933, as amended (the "Securities Act") can not be
completed until the Undersigned executes this Subscription Agreement and
delivers it to the Corporation, and then such exercise is effective only in
accordance with the terms of the Plan and this Subscription Agreement.
In connection with the Undersigned's acquisition of the Securities, the
Undersigned represents and warrants to the Corporation as follows:
<PAGE>
1. The Undersigned has been provided, and has reviewed all available
reports filed by the Corporation pursuant to the Securities Exchange Act of
1934, including (without limitation) the Corporation's most recent annual report
on Form 10-K (or Form 10-KSB) for the most recently- completed fiscal year and
all Forms 10-Q (or Forms 10-QSB) for the quarters subsequent to the end of the
most recent fiscal year, the Plan, and such other information as the Undersigned
may have requested of the Corporation regarding its business, operations,
management, and financial condition (all of which is referred to herein as the
"Available Information").
2. The Corporation has given the Undersigned the opportunity to ask
questions of and to receive answers from persons acting on the Corporation's
behalf concerning the terms and conditions of this transaction and the
opportunity to obtain any additional information regarding the Corporation, its
business and financial condition which the Corporation possesses or can acquire
without unreasonable effort or expense.
3. The Securities are being acquired by the Undersigned for his own account
and not on behalf of any other person or entity. The Undersigned's present
financial condition is such that it is unlikely that it would be necessary for
the Undersigned to dispose of any portion of the Securities in the foreseeable
future.
4. The Undersigned understands that the Securities being acquired hereby
have not been registered under the Securities Act or any state or foreign
securities laws, and are and will continue to be restricted securities within
the meaning of Rule 144 of the General Rules and Regulations under the
Securities Act and applicable state statutes, and consents to the placement of
an appropriate restrictive legend or legends on any certificates evidencing the
Securities and any certificates issued in replacement or exchange therefor and
acknowledges that the Corporation will cause its stock transfer records to note
such restrictions.
5. By the Undersigned's execution below, it is acknowledged and understood
that the Corporation is relying upon the accuracy and completeness hereof in
complying with certain obligations under applicable securities laws.
6. This Agreement binds and inures to the benefit of the representatives,
successors and permitted assigns of the respective parties hereto.
-2-
<PAGE>
7. The Undersigned acknowledges and agrees that the Corporation has
withheld ___________ shares for the payment of taxes as a result of the exercise
of an Option in satisfaction of federal withholding taxes.
(Undersigned)
______________, 19__ ____________________________
Recipient: _________________
Tax ID Number:______________
Address: __________________
============================
-3-
<PAGE>
AMENDMENT TO THE NATIONAL MRO, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
The second sentence in Section 4(a) of the National MRO, Inc. Stock
Option Plan hereby is amended to read as follows:
The aggregate number of shares of Common Stock as to which Options may
be granted from time to time under the Plan ("Available Shares") shall
not exceed 565,922 shares.
This amendment was approved by the Board of Directors of the
Corporation on April 3, 1995.
This amendment was approved by the shareholders of the Corporation on
May 5, 1995.
NATIONAL MRO, INC.
By: /S/ MICHAEL I. RUXIN
----------------------------------
Michael I. Ruxin, President
<PAGE>
SECOND AMENDMENT TO THE NATIONAL MRO, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
The second sentence in Section 4(a) of the National MRO, Inc. Stock
Option Plan hereby is amended to read as follows:
The aggregate number of shares of Common Stock as to which Options may
be granted from time to time under the Plan ("Available Shares") shall
not exceed 1,234,279 shares.
This amendment was approved by the Board of Directors of the
Corporation on May 7, 1996.
This amendment was approved by the shareholders of the Corporation on
May 29, 1996.
EXHIBIT 10.8
Exhibit B
VOTING AGREEMENT
----------------
This Voting Agreement is made this 23rd day of May, 1995, by and among the
undersigned, being 79.8% of the Shareholders (the "Shareholders") of Global Data
Technologies, Inc. a Colorado corporation (f/k/a National MRO, Inc.) (the
"Company") after the consummation of a merger between the Company and The
Wyndgate Group, Ltd., a California corporation ("Wyndgate").
WHEREAS the Company and Wyndgate entered into an Agreement of Merger and
Plan of Reorganization (the "Merger Agreement") whereby Wyndgate will be merged
with and into the Company (the "Merger");
WHEREAS the Merger Agreement requires that the Shareholders enter into a
Voting Agreement pursuant to which the pre-Merger shareholders of the Company
(the "Former National Shareholders") shall vote for the Board of Director
nominees selected by the pre-Merger shareholders of Wyndgate (the "Former
Wyndgate Shareholders") and the Former Wyndgate Shareholders shall vote for the
Board of Director nominees selected by the Former National Shareholders.
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Merger Agreement and this Agreement, the parties hereby agree as follows:
1. The Former National Shareholders agree to vote their shares for the Board
of Director nominees selected by the Former Wyndgate Shareholders.
2. The Former Wyndgate Shareholders agree to vote their shares for the Board
of Director nominees selected by the Former National Shareholders.
3. This Agreement shall terminate upon the earlier of (i) five years from the
date first set forth above, or (ii) the effective date of a registration
statement filed with the Securities and Exchange Commission.
4. Each party hereto agrees for itself, its successors and permitted assigns
to execute any and all instruments necessary for the fulfillment of the
terms of this Agreement.
5. This Agreement is made under, shall be construed in accordance with and
shall be governed by the laws of the State of Colorado.
6. This Agreement may be executed in one or more counterparts, each of which
shall constitute an original but all of which, when taken together, shall
constitute only one document.
<PAGE>
IN WITNESS WHEREOF the parties have signed this Agreement effective as of
the date first set forth above.
/S/ WILLIAM J. COLLARD
----------------------------------
William J. Collard
/S/ GERALD F. WILLMAN, JR.
----------------------------------
Gerald F. Willman, Jr.
/S/ LORI J. WILLMAN
----------------------------------
Lori J. Willman
/S/ TIMOTHY J. PELLEGRINI
----------------------------------
Timothy J. Pellegrini
/S/ MICHAEL I. RUXIN
----------------------------------
Michael I. Ruxin
MDS Health Group, Ltd.
By /S/ JOHN A. ROGERS
----------------------------------
President and COO
Attest:
By: /S/ PETER E. BRENT
--------------------------------
Peter E. Brent
Secretary
-2-
EXHIBIT 10.9
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made as of the 16th day of August, 1991, by and among MICHAEL
I. RUXIN ("Ruxin"), MDS HEALTH GROUP INC. ("MDS"), GORDON SEGAL, ERIC SIPF, and
ROBIN VORP (together with Ruxin and MDS, the "Current Holders"), and NATIONAL
MRO, INC., a Colorado corporation (the "Company").
BACKGROUND. The Current Holders own, in the aggregate, all of the issued and
outstanding shares of capital stock of the Company. The Current Holders believe
that it is in their best, interests to restrict the transfer of the Shares, to
provide for the future liquidity of the Shares and to make certain provisions
for the operation of the business of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE I - CERTAIN DEFINITIONS
- -------------------------------
For the purposes of this Agreement, the following terms, when capitalized, are
defined terms and shall have the meanings set forth below unless the context
requires otherwise:
Affiliate means, with respect to any entity, all directors and officers of such
entity, all persons and entities controlling, controlled by or under common
control with, such entity and all directors and officers of Affiliates.
Commission means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
Exchange Act means that the Securities Exchange Act of 1934, as amended, or any
similar successor federal statute and the rules and regulations thereunder, all
as the same may be in effect from time to time.
Exempt Transfer means any (a) gratuitous transfer of Shares made to a Management
Holder's spouse or issue, including adopted children, or to a trust for the
exclusive benefit of the Management Holder or the Management Holder's spouse or
issue, or (b) transfer of title to Shares effected pursuant to the Management
Holder's will or the laws of intestate succession, or (c) transfer of Shares by
an MDS Holder to any Affiliate of such MDS Holder, or (d) sale or pledge by
Ruxin of up to 50,000 Shares (appropriately adjusted for stock splits, share
combinations and similar events) to any person or entity not engaged in
competition with, and not having any Affiliate engaged in competition with, MDS
or an Affiliate of MDS, provided, however, that each Person to whom Shares are
transferred by means of an Exempt Transfer must, as a condition precedent to the
validity of such transfer, acknowledge in writing that such person is bound by
the provisions of this Agreement.
Holder means any person who holds Registrable Securities and any holder of
Registrable Securities to whom the registration rights conferred by Article VI
of this Agreement have been transferred in compliance with Section 6.9 thereof.
Management Holder means Ruxin, Gordon Segal, Eric Sipf and Robin Vorp and any
Holder or other person or entity to whom a Management Holder has transferred
Shares in an Exempt Transfer.
MDS Holder means MDS Health Group Inc. and any Holder to whom an MDS Holder has
transferred the registration rights conferred by Article VII of this Agreement
in compliance with Section 6.9 hereof.
<PAGE>
New Securities means any capital stock (including common stock and/or preferred
stock) of the Company whether now authorized or not, and rights, options or
warrants to purchase such capital stock, and securities of any type whatsoever
that are, or may become, convertible into capital stock; provided that the term
"New Securities" does not include (a) securities issued pursuant to the
acquisition of another business entity or business segment of any such entity by
the Company by merger, purchase of substantially all of the assets or other
reorganization whereby the Company will own not less than 51% of the voting
power of such business entity or business segment of any such entity; (b) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the
Company; (c) securities representing up to 10% of the capital stock of the
Company, issued to employees, consultants, officers or directors of the Company
pursuant to any stock option, stock purchase or stock bonus plan, agreement or
arrangement unanimously approved by the-Board of Directors; (d) securities
issued to vendors or customers or to other persons in similar commercial
situations with the Company if such issuance is unanimously approved by the
Board of Directors; (e) securities issued in connection with obtaining lease
financing, whether issued to a lessor, guarantor or other person; (f) securities
issued in a public offering pursuant to a registration under the Securities Act
with an aggregate offering price to the public of at least $4,000,000; (g)
securities issued in connection with any stock split, stock dividend or
re-capitalization of the Company; (h) any right, option or warrant to acquire
any security convertible into the securities excluded from the definition of New
Securities pursuant to clauses (a) through (g) above; (i) up to 75,000 shares of
common stock sold by the Company within ninety (90) days after the date of this
Agreement at a price not less than $1.54 per Share, provided that each purchaser
of Shares pursuant to this clause (i) shall agree in writing to be bound by the
provisions of this Agreement; and (j) securities as to which Ruxin and MDS agree
in writing that the preemptive rights set forth in Article III shall not apply.
Other Stockholders persons other than Holders who, by virtue of agreements with
the Company, are entitled to include their securities in certain registrations
under Article VI hereof.
Reqistrable Securities means (i) the Shares and (ii) any common stock issued as
a dividend or other distribution with respect to or in exchange for or in
replacement of the Shares, provided, however, that Registrable Securities shall
not include any shares of common stock that have previously been registered or
that have been sold to the public.
Registration Expenses means all expenses incurred in effecting any registration
pursuant to Article VI of this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
Rule 144 means Rule 144 as promulgated by the Commission under the Securities
Act, as such Rule may be amended from time to time, or any similar successor
rule that may be promulgated by the Commission.
Rule 145 means Rule 145 as promulgated by the Commission under the Securities
Act, as such Rule may be amended from time to time, or any similar successor
rule that may be promulgated by the Commission.
Ruxin Holder means Ruxin and any Holder or other person or entity to whom a
Ruxin Holder has transferred Shares in an Exempt Transfer.
Securities Act means the Securities Act of 1933 as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the
same shall be in effect from time to time.
<PAGE>
Selling Expenses means all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities and all fees and disbursements
of counsel for any Holder (other than fees and disbursements of counsel included
in Registration Expenses).
Shares means all shares of common stock, par value $.01 per share, of the
Company held by any Holder who is a party to this Agreement.
ARTICLE II - OPERATIONS OF THE COMPANY
- --------------------------------------
2.1 Election of Directors. Each Holder agrees that for the term of this
Agreement each of them will vote his Shares to establish and maintain the number
of directors constituting the entire Board of Directors at three directors, to
elect two directors designated by Management Holders holding a majority of the
Shares held by Management Holders, and to elect one director designated by MDS
Holders holding a majority of the Shares held by MDS Holders.
2.2 Restricted Activities. The Company shall not, without the unanimous approval
of the Board of Directors:
2.2.1 Declare or pay any dividend, whether in cash, securities or other
property, or purchase any shares of capital stock of the Company or
otherwise make any distribution or payment with respect to shares of
capital stock of the Company.
2.2.2 Sell, lease or otherwise dispose of all or substantially all of the
assets of the Company.
2.2.3 Merge or consolidate with any other entity or group.
2.2.4 Do any act that would make it impossible to carry on the ordinary
business of the Company.
2.2.5 Amend the articles of incorporation or bylaws of the Company.
2.2.6 Adopt any stock option, stock purchase or stock bonus plan, agreement
or arrangement for employees, consultants, officers or directors of
the Company.
2.2.7 Agree, whether in writing or otherwise, to take any action described
in Sections 2.2.1 through 2.2.6.
2.3 Financial Information. The Company will furnish to each Holder, so long as
such Holder owns at least 100,000 Shares, the following reports:
2.3.1 As soon as practicable after the end of each fiscal year of the Company,
and in any event within ninety (90) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated statements of operations, stockholders' equity and cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and, if requested by MDS, certified by
independent public accountants of recognized national standing selected by the
Company, and a Company prepared comparison to the Company's operating plan for
such year.
2.3.2 As soon as practicable after the end of the first, second, and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within forty-five (45) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations, stockholders' equity and cash
flows of the Company and its subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the corresponding periods of the previous
fiscal year and to the Company's operating plan then in effect and approved by
its Board of Directors, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such financial statements need
not contain the notes required by generally accepted accounting principles.
<PAGE>
2.3.3 Annually, but in any event at least thirty (30) days prior to the
commencement of each fiscal year of the Company, the financial plan of the
Company, in such manner and form as approved by the Board of Directors of the
Company, which financial plan shall include a projection of income and a
projected cash flow statement for such fiscal year and a projected balance sheet
as of the end of such fiscal year. Any material changes in such business plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
2.3.4 As soon as practicable after the end of each fiscal year as to which MDS
has requested certified financial statements pursuant to Section 2.3.1 and in
any event within ninety (90) days thereafter, a copy of the annual management
review letter of the Company's independent public accountants.
2.3.5 With reasonable promptness, such other information and data with respect
to the Company and its subsidiaries as such Holder may from time to time
reasonably request.
2.4. Prompt Payment of Taxes. The Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the income, profits,
property or business of the Company or any subsidiary; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
ARTICLE III - PREEMPTIVE RIGHTS OF HOLDERS
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3.1 Preemptive Rights. The Company hereby grants to each Holder who owns any
Shares the preemptive right to purchase a pro rata share of New Securities which
the Company may, from time to time, propose to sell and issue. A Holder's pro
rata share, for purposes of this preemptive right, is the ratio of the number of
Shares owned by such Holder immediately prior to the issuance of New Securities
to the total number of Shares outstanding immediately prior to the issuance of
New Securities. For purposes of determining the number of Shares owned by MDS
and the total number of Shares outstanding, all of the "Adjustment Shares"
issued in the name of MDS and delivered to an escrow agent pursuant to the Stock
Purchase Agreement, of even date herewith, between MDS and the Company, shall be
deemed to be outstanding and owned by MDS unless and until such Adjustment
Shares have been returned to the Company by the escrow agent in accordance with
the terms of such Stock Purchase Agreement.
3.2 Exercise of Rights. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Holder written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each Holder
shall have thirty (30) days after any such notice is effective to agree to
purchase such Holder's pro rata share of such New Securities for the price and
upon the terms specified in the notice by giving written notice to the Company
and stating therein the Quantity of New Securities to be purchased. If such
right is exercised, then such Holder shall effect the purchase of the New
Securities, including payment of the purchase price, not more than thirty (30)
days after giving notice of such exercise.
3.3 Securities Not Purchased. After the thirty (30) day period described in
Section 3.2, the Company shall have one hundred eighty (180) days to sell the
New Securities respecting which the Holders' preemptive rights set forth in this
Article III were not exercised, at a price and upon terms no more favorable to
<PAGE>
the purchasers thereof than specified in the Company's notice to Holders
pursuant to Section 3.2. As a condition precedent to the validity of any such
sale, however, each Person to whom Shares are sold must acknowledge in writing
that such Person is bound by the provisions of this Agreement. Following the
expiration of said one hundred eighty (180) day period, the Company shall not
issue or sell any New Securities without first again offering such securities to
the Holders in the manner provided in Section 3.2.
3.4 Assignment. The preemptive rights set forth in this Article III may not be
assigned or transferred, except that (a) such right is assignable by each MDS
Holder to any wholly owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Securities Act, controlling,
controlled by or under common control with, any such MDS Holder, and (b) such
right is assignable between and among any of the MDS Holders.
ARTICLE IV - RIGHTS OF FIRST REFUSAL
- ------------------------------------
4.1 Restrictions on Transfer. No Holder shall encumber or transfer, by sale,
gift, assignment, operation of law or otherwise, any Shares now or hereafter
owned by such Holder, except (a) with the consent of Ruxin and MDS, (b) in an
Exempt Transfer, or (c) in accordance with this Article IV and, in the case of a
Ruxin Holder, in accordance with Article V of this Agreement.
4.2 Notice of Intended Disposition. In the event any Holder (the "Selling
Holder") desires to accept a bona fide third-party offer for any or all of the
Shares owned by him (the Shares subject to such offer to be hereinafter called,
solely for the purposes of this Article IV, the "Target Shares"), the Selling
Holder shall promptly deliver to the Company and the other Holders written
notice (the "Disposition Notice") of the offer and the basic terms and
conditions thereof, including the proposed purchase price.
4.3 Company Exercise of Right. The Company shall, for a period of thirty (30)
days following the date of the Disposition Notice, have the right to purchase
any or all of the Target Shares specified in the Disposition Notice upon
substantially the same terms and conditions specified therein. Such right shall
be exercisable by written notice (the "Company Exercise Notice") delivered to
the Selling Holder and all other Holders prior to the expiration of the thirty
(30) day exercise period. If such right is exercised with respect to all the
Target Shares specified in the Disposition Notice, then the Company shall effect
the purchase of the Target Shares, including payment of the purchase price, not
more than sixty (60) days after the date of the Disposition Notice; and at such
time the Selling Holder shall deliver to the Company the certificates
representing the Target Shares to be purchased, each certificate to be properly
endorsed for transfer.
4.4 Holder Exercise of Right. In the event a Company Exercise Notice with
respect to all the Target Shares is not delivered by the Company within thirty
(30) days following the date of the Disposition Notice, then the Holders (other
than the Selling Holder) shall, for a period beginning 31 days and ending 60
days after the date of the Disposition Notice, have the right to purchase any or
all of the Target Shares not covered by a Company Exercise Notice upon
substantially the same terms and conditions specified in the Disposition Notice.
Such right shall be exercisable by written notice (the "Holder Exercise Notice")
specifying the maximum number of Target Shares the Holder is willing to purchase
and given to the Selling Holder and the Company prior to the expiration of the
exercise period. If the number of Target Shares covered by Holder Exercise
Notices exceeds the number of Target Shares available after giving effect to any
Company Exercise Notice, the available Target Shares shall be allocated pro rata
among the Holders delivering Holder Exercise Notices (the "Buying Holders") in
accordance with the number of Shares owned by them. If Holder Exercise Notices
are delivered with respect to all Target Shares not covered by a Company
Exercise Notice, the Buying Holders and, if applicable, the Company shall effect
the purchase of the Target Shares, including payment of the purchase price, not
more than ninety (90) days after the date of the Disposition Notice; and at such
time the Selling Holder shall deliver to the purchaser(s) the certificates
representing the Target Shares to be purchased, each certificate to be properly
endorsed for transfer.
<PAGE>
4.5 Non-Cash Offers. Should the purchase price specified in the Disposition
Notice be payable in property other; than cash, the Company and/or the Buying
Holders shall have the' right to pay the purchase price in the form of cash
equal in amount to the value of such property. If the Selling Holder and the
Company and/or the Buying Holders cannot agree on such cash value within ten
(10) days after expiration of the last applicable exercise period, the valuation
shall be made by an appraiser of recognized standing selected by the Selling
Holder and the Company (or, if the Company is not purchasing any Target Shares,
the Buying Holders) or, if they cannot agree on an appraiser within twenty (20)
days after expiration of the last applicable exercise period, each shall select
an appraiser of recognized standing and the two appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be determinative
of such value. The cost of such appraisal shall be shared equally by the Selling
Holder and the Company, or if the Company is not purchasing any Target Shares,
the Buying Holders in accordance with their relative share ownership's. The
closing shall then be held on the later of (i) the 30th day following expiration
of the last applicable exercise period or (ii) the 15th day after such cash
valuation shall have been made.
4.6 Non-Exercise of Right. In the event no Company or Holder Exercise Notice
("Exercise Notice") is given to the Selling Holder within sixty (60) days
following the date of the Disposition Notice, the Selling Holder shall have a
period of thirty (30) days thereafter, in which to sell or otherwise dispose of
the Target Shares upon terms and conditions (including the purchase price) no
more favorable to the third-party purchaser than those specified in the
Disposition Notice. The third-party purchaser shall acquire the Target Shares
subject to the provisions of this Agreement and it shall be a condition
precedent to the validity of any such transfer that the third-party purchaser
acknowledge in writing that such purchaser is bound by the provisions of this
Agreement. In the event the Selling Holder does not sell or otherwise dispose of
the Target Shares within the specified thirty (30) day period, the provisions of
this Article IV shall continue to be applicable to any subsequent disposition of
the Target Shares by the Selling Holder.
4.7 Partial Exercise of Right. In the event Exercise Notices are delivered with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, the Selling Holder shall have the option, exercisable by
written notice to the Company and the Buying Holders delivered within seventy
(70) days after the date of the Disposition Notice, to effect the sale of the
Target Shares pursuant to one of the following alternatives:
(i) sale or other disposition of all the Target Shares to a third-party
purchaser in compliance with the requirements of Section 4.6, as if the Company
and the Holders did not exercise the first refusal rights hereunder; or
(ii) sale to the Company and/or the Buying Holders of the portion of the Target
Shares which the Company and/or the Buying Holders have elected to purchase,
such sale to be effected in substantial conformity with the provisions of
Section 4.4.
Failure of the Selling Holder to deliver timely notification to the Company and
the Buying Holders under this Section 4.7 shall be deemed to be an election by
the Selling Holder to sell the Target Shares pursuant to alternative (i) above.
4.8 Recapitalization. In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Company's outstanding common
stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Shares shall be immediately
subject to the provisions of this Article IV, but only to the extent the Shares
are at the time covered by this Article IV.
<PAGE>
ARTICLE V - CO-SALE AGREEMENT
- -----------------------------
5.1 Notice of Sale. If any Ruxin Holder proposes to sell or transfer any Shares
in one or more related transactions which will result in the transferee of such
Shares holding more than five percent (5%) of the outstanding Shares, then such
Ruxin Holder shall promptly give written notice (the "Notice") to the Company
and the MDS Holders at least 20 days prior to the closing of such sale or
transfer. The Notice may be combined with the written notice required to be
given pursuant to Section 4.2. The Notice shall describe in reasonable detail
the proposed sale or transfer including, without limitation, the number of
Shares to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid, and the name and address of each prospective purchaser
or transferee. In the event that the sale or transfer is an Exempt Transfer, the
Notice shall so specify and shall state the relationship of the transferee to
the Ruxin Holder.
5.2 Exercise of Co-Sale Right. Each MDS Holder shall have the right, exercisable
upon written notice to such Ruxin Holder within 15 days after receipt of the
Notice, to participate in such sale of Shares on the same terms and conditions.
To the extent one or more of the MDS Holders ('Participants") exercise such
right of participation in accordance with the terms and conditions set forth
below, the number of Shares that the Ruxin Holder may sell in the transaction
shell: tee correspondingly reduced.
Number of Shares. Each MDS Holder may sell all or any part of that number of
Shares equal to the product obtained by multiplying (x) the aggregate number of
Shares covered by the Notice times (y) a fraction the numerator of which is the
number of Shares owned by the MDS Holder at the time of the sale or transfer and
the denominator of which is the total number of Shares owned by the Ruxin Holder
and the MDS Holders at the time of the sale or transfer.
5.4 Delivery of Shares. Each Participant shall effect its participation in the
sale by promptly delivering to the Ruxin Holder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent the number of Shares which such Participant elects to sell. The stock
certificate or certificates that the Participant delivers to the Ruxin Holder
shall be transferred to the prospective purchaser in consummation of the sale of
the Shares pursuant to the terms and conditions specified in the Notice, and the
Ruxin Holder shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Participant exercising its rights of co-sale hereunder,
the Ruxin Holder shall not sell to such prospective purchaser or purchasers any
Shares unless and until, simultaneously with such sale, the Ruxin Holder shall
purchase such shares or other securities from such Participant.
5.5 Effect of Non-participation. The exercise or non exercise of the rights of
the Participants hereunder to participate in one or more sales of Shares made by
the Ruxin Holder shall not adversely affect their rights to participate in
subsequent sales of Shares subject to Section 5.1.
5.6. Prohibited Transfers. In the event a Ruxin Holder shall sell any Shares in
contravention of the co-sale rights of the MDS Holders under this Article V (a
"Prohibited Transfer"), the MDS Holders, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the put option
provided below, and the Ruxin Holder shall be bound by the applicable provisions
of such option. In the event of a Prohibited Transfer, each MDS Holder shall
have the right to sell to the Ruxin Holder the number of Shares equal to the
number of Shares such MDS Holder would have been entitled to transfer to the
purchaser under Section 5.3 had the Prohibited Transfer been effected pursuant
to and in compliance with the terms hereof. Such sale shall be made on the
following terms and conditions:
5.6.1. The price per Share at which the Shares are to be sold to the Ruxin
Holder shall be equal to the price per Share paid by the purchaser to the Ruxin
Holder in the Prohibited Transfer. The Ruxin Holder shall also reimburse each
MDS Holder for any and all fees and expenses' including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the MDS Holder's
rights under this Article V.
<PAGE>
5.6.2 Within 90 days after the date on which the MDS Holder received notice of
the Prohibited Transfer, each MDS Holder shall, if exercising the option created
hereby, deliver to the Ruxin Holder the certificate or certificates representing
Shares to be sold, each certificate to be properly endorsed for transfer.
5.6.3 The Ruxin Holder shall, upon receipt of the certificate or certificates
for the Shares to be sold by an MDS Holder pursuant to this Section 5.6, pay the
aggregate purchase price therefor and the amount of reimbursable fees and
expenses, as specified in Section 5.6.1, in cash or by other means acceptable to
the MDS Holder.
5.6.4 Notwithstanding the foregoing, any attempt by an Ruxin Holder to transfer
Shares in violation of this Article V shall be void and the Company agrees it
will not effect such a transfer nor will it treat any alleged transferee as the
holder of such Shares without the written consent of a majority in interest of
the MDS Holders.
5.7 Exempt Transfers. Notwithstanding the foregoing, the co-sale rights of the
MDS Holders shall not apply to any Exempt Transfer.
ARTICLE VI - REGISTRATION RIGHTS OF HOLDERS
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6.1 Company Registration.
6.1.1 If the Company shall determine to register any of its securities either
for its own account or the account of a security holder or holders exercising
their respective demand registration rights (other than pursuant to Section 6.2
hereof), other than a registration relating solely to employee benefit plans, or
a registration relating solely to a Rule 145 transaction, or a registration on
any registration form that does not permit secondary sales, the Company will:
(a) promptly give to each Holder written notice thereof; and
(b) use its best efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), except as set forth in
Section 6.1.2 below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made by any
Holder within twenty (20) days after the written notice from the Company
described in clause (a) above is given. Such written request may specify all or
a part of a Holder's Registrable Securities, provided, however, that in no event
shall such request relate to less than one hundred thousand (100,000) Shares
(appropriately adjusted for stock splits, share combinations, and similar
events).
6.1.2 If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to Section 6.1.1. In such
event, the right of any Holder to registration pursuant to this Section 6.1
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
of securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company. Notwithstanding any other
provision of this Section 6.1, if the representative of the underwriters advises
the Company in writing that marketing factors require a limitation on the number
of shares to be underwritten, the representative may (subject to the limitations
set forth below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
<PAGE>
the number of shares of securities that are entitled to be included in the
registration and underwriting shall/ be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
6.11. If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of share so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
Section 6.11 hereof.
6.2 Registration on Form S-3.
-------------------------
6.2.1 After its initial public offering, the Company shall use its best efforts
to qualify for registration on Form S3 or any comparable or successor form or
forms. After the Company has qualified for the use of Form S-3, in addition to
the rights contained in the foregoing provisions of this Article VI, the Holders
of Registrable Securities ("Initiating Holders!') shall, subject to the
provisions of Section 6.2.2, have the right to request registration on Form S-3
(such request shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Initiating Holders). Promptly following receipt of any
such request from the Initiating Holders, the Company shall give all other
Holders written notice of the request and give such Holders an opportunity to
request inclusion of their Registrable Securities in the requested registration.
6.2.2 The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 6.2:
(a) Unless the aggregate price to the public of the Registrable Securities
proposed to be offered is reasonably expected to exceed S1, $1,000,000
(b) In any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification, or; compliance, unless the Company is already subject to service
in/ such jurisdiction;
(c) After the Company has initiated one such registration pursuant to this
Section 6.2 (counting for these purposes only a registration which has been
declared or ordered effective and pursuant to which securities have been sold
and registrations which have been withdrawn by the Holders as to which the
Holders have not elected to bear the Registration Expenses pursuant to Section
6.3 hereof and would, absent such election, have been required to bear such
expenses); or
(d) During the period starting with the date sixty (60) days prior to the
Company's good faith estimate of the date of filing of, and ending on a date one
hundred eighty (180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective.
6.2.3 Subject to Section 6.2.2, the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Initiating Holders:
provided, however, that if (a) in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (b) the Company shall furnish to such Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future and that
it is, therefore, essential to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for the period during
<PAGE>
which such filing would be seriously detrimental, provided that (except as
provided in clause (d) of Section 6.2.2 above) the Company may not defer the
filing for a period of more than one hundred eighty (180) days after receipt of
the request of the Initiating Holders, and, provided further, that the Company
shall not defer its obligation in this manner more than once in any twelve-month
period. The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 6.11 hereof,
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
6.2.4 If the Initiating Holders intend to dispose of their Registrable
Securities in an underwritten offering, the right of any Holder to registration
pursuant to this Section 6.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority interest of the Initiating Holders and such Holder with respect to
such participation and inclusion) to the extent provided herein. A Holder may
elect to include in such underwriting all or a part of the Registrable
Securities he holds.
6.2.5 If the Initiating Holders intend to dispose of their Registrable
Securities in an underwritten offering and the Company shall request inclusion
in any registration pursuant to this Section 6.2 of securities being sold for
its own account, or if other persons shall request inclusion in any registration
pursuant to this Section 6.2, the Initiating Holders shall, on behalf of all
Holders, offer to include such securities in the underwriting and may condition
such offer on their acceptance of the further applicable provisions of this
Article VI (including Section 6.10). The Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Holders, which underwriters are reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
6.2, if the representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 6.11 hereof. If a person
who has requested inclusion in such registration as provided above does not
agree to the terms of any such underwriting, such person shall be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
Holders. The securities so excluded shall also be withdrawn from registration.
Any Registrable Securities or other securities excluded shall also be withdrawn
from such registration. If shares are so withdrawn from the registration and if
the number of shares to be included in such registration was previously reduced
as a result of marketing factors pursuant to this Section 6.2.5, then the
Company shall offer to all holders who have retained rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with; such shares to be allocated among such Holders requesting" additional
inclusion in accordance with Section 6.11 hereof.
6.3 Expenses of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Sections 6.1 and
6.2 hereof shall be borne by the Company provided, however, that if the Holders
bear the Registration Expenses for any registration proceeding begun pursuant to
Section 6.2 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 6.2 hereof, and in the event that any such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 6.2, such registration shall not be
treated as a counted registration for purposes of Section 6.2 hereof, even
though the Holders do not bear the Registration Expenses for such registration.
All Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf.
<PAGE>
6.4 Registration Procedures. In the case of each registration effected by the
Company pursuant to this Article VI, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
6.4.1 Keep such registration effective for a period of one hundred twenty (120)
days or until the Holder or Holders have ~ completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (i) such 120-day period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (a) includes any prospectus required by Section
10(a)(3) of the Securities Act or (b) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (a) and (b) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
6.4.2 Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
6.4.3 Furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request;
6.4.4 Notify each seller of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such seller, prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
6.4.5 Cause all such Registrable Securities registered pursuant to Article VI
hereunder to be listed on each securities exchange, if any, on which similar
securities issued by the Company are listed;
6.4.6 Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
6.4.7 Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section ll(a) of the Securities Act;
and
<PAGE>
6.4.8 In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 6.2 hereof, the Company will enter into an
underwriting agreement reasonably necessary to effect the offer and sale of the
Registrable Securities, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so requests
the underwriting agreement will contain customary contribution provisions.
6.5 Indemnification.
----------------
6.5.1 The Company will indemnify each Holder, each of its officers, directors
and partners, legal counsel, and accountants and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification, or compliance has been effected pursuant to
this Article VII, and each underwriter, if any, and each person who controls
within the meaning of Section 15 of the Securities Act any underwriter, against
all expenses, claims, losses, damages, and liabilities (or actions, proceedings,
or settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular, or other document (including any related
registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by any Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
6.5.1 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
6.5.2 Each Holder will, if Registrable Securities held by him are included in
the securities as to which such registration, qualification, or compliance is
being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder and Other Stockholder, and each of their
officers, directors, and partners, and each person controlling such Holder or
Other Stockholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other documents, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and such Holders, Other Stockholders, directors, officers,
partners, legal counsel, and accountants, persons, underwriters, or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability, or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder; provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld).
<PAGE>
6.5.3 Each party entitled to indemnification under this Section 6.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6.5, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
6.5.4 If the indemnification provided for in this Section 6.5 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
6.5.5 Notwithstanding the foregoing, to the extent that/ the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
6.6 Information by Holder. Each Holder of Registrable Securities shall furnish
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification,
or compliance referred to in this Article VI.
6.7 Limitations on Registration of Issues of Securities. From and after the date
of this Agreement, the Company shall not, without the prior written consent of a
majority in interest of the Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are more favorable
than the registration rights granted to the Holders hereunder.
6.8 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission that may permit the sale of restricted
securities of the Company to the public without registration, the Company agrees
to use its best efforts to:
6.8.1 Make and keep public information regarding the Company available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
<PAGE>
6.8.2 File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
6.8.3 So long as a Holder owns any restricted securities, furnish to the Holder
forthwith upon written request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of it securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
6.9 Transfer or Assignment of Registration Rights. The rights to cause the
Company to register securities granted to a Holder by the Company under this
Article VI may be transferred or assigned by any Holder to any transferee or
assignee of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
and the like), provided that the Company is given written notice at the time of
or within a reasonable time after said transfer or assignment, stating the name
and address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes
the obligations of such Holder under this Article VI.
6.10 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of common stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Shares (or other securities) of
the Company held by such Holder (other than those included in the registration)
during the one hundred eighty (180) day period following the effective date of a
registration statement of the company filed under the Securities Act, provided
that: (a) such agreement shall only apply to the first such registration
statement of the Company, including securities to be sold on its behalf to the
public in an underwritten offering; and (b) all Holders and officers and
directors of the Company enter into similar agreements. -The obligations
described in this Section 6.10 shall not apply to a registration relating solely
to employee benefit plans on Form S1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Company may impose stop-transfer instructions with respect to the
Shares (or securities) subject to the foregoing restriction until the end of
said one hundred eighty (180) day period.
6.11 Allocation of Registration Opportunities. In any circumstance in which all
of the Registrable Securities and other shares of common stock of the Company
(including shares of common stock issued or issuable upon conversion of shares
of any currently un-issued series of preferred stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares or Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
<PAGE>
stockholders; provided, however, so that such allocation shall not operate to
reduce the aggregate number of Registrable Securities and Other Shares to be
included in such registration, if any Holder or other selling stockholder does
not request inclusion of the maximum number of Registrable Securities and Other
Shares allocated to him pursuant to the above-described procedure, the remaining
portion of his allocation shall be reallocated among those requesting Holders
and other selling stockholders whose allocations did not satisfy their requests
pro rata on the basis of the number of shares of Registrable Securities and
Other Shares which would be held by such Holders and other selling stockholders;
and this procedure shall be repeated until all of the shares of Registrable
Securities and Other Shares which may be included in the registration on behalf
of the Holders and other selling stockholders have been so allocated.
6.12 Delay of Registration. No Holder shall have any right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Article VI.
6.13 Termination of Registration Rights. The right of any Holder to request
registration or inclusion in any registration pursuant to Section 6.1 or 6.2
shall terminate on the closing of the first Company-initiated registered public
offering of common stock of the Company, provided that all shares of Registrable
Securities held by such Holder may immediately be sold under Rule 144 during any
90-day period, or on such date after the closing of the first Company-initiated
registered public offering of common stock of the Company as all shares of
Registrable Securities held; by such Holder may immediately be sold under Rule
144 during any/ 90-day period; provided, however, that the provisions of this
Section 6.13 shall not apply to any Holder who owns more than ten percent (10%)
of the Company's outstanding stock until the earlier of (a) such time as such
Holder owns less than two percent (2%) of the outstanding stock of the Company,
or (b) the expiration of three (3) years after the closing of the first
registered public offering of common stock of the Company.
ARTICLE VII - MISCELLANEOUS
- ---------------------------
7.1 Termination of Certain Rights. The rights and obligations of the parties
under Articles II, III, IV, and V of this Agreement shall terminate upon the
first sale of Common Stock of the Company to the public effected pursuant to a
registration statement filed with, and declared effective by, the Commission
under the Securities Act, with proceeds of more than $4,000,000 or upon such
earlier date as may be agreed upon by Ruxin and MDS (the "Termination Date").
Prior to the Termination Date, Ruxin and MDS may, by agreement in writing,
terminate the rights and obligations of the parties under any one or more of
Articles II, III, IV and V.
7.2 Legend. Prior to the Termination Date, each certificate representing Shares
now or hereafter owned by any Holder shall be endorsed with the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
7.3 Stop Transfer Instructions. Each Holder agrees that the Company may instruct
its transfer agent to impose transfer restrictions on the Shares represented by
certificates bearing the legend referred to in Section 7.2 above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The stop
transfer instructions shall be removed on the Termination Date.
7.4 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Colorado applicable to contracts made and to be performed
therein.
7.5 Amendment. Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (a) as to the
Company, only the Company, (b) as to the Management Holders, persons holding
more than fifty percent (50%) in interest of the Shares held by Management
Holders, (c) as to each MDS Holder, such MDS Holder, and (d) as to the Ruxin
Holders, persons holding more than fifty percent (50%) in interest of the Shares
held by Ruxin Holders, provided that any Holder may waive any of his rights
hereunder without obtaining the consent of any other Holder. Any amendment or
waiver effected in accordance with clauses (a), (b), (c) and (d) of this
paragraph shall be binding upon the Company, each Management Holder, his
successors and assigns, the MDS Holder in question, and each Ruxin Holder, his
successors and assigns.
<PAGE>
7.6 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified or five (5) days after deposit in the United States mail, by registered
or certified mail, postage prepaid and properly addressed to the party to be
notified as set forth on the signature page hereof or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties hereto.
7.7 Severabilitv. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or un-enforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
7.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Holders and the Company have duly executed this
Agreement as of the date first above set forth.
/S/ MICHAEL I. RUXIN
- -------------------------------------
MICHAEL I. RUXIN
Address:
MDS HEALTH GROUP, INC.
By: /S/ J. A. ROGERS
---------------------------------
Title: Vice-President
By: /S/ B.R. Moffatt
---------------------------------
Title: Secretary
Address: 395 South Youngs Road
Williamsville New York 14221
/S/ GORDON SEGAL
- -------------------------------------
GORDON SEGAL
Address: 340 W. 57th, Apt. 9J, NY, NY 10019
/S/ ERIC SIPF
- -------------------------------------
ERIC SIPF
Address: 4265 S. Bellaire Circle, Englewood, Co 80110
/S/ ROBIN VORP
- -------------------------------------
ROBIN VORP
Address: 5370 S. Geneva St., Englewood, Co 80111
NATIONAL MRO, INC.
By: /S/ Michael Ruxin
---------------------------------
Title: President
Address: 12000 600 West Colfax Ave.
Suite A5, Lakewood, Colorado 80215
<PAGE>
AMENDMENT TO SHAREHOLDERS' AGREEMENT
This Agreement is made and entered into this 5th day of May, 1995 between
Michael I. Ruxin ("Ruxin") and MDS Health Group, Inc. ("MDS").
WHEREAS, on August 16, 1991, Ruxin, MDS and certain other shareholders of
National MRO, Inc. ("National") entered into a Shareholders' Agreement which
provided for certain rights to Ruxin, MDS and the other signatories to that
Agreement; and
WHEREAS, Article III of the Shareholders' Agreement granted preemptive
rights to the parties to the Agreement to purchase a pro-rata share of any New
Securities (as defined in the Shareholders' Agreement ) which National may, from
time to time, propose to sell and issue in the future; and
WHEREAS, Article I of the Shareholders' Agreement excludes from the
definition of New Securities any securities as to which Ruxin and MDS agree in
writing that the preemptive rights set forth in Article III shall not apply.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
Ruxin and MDS hereby agree as follows:
1. Ruxin and MDS do hereby agree that the preemptive rights set forth
in Article III of the Shareholders' Agreement shall not apply to the Units and
component parts thereof (including underlying shares of common stock into which
warrants may be converted) to be issued in connection with the private offering
up to 400,000 Units of National (the "Offering") during April 1995, each Unit
consisting of two shares of National $.01 par value Common Stock (the "Common
Stock") and one Common Stock Purchase Warrant exercisable at $3.00 per share for
a period of three years.
2. Ruxin and MDS do hereby agree that the preemptive rights set forth in
Article III of the Shareholders' Agreement shall not apply to the shares to be
issued in connection with the contemplated merger between National and The
Wyndgate Group, Ltd, a California corporation, ("Wyndgate") pursuant to the
Letter of Intent between National and Wyndgate dated March 15, 1995 and the
subsequent Agreement of Merger and Plan of Reorganization.
3. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this agreement as of
the date first above set forth.
/s/ MICHAEL I. RUXIN
----------------------------------
Michael I. Ruxin
MDS HEALTH GROUP, INC.
By /s/ JOHN A. ROGERS
-----------------------------------
John A. Rogers, President and Chief
Operating Officer
Attest:
/S/ PETER E. BRENT
- ------------------------------
Peter E. Brent, Secretary
2
<PAGE>
SECOND AMENDMENT TO SHAREHOLDERS' AGREEMENT
This Second Amendment to Shareholders' Agreement is made and entered into
this day of September, 1995 by and among Global Data Technologies, Inc., a
Colorado corporation ("Global Data"), Michael I. Ruxin ("Ruxin"), MDS Health
Group, Inc. ("MDS"), Gordon Segal, Eric Sipf and Robin Vorp. Ruxin, MDS and the
other individual signatories are referred to herein as the "Holders".
WHEREAS, on August 16, 1991, the Holders entered into a Shareholders'
Agreement with Global Data (f/k/a National MRO, Inc.) which provided for certain
rights to the Holders under that Agreement; and
WHEREAS, Article III of the Shareholders' Agreement granted preemptive
rights to the parties to the Agreement to purchase a pro-rata share of any New
Securities (as defined in the Shareholders' Agreement ) which Global Data may,
from time to time, propose to sell and issue in the future; and
WHEREAS, Article I of the Shareholders' Agreement excludes from the
definition of New Securities any securities as to which Ruxin and MDS agree in
writing that the preemptive rights set forth in Article III shall not apply.
1. NOW THEREFORE, in consideration of the mutual covenants herein
contained, Ruxin and MDS hereby agree as follows:
Ruxin and MDS do hereby agree that the preemptive rights set forth in
Article III of the Shareholders' Agreement shall not apply to the
Series A Preferred Stock (including underlying shares of common stock
into which the Series A Preferred Stock may be converted) to be issued
in connection with the private offering of up to 2,666,667 shares of
Series A Preferred Stock of Global Data (the "Offering") in conjunction
with Brenner Securities Corporation.
2. NOW THEREFORE, in consideration of the mutual covenants herein
contained, the Holders hereby agree that Section 2.1 of the Shareholders'
Agreement hereby is amended to read as follows:
Each Holder agrees that for the term of this Agreement each of them
will vote his Shares to establish and maintain the number of directors
constituting the entire Board of Directors at four directors, to elect
two directors designated by Management Holders holding a majority of
the Shares held by Management Holders, and to elect one director
designated by MDS Holders holding a majority of the Shares held by the
MDS Holders.
3. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this agreement as of
the date first above set forth.
/S/ MICHAEL I. RUXIN
-------------------------------------
Michael I. Ruxin
MDS HEALTH GROUP, LTD. (as sole
shareholder of MDS HEALTH GROUP,
INC.)
By /S/ PETER E. BRENT
------------------------------------
Peter E. Brent, Corporate Secretary
Attest:
/s/ JANE MASON
- ------------------------------
Law Clerk
- ------------------------------
/S/ GORDON SEGAL
--------------------------------------
Gordon Segal
/S/ ERIC SIPF
--------------------------------------
Eric Sipf
/S/ ROBIN VORP
--------------------------------------
Robin Vorp
2
<PAGE>
THIRD AMENDMENT TO SHAREHOLDERS' AGREEMENT
This Agreement is effective the 13th day of June, 1996 between Michael I.
Ruxin ("Ruxin") and MDS, Inc. ("MDS").
WHEREAS, on August 16, 1991, Ruxin, MDS and certain other shareholders of
Global Data Technologies, Inc. ("Global") entered into a Shareholders' Agreement
which provided for certain rights to Ruxin, MDS and the other signatories to
that Agreement; and
WHEREAS, Article III of the Shareholders' Agreement granted preemptive
rights to the parties to the Agreement to purchase a pro-rata share of any New
Securities (as defined in the Shareholders' Agreement ) which Global may, from
time to time, propose to sell and issue in the future; and
WHEREAS, Article I of the Shareholders' Agreement excludes from the
definition of New Securities any securities as to which Ruxin and MDS agree in
writing that the preemptive rights set forth in Article III shall not apply.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
Ruxin and MDS hereby agree as follows:
1. Ruxin and MDS do hereby agree that the preemptive rights set forth in
Article III of the Shareholders' Agreement shall not apply to the Notes and
component parts thereof (including underlying shares of common stock into which
the Notes and Warrants may be converted) to be issued in connection with the May
1996 Private Offering of 10% 3 Year Convertible Notes, issued with Common Stock
Purchase Warrants exercisable at $3.75 per share for a period of 3 years from
date of issuance.
2. Ruxin and MDS do hereby agree that the preemptive rights set forth in
Article III of the Shareholders' Agreement shall not apply to the shares issued
pursuant to the Brenner Private Offering of Series A Preferred Stock,
convertible into Common Shares, which included 66,667 shares of Series A
Preferred Stock at $3.75 per share issued to Ronald O. Gilcher.
3. Ruxin and MDS do hereby agree that the preemptive rights set forth in
Article III of the Shareholders' Agreement shall not apply to the proposed
private placement with RAF Financial Corporation in which Global contemplates
raising approximately $1,200,000 through RAF.
4. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this agreement as of
the date first above set forth.
/S/ MICHAEL I. RUXIN
----------------------------------
Michael I. Ruxin
MDS, INC.
By /S/ PETER E. BRENT
----------------------------------
Peter E. Brent, Corporate Secretary
2
<PAGE>
AMENDMENT FOUR TO SHAREHOLDER'S AGREEMENT
RESCISSION AND CANCELLATION OF
ARTICLE III AND ARTICLE IV
This Amendment Four to Shareholder's Agreement Rescission and Cancellation
of Article III and Article IV is entered into this 25th day of July, 1996 by and
among Michael I. Ruxin ("Ruxin"), MDS Inc. ("MDS"), Gordon Segal, Eric Sipf and
Robin Vorp (together with Ruxin and MDS, the "Holders"), and Global Med
Technologies, Inc. (the "Company").
WHEREAS, on August 16, 1991, the Holders and the Company entered into a
Shareholders' Agreement (the "Shareholders' Agreement") which provided, among
other things, in Article III entitled, "Preemptive Rights of Holders" and
Article IV entitled, "Rights of First Refusal"; and
WHEREAS, the Company has entered into a letter of intent dated May 28, 1996
with RAF Financial Corporation (the "RAF LOI") concerning a proposed public
offering of the Company's common stock and common stock purchase warrants; and
WHEREAS, the Company and the Holders desire to rescind and cancel Articles
III and IV of the Shareholders' Agreement, such rescission and cancellation to
be effective upon the date set forth above.
NOW THEREFORE, in consideration of the mutual covenants of the parties
herein contained, the Holders hereby agree as follows:
1. Article III of the Shareholders' Agreement dated August 16, 1991
entitled, "Preemptive Rights of Holders" is rescinded and cancelled effective
upon the date set forth above.
2. Article IV of the Shareholders' Agreement dated August 16, 1991
entitled, "Rights of First Refusal" is rescinded and cancelled effective upon
the date set forth above.
3. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first set forth above.
/S/ MICHAEL I. RUXIN
---------------------------------------------
Michael I. Ruxin
MDS INC.
By /S/ J. A. ROGERS
-------------------------------------------
J.A. Rogers, President & C.O.O.
/S/ GORDON SEGAL
---------------------------------------------
Gordon Segal
/S/ ERIC SIPF
---------------------------------------------
Eric Sipf
/S/ ROBIN VORP
---------------------------------------------
Robin Vorp
GLOBAL MED TECHNOLOGIES, INC.
By /S/ MICHAEL I. RUXIN
------------------------------------------
Michael I. Ruxin, Chief Executive Officer
2
<PAGE>
CONSENT TO WAIVER OF PREEMPTIVE RIGHTS AND REGISTRATION RIGHTS
UNDER SHAREHOLDER'S AGREEMENT DATED AUGUST 16, 1991
This Consent and Waiver is effective the 12th day of July, 1996 and is
agreed to by Michael I. Ruxin ("Ruxin") and MDS, Inc. ("MDS") formerly MDS
Health Group, Inc.
WHEREAS on August 16, 1991 Ruxin, MDS and certain other shareholders of
Global Data Technologies, Inc. ("Global") formerly National MRO, Inc. entered
into a Shareholder's Agreement which provided for certain rights to Ruxin, MDS
and other signatories to that Agreement and;
WHEREAS Article III of the Shareholder's Agreement granted preemptive
rights to the parties to the Agreement to purchase a pro-rata share of any new
securities (as defined in the Shareholder's Agreement) which Global may from
time to time propose to sell and issue in the future and;
WHEREAS Article I of the Shareholder's Agreement excludes from the
definition of new securities any securities as to which Ruxin and MDS agree in
writing that the preemptive rights set forth in Article III shall not apply;
WHEREAS Article 6.7 provides for Limitation on Registration of Issues of
Securities;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
Ruxin and MDS hereby agree as follows:
1. Ruxin and MDS do hereby agree that the preemptive rights set forth
in Article III of the Shareholder's Agreement shall not apply to the
proposed Private Placement of up to 600,000 shares of Global's common
stock to be offered by RAF Financial Corporation as placement agent to
raise up to $1,500,000.
2. In accordance with the Letter of Intent entered into by Global with
RAF Financial Corporation and the registration rights granted to the
purchasers of the aforementioned Private Placement, Paragraph 6.7 of
the Shareholder's Agreement is waived by Ruxin and MDS insofar as the
proposed Private Placement is concerned.
The undersigned, as the Holders of a majority in interest of the stock of
the Holders as defined in the aforementioned Shareholder's Agreement, have
evecuted this Agreement as of the date set forth above.
/S/ MICHAEL I. RUXIN
---------------------------------------
Michael I. Ruxin
MDS, Inc.
/S/ PETER E. BRENT
----------------------------------------
By: Peter E. Brent, Corporate Secretary
<PAGE>
RESCISSION OF SHAREHOLDERS' AGREEMENT
This Rescission of Shareholders' Agreement is entered into this 22nd day of
June, 1996 by and among Michael I. Ruxin ("Ruxin"), MDS Inc. ("MDS"), Gordon
Segal, Eric Sipf and Robin Vorp (together with Ruxin and MDS, the "Holders"),
and Global Med Technologies, Inc. (the "Company").
WHEREAS, on August 16, 1991, the Holders and the Company entered into a
Shareholders' Agreement (the "Shareholders' Agreement") which provided, among
other things, certain voting, preemptive and registration rights to the Holders;
and
WHEREAS, the Company has entered into a letter of intent dated May 28, 1996
with RAF Financial Corporation (the "RAF LOI") concerning a proposed public
offering of the Company's common stock and common stock purchase warrants;
WHEREAS, the Company and the Holders desire to rescind the Shareholders'
Agreement, such rescission to be effective only upon the effective date of a
registration statement for the Company's common stock filed in connection with
the RAF LOI.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the Holders hereby agree as follows:
1. The Shareholders' Agreement is rescinded effective upon the effective
date of a registration statement covering the Company's shares of common stock.
2. If a registration statement covering the Company's shares of common
stock does not become effective, then this Rescission Agreement shall not take
effect.
3. This agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first set forth above.
/S/ MICHAEL I. RUXIN
--------------------------------------
Michael I. Ruxin
MDS INC.
By /S/ PETER E. BRENT
-----------------------------------
Peter E. Brent, Corporate Secretary
/S/ GORDON SEGAL
-------------------------------------
Gordon Segal
/S/ ERIC SIPF
-------------------------------------
Eric Sipf
/S/ ROBIN VORP
-------------------------------------
Robin Vorp 6/24/96
GLOBAL MED TECHNOLOGIES, INC.
By /S/ MICHAEL RUXIN
--------------------------------
2
EXHIBIT 10.10
AGREEMENT
---------
AGREEMENT effective as of April 8, 1996, by and between GLOBAL DATA
TECHNOLOGIES, INC., a corporation organized and existing under the laws of the
State of Colorado with its principal place of business at 12600 W. Colfax, Suite
A500, Lakewood, CO, 80215 herein referred to as "GDT", and LMU & COMPANY, a
corporation organized and existing under the laws of the State of Colorado, with
its principal place of business at 1200 17th Street, Suite 1000, Denver, CO
80202, herein referred to as "LMU".
RECITALS
--------
WHEREAS, LMU is engaged in the business of providing management advisory
services with respect to business and financial community relations;
WHEREAS, GDT desires to engage the services of LMU described herein and LMU
desires to perform such services, all in accordance with the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:
1. Services.
---------
At the request of GDT during the term of this Agreement set forth in
Section 2 hereof, LMU will provide assistance to GDT in developing and
implementing a strategic plan for business and financial community relations. In
developing the plan, LMU will conduct a review and analysis of GDT's business
operations and industry position in order to evaluate its capabilities and
prospects for achieving its growth objectives. LMU will, as requested, assist
GDT management in implementing the plan, by advising on financial community
relations and marketing; and establishing relationships with institutional
lenders and commercial bankers, management consultants, and other professionals.
Such services shall be performed by L. Michael Underwood and by others whom he
may engage, at his sole discretion. The parties expressly acknowledge that the
services provided hereunder are not rendered by LMU as a business, securities or
other broker of any type.
2. Term.
-----
This Agreement shall be in effect for a term of one (1) year, commencing
from the date hereof.
3. Compensation.
-------------
GDT, simultaneously with its execution hereof, is issuing LMU an option
("Option") attached hereto as Exhibit A, to purchase 160,000 shares of GDT
Common Stock ("Option Shares"). The Option Shares when issued shall be duly
authorized and issued, fully paid and non-assessable. GDT agrees to register the
Option Shares with the SEC two years from the date hereof or sooner in the event
-1-
<PAGE>
that shares are registered on behalf of any management member, in which case GDT
shall cause the Option Shares to be registered at the same time. LMU shall pay
any expense of registration in excess of $5,000. GDT shall pay LMU Five Thousand
Dollars ($5,000) per month during the term of this Agreement. The first payment
shall be due October 1st, 1996 provided the Common Stock has closed at an
average price of at least $5.00 for five consecutive trading days as quoted on
NASDAQ or other national exchange. Each subsequent payment shall be made on the
first day of each month during the term of this Agreement.
4. Expenses.
---------
LMU shall be reimbursed for all out-of-pocket expenses incurred in
performing services on behalf of GDT during the term of this Agreement,
provided, however, that any such costs in excess of $100 per month shall be
approved in writing in advance by GDT. These expenses shall be reimbursed
quarterly beginning October 1st, 1996, and payable within twenty days after
statement is rendered.
5. Independent Contractor.
-----------------------
LMU shall be, and be deemed to be, an independent contractor in the
performance of its duties hereunder. LMU shall have no power to enter into any
agreement on behalf of or otherwise bind GDT. LMU shall be free to pursue,
conduct and carry on for its own account (or for the account of others) such
activities, employments, ventures, businesses and other pursuits as LMU may
determine in its sole, absolute and unfettered discretion.
6. Indemnification.
----------------
GDT will indemnify and hold LMU harmless from any and all losses,
claims, damages or liabilities, joint or several, to which it may become subject
to or in connection with, any action resulting from the performance of LMU's
duties under this Agreement, and agrees to, at the option of LMU, reimburse LMU
or pay directly for any and all legal or other expenses incurred in connection
with the investigation or defense of any action or claim in connection
therewith; provided, however, that GDT shall not be liable in any such case to
the extent that any such loss, claim, damage or liability is found in a final
judgment by a court of competent jurisdiction to have resulted in material part
from any act by LMU which constitutes fraud or gross negligence by LMU.
LMU will indemnify and hold GDT harmless from any and all losses,
claims, damages or liabilities, joint or several, to which it may become subject
to or in connection with, any action resulting from the performance of GDT's
duties under this Agreement, and agrees to, at the option of GDT, reimburse GDT
or pay directly for any and all legal or other expenses incurred in connection
with the investigation or defense of any action or claim in connection
therewith; provided, however, that LMU shall not be liable in any such case to
the extent that any such loss, claim, damage or liability is found in a final
judgment by a court of competent jurisdiction to have resulted in material part
from any act by GDT which constitutes fraud or gross negligence by GDT.
-2-
<PAGE>
7. Confidentiality.
----------------
Until such time as the same may become publicly known through sources other
than LMU, LMU agrees that any information provided to it by GDT of a
confidential nature will not be revealed or disclosed to any person or entity,
except in the performance of this Agreement, and upon completion of its services
and upon the written request of GDT, all documentation provided by GDT will be
returned to it or destroyed.
8. Notices.
--------
All notices hereunder shall be in writing and addressed to the party at the
address herein set forth, or at such other address as to which notice pursuant
to this section may be given, and shall be given by personal delivery, by
certified mail (return receipt requested), Express Mail or by national overnight
courier. Notices will be deemed given upon the earlier of actual receipt or
three (3) business days after being mailed or delivered to such courier service.
Notices shall be addressed to LMU at:
LMU & Company
1200 17th Street, Suite 1000
Denver, CO 80202
Attn: Lawrence M. Underwood, President
and to GDT at:
GLOBAL DATA TECHNOLOGIES, INC.
12600 West Colfax, Suite A500
Lakewood, CO 80215
Attn: Mick Ruxin, Chairman and CEO
Any notices to be given hereunder will be effective if executed by and sent
by the attorneys for the parties giving such notice, and in connection there
with the parties and their respective counsel agree that, in giving such notice,
such counsel may communicate directly in writing with such parties to the extent
necessary to give such notice.
-3-
<PAGE>
9. Representations and Warranties of GDT.
--------------------------------------
GDT hereby represents and warrants that:
(a) GDT will cooperate fully and timely with LMU to enable LMU to perform
the services which may be rendered hereunder;
(b) GDT has full power and authority to enter into this Agreement;
(c) The performance by GDT of this Agreement will not violate any
applicable court decree, law or regulation, nor will it violate any
provision(s) of the organizational or corporate governance documents
of GDT or any contractual obligation by which GDT may be bound;
(d) All information supplied to LMU by GDT, shall be true, accurate and
complete in all material respects, to the best of GDT's knowledge; and
(e) GDT will act diligently and promptly in reviewing materials submitted
to it by LMU and timely inform LMU of any inaccuracies contained
therein prior to any dissemination thereof.
10. Representations and Warranties of LMU.
--------------------------------------
LMU hereby represents and warrants that:
(f) It has full power and authority to enter this Agreement;
(g) It has the requisite skill and experience to perform the services and
to carry out and fulfill its duties and obligations hereunder;
(h) It will use its best efforts to complete all services in a timely and
professional manner.
11. Miscellaneous.
--------------
(i) No Waiver. No provision of this Agreement may be waived except by
agreement in writing signed by the waiving party. A waiver of any term
or provision of this Agreement shall not be construed as a waiver of
any other term or provision.
(j) Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Colorado (without giving effect to any
provisions regarding conflicts of laws), which shall be applied by any
court or arbitration panel before which any action concerning the
rights or obligations of the parties is brought hereunder.
-4-
<PAGE>
(k) Arbitration; Right to Injunctive Relief under Certain Circumstances;
Right to recover Costs and Fees; Jurisdiction and Venue.
All actions brought to enforce any rights or obligations arising
hereunder shall be brought in arbitration under the applicable rules
of the American Arbitration Association as then in effect; provided
however, that in the case where any breach or default would result in
irreparable injury to the non-breaching or defaulting party, such
party shall be allowed to bring suit in equity for the specific
performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the
exercise of any power granted in this Agreement or to enforce any
other equitable right of such party or to take any one or more of such
actions.
In any action brought in arbitration, the procedural and
substantive rules of discovery provided for under Colorado law
applicable to a civil case brought in a court which, but for this
arbitration clause, would have appropriate jurisdiction over the case,
shall govern the discovery allowed in any such proceeding.
In the event a party brings any action hereunder, the prevailing
party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement, including
without limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs
and expenses of appeals.
The jurisdiction and venue for any such proceeding in equity
shall be in the District Courts of the State of Colorado in Denver
County, Colorado, the county in which LMU has its principal place of
business. Any proceeding in arbitration shall be conducted in Denver
County, Colorado. No party shall object to such venue on the basis of
inconvenience to such party.
(l) Nonassignability. This Agreement is not assignable without the written
consent of the non-assigning party.
(m) Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original. It shall not
be necessary that each party execute each counterpart, or that any one
counterpart be executed by more than one party, so long as each party
executes at least one counterpart.
(n) Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions of this
Agreement.
(o) Construction. No provision of this Agreement shall be construed
against any party by virtue of the fact that this Agreement was
primarily prepared by such party.
(p) Headings. The section and paragraph headings shall not be deemed a
part of this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year first above written.
LMU & COMPANY GLOBAL DATA TECHNOLOGIES , INC.
By: /S/ LAWRENCE M. UNDERWOOD By: /S/ MICK RUXIN
----------------------------- -------------------------------
Lawrence M. Underwood, Mick Ruxin,
President Chairman and CEO
-6-
<PAGE>
Exhibit A
STOCK PURCHASE OPTION
RIGHT TO PURCHASE 160,000 SHARES OF COMMON STOCK
GLOBAL DATA TECHNOLOGIES, INC.
THIS CERTIFIES THAT Global Data Technologies, Inc. ("Grantor") hereby
grants LMU & Company ("LMU") and its successors and assigns ("Holder(s)") the
option to purchase up to One Hundred and Sixty Thousand (160,000) shares of the
common stock ($.01 par value) ("Shares") of Grantor, a Colorado corporation (the
"Corporation"), at the purchase price of Two Dollars and Fifty Cents ($2.50) per
Share (the "Exercise Price"), subject to adjustment as hereafter set forth. The
rights granted hereunder shall be immediately exercisable and shall continue for
a period of five (1) years thereafter (the "Exercise Period"). The Holder(s)
shall have the right to purchase any number of the shares of stock underlying
this Stock Purchase Option (the "Option") at any time during the Exercise Period
either in a single transaction or a series of transactions upon written notice
("Exercise Notice") to the Grantor, specifying the number of Shares then being
purchased. The closing of each purchase of stock pursuant to this Option shall
occur within 5 business days after the Grantor's receipt of the Exercise Notice.
At the closing, the Holder(s) shall deliver to the Grantor payment, in good
funds, equal to the Exercise Price multiplied by the number of shares then being
purchased, and the Grantor shall promptly deliver to the purchasing Holder(s) a
certificate evidencing the number of shares so purchased.
This Option is granted pursuant to that certain Agreement between LMU and the
Grantor dated April 8, 1996.
1. Adjustment of Exercise Price and Number of Shares Deliverable Upon
Exercise of Option. The Exercise Price and the number of Shares purchasable upon
the exercise of this Option are subject to adjustment from time to time upon the
occurrence of the events enumerated in this paragraph.
(a) In case the Corporation shall at any time after the date of this
Option:
(i) Pay a dividend in shares of its Common Stock or make a
distribution in shares of its Common Stock with respect to its
outstanding Common Stock;
(ii) Subdivide its outstanding shares of Common Stock;
(iii) Combine or reverse split its outstanding shares of Common
Stock; or,
(iv) Issue any other shares of capital stock by reclassification of
its shares of Common Stock;
the Exercise Price in effect at the time of the record date of such dividend,
subdivision, combination, or reclassification shall be proportionately adjusted
so that the Holder(s) shall be entitled to receive the aggregate number and kind
of shares which, if this Option had been exercised prior to such event, the
Holder(s) would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
<PAGE>
(b) In case the Corporation shall fix a record date for the issuance of
rights or options, or make a distribution of shares of Common Stock to all (but
not less than all) holders of its outstanding Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
shares of Common Stock) at a price per share (or having a conversion price per
share, if a security convertible into Common Stock) less than the market price
of the Common Stock (based on the closing price on the record date on a listed
securities exchange of the Corporation's Common Stock, or if no such quote is
available, the shareholders equity on the date of the last regularly prepared
financial statement (whether audited or unaudited), adjusted to reflect material
transactions occurring subsequent thereto and through the date of the
declaration of the rights, divided by the total number of shares outstanding)
(the "Market Price"), the Exercise Price to be in effect after such record date
shall be determined by multiplying the then current Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on such record date
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so to be offered (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Market Price and of which the denominator shall be the number
of shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible). Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights or options are not so issued,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such record date had not been fixed.
(c) In case of any reorganization of the Corporation, or in case of any
reclassification or change of outstanding Common Stock issuable upon exercise of
this Option (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
split-up or combination of the Common Stock), or in case of any consolidation or
merger of the Company with or into another entity (other than a consolidation or
merger with a subsidiary or a continuing corporation), or in case of any sale or
conveyance to another entity of all or substantially all of the property of the
Corporation, then as a condition of such reorganization, reclassification,
change, consolidation, merger, sale, or conveyance, the Grantor shall forthwith
provide to the Holder(s) a supplemental option (the "Supplemental Option") which
will make lawful and adequate provision whereby Holder(s) shall have the right
thereafter to receive, upon exercise of such Supplemental Option, the kind and
amount of shares and other securities and property which would have been
received upon such reorganization, reclassification, change, consolidation,
merger, sale, or conveyance by a holder of a number of shares of Common Stock
equal to the number of shares of Common Stock issuable upon exercise of the
Option immediately prior to such reorganization, reclassification, change,
consolidation, merger, sale, or conveyance. Such Supplemental Option shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph. The provisions of
this paragraph shall similarly apply to successive reorganizations,
reclassifications, and changes of Common Stock and to successive consolidations,
mergers, sales, or conveyances.
2
<PAGE>
This Option is subject to Grantor's right of redemption set forth in that
certain Securities Purchase Agreement entered into on even date herewith.
2. Registration Rights. The shares underlying this Option shall be
registered with the Securities and Exchange Commission two years from the date
hereof or sooner in the event that shares are registered on behalf of any
management member, in which case Grantor shall cause the Option Shares to be
registered at the same time.
3. Miscellaneous.
(a) Notices; Further Assurances. Any notice required hereunder shall be
sufficient if in writing and if sent by overnight courier or registered or
certified mail, postage prepaid, as follows: If to LMU, at 1200 17th Street,
Suite 1000, Denver, CO 80202 Attention: L. Michael Underwood; if to any Holder,
at the address of such Holder as Grantor shall have been given notice; if to the
Grantor, at the address set forth on the signature page hereto, or such other
address as may be designated by written notice to the other party. All notices
shall be deemed given when personally delivered (including by overnight courier)
or on the third day after the date of mailing if mailed postage prepaid by
registered or certified mail, return receipt requested.
The Grantor agrees to execute and deliver to the Holder(s), from time to
time, such further assignments, certificates, instruments, records, or other
documents, assurances, or things as may be reasonably necessary to give full
effect to this Option and to allow the Holder(s) fully to enjoy and exercise the
rights accorded and acquired under this Option.
(b) Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Colorado, which shall be applied by any court or
arbitration panel before which any action concerning the rights or obligations
of the parties is brought hereunder.
(c) Arbitration; Right to Injunctive Relief under Certain Circumstances;
Right to recover Costs and Fees; Jurisdiction and Venue.
All actions brought to enforce any rights or obligations arising hereunder
shall be brought in arbitration under the applicable rules of the American
Arbitration Association as then in effect; provided however, that in the case
where any breach or default would result in irreparable injury to the non-
breaching or defaulting party, such party shall be allowed to bring suit in
equity for the specific performance of any term contained in this Agreement or
for an injunction against the breach of any such term or in aid of the exercise
of any power granted in this Agreement or to enforce any other equitable right
of such party or to take any one or more of such actions.
3
<PAGE>
In any action brought in arbitration, the procedural and substantive rules
of discovery provided for under Colorado law applicable to a civil case brought
in a court which, but for this arbitration clause, would have appropriate
jurisdiction over the case, shall govern the discovery allowed in any such
proceeding.
In the event a party brings any action hereunder, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
The jurisdiction and venue for any such proceeding in equity shall be in
the District Courts of the State of Colorado in Denver County, Colorado, the
county in which LMU has its principal place of business. Any proceeding in
arbitration shall be conducted in Denver County, Colorado. No party shall object
to such venue on the basis of inconvenience to such party.
(d) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation, its respective successors and assigns, and the
Holder(s) from time to time, or any of them. Nothing in this Agreement is
intended or shall be construed to confer upon any other person any right, remedy
or claim or to impose upon any other person any duty, liability or obligation.
(e) Entire Agreement; Severability. This Agreement, together with that
certain Agreement and that certain Registration Rights Agreement, both of even
date herewith, embody the entire agreements between the parties with respect to
the subject matter hereof and thereof, and supersede any and all other
agreements. arrangements and understandings, written or oral, between the
parties. This Agreement may not be modified or terminated except as provided
herein or by a written instrument specifically to such effect, and signed by the
party to be bound by any such modification. If a court of competent jurisdiction
declares any section, provision or clause of this Agreement to be invalid, those
sections, provisions and clauses shall be considered to be deleted from this
Agreement and shall not invalidate the remaining sections, provisions and
clauses hereof.
4
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Option to be duly executed
as of April 8, 1996.
Attest: /S/ MICHAEL RUXIN
-----------------------------------
Global Data Technologies, Inc.
GRANTOR
5
EXHIBIT 10.11
AGREEMENT FOR DRUG AND ALCOHOL TESTING SERVICES
-----------------------------------------------
THIS AGREEMENT is made as of _____________________, 199_, by and between
the _____________________________________ having its principal office at
___________________ (hereinafter referred to as the "Company"), and Global Med
Technologies, Inc., dba DataMed International (formerly National MRO), having
its principal office at 12600 W. Colfax Avenue, Suite A500, Lakewood, Colorado
80215 (hereinafter referred to as "DataMed International or DMI").
RECITALS
The Company desires to secure professional and technical services to assist
it in drafting policies, practices, forms and educational material; performing
drug and alcohol testing; and engaging in related activities that are either
required or made advisable by the federal Omnibus Transportation Employee
Testing Act of 1991 and the Regulations of the US Department of Transportation
and its Federal Highway Administration that were adopted thereunder (49 CFR
Parts 40, 382, 391, 392 and 395).
DataMed International desires to provide services to the Transportation
Supervisors and similar personnel who are its members, and to the Company which
employ them.
IN CONSIDERATION of the mutual covenants and agreements set forth herein,
and of other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do covenant and agree as follows:
Section 1. Description of Services to be Provided
--------------------------------------
DataMed International shall perform the services which are set forth in
Appendix "A", attached hereto. The parties agree that the services shall be
performed by DataMed International or its qualified employee(s) or
subcontractors.
Section 2. Term
-----
This Agreement shall commence on ________________________ 199______ and
continue for the duration of the Company's fiscal year, which ends on
_______________________ 199________. Thereafter, it shall be automatically
renewed for a new fiscal year, upon the same terms, unless either party gives
notice to the other at least 30 days prior to the termination date of its intent
to terminate the Agreement.
Section 3. Fee
---
The Company agrees to pay and DataMed International agrees to accept as
full payment for the work and services performed and the granting of rights
pursuant to this Agreement, a fee computed as set forth in Appendix "B" attached
hereto. Unless otherwise specified in Appendix "B", payment shall be made
monthly for work completed, upon invoice from DataMed International. DataMed
International shall not be entitled to receive any other payment from the
Company, whether for fee, reimbursement for expenses or otherwise, except as set
forth in Appendix "B", or except as otherwise agreed.
All fees for services rendered shall be invoiced monthly, and are due upon
receipt of invoice. Should the account become 60 days delinquent, DMI reserves
the right to hold all further test results until the delinquency has been
corrected. DMI will also notify the laboratory and collection site(s) that DMI
is not responsible or liable for any testing costs incurred while the account is
on credit hold. Should the account become 90 days delinquent, DMI reserves the
right to place the account for collection.
<PAGE>
Section 4. Termination
-----------
Either party may terminate this Agreement by 30 days prior written notice,
or for cause, effective upon the giving of written notice. In the event of
termination, DataMed International shall be entitled to payment for work and
services properly performed up to the termination date.
Section 5. Tax
---
The Company is exempt from paying manufacturer's excise, floor, use or
sales taxes of the United States, the State of New York, and of cities and
counties for all materials, pursuant to this Agreement. This exemption may not
apply to tools, machinery, equipment or other property purchased by, leased by
or leased to DataMed International or to supplies or materials not incorporated
into the completed project. The Company will not be required to pay, nor will it
be invoiced for the amount of such taxes. The permanent sales tax exemption
number of the Company is __________________.
Section 6. Indemnification
---------------
By DataMed International. DataMed International shall be liable for any and
all claims, costs and expenses arising from or out of any alleged negligent act,
omission or breach of this agreement by DataMed International, its agents or
employees, in the performance of its obligations under the Agreement.
By Company. Company shall be liable for any and all claims, costs and
expenses arising from or out of any alleged negligent act, omission or breach of
this agreement by the Company, its agents or employees, in the performance of
its obligations under the Agreement.
Section 7. Compliance with all Laws
------------------------
DataMed International agrees that, during the performance of the work
required pursuant to this Agreement, it and all of its employees or agents shall
endeavor to comply with all federal, state and local laws, ordinances, rules and
regulations governing its actions during such work.
Section 8. Notification of Suit
--------------------
In the event a party is sued, or otherwise becomes the subject of action
before a court, administrative agency or an arbitration tribunal, relating to
work performed or other services rendered hereunder, it shall notify the other
party as soon as possible of same.
Section 9. Intellectual Property Rights
----------------------------
DataMed International retains all right, title and interest in and to any
and all ideas, data, documentation and information, in whatever form, first
produced or created by or for DataMed International as a result of or related to
the Project or the performance of work or the rendition of services under this
Agreement ("Work Product"), and in and to all patents, copyrights, trade secrets
and other proprietary rights in or based on the Work Product. The Company may
copy, modify, disseminate and otherwise use the Work Product provided by DataMed
International for its own internal use, but may not photocopy or otherwise
reproduce or disseminate the Work Product to outside parties.
Section 10. Company Approval
----------------
This agreement shall become binding upon the parties execution and Company
approval of same.
<PAGE>
Section 11. Extent of Agreement
-------------------
This Agreement, including the Appendices hereto, constitutes the entire and
integrated agreement between and among the parties hereto and supersedes any and
all prior negotiations, representations, agreements and/or conditions, whether
written or oral. Any modification or amendment to this Agreement shall be void
unless it is in writing and subscribed by the party to be charged or by its
Authorized Agent.
Section 12. Independent Contractor
----------------------
The relationship between DataMed International and the Company is that of
independent contractor and DataMed International agrees to do all things legally
required to establish and maintain its status as an independent contractor.
DataMed International in accordance with its status as an independent
contractor, covenants and agrees that it will conduct itself consistent with
such status, and that it will neither hold itself out as nor claim to be, an
officer, employee or agent of the Company by reason hereof. The employees or
agents of one party shall not be deemed employees or agents of the other. As an
independent contractor, DataMed International and any person(s) engaged by it
shall not be entitled to any medical, health, pension, retirement, disability,
unemployment, workers compensation or other insurance coverage, or any other
benefit, similar or dissimilar, from the Company. The parties agree that all
reporting by either of them to income tax and other governmental agencies shall
be consistent with the provisions of this paragraph.
Section 13. Governing Law and Venue
-----------------------
This Agreement is made under and shall be governed by the laws of the State
of New York. In the event that a dispute arises between the parties, venue for
the resolution of such dispute shall be the County of ___________________, State
of New York.
Section 14. Non-Waiver
----------
In the event that the terms and conditions of this Agreement are not
strictly enforced by either party, such non-enforcement shall not act as or be
deemed to act as a waiver or modification of this Agreement, nor shall such
non-enforcement prevent either party from enforcing each and every term of this
Agreement thereafter.
Section 15. Severability
------------
If any provision of this Agreement is held invalid by a court of law, the
remainder of this Agreement shall in no way be affected thereby if such
remainder would then continue to conform to the laws of the State of New York.
Section 16. Miscellaneous
-------------
The Section headings in this Agreement are for convenience of reference
only and shall not be used in interpretation of this Agreement. The singular
number used herein shall include the plural and the plural the singular. The
neuter, masculine or feminine genders used herein shall be deemed to include
each other.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement
intending to be legally bound upon approval of the _____________________.
Executed as of this_______________ day of ________________, 199___.
"DataMed International"
By:
------------------------------------------------
Signature
Michael I. Ruxin, M.D.
Name (Typed)
Chairman and Chief Executive Officer
Title
"Company " ---------------------------------------------------
By:
------------------------------------------------
Signature
---------------------------------------------------
Name
---------------------------------------------------
Title
APPROVED BY THE ____________ AT ITS MEETING OF ______________________, 199_.
<PAGE>
APPENDIX A
----------
Management and Administration
Drug Testing Policy/Procedures Consulting
US DOT Reporting/Record Keeping
Random Generation Procedure
Blind Sample Program Management
Individualized Data Management
Specimen Collection
Collection Site Management
Chain of Custody Review
Collection Supplies
Specimen Transport
Laboratory Services
SAMHSA/NIDA Approved Laboratory
US DOT Reporting/Record Keeping
Initial Screen and GCMS Confirmation
Specimen Storage
Alcohol Testing and Training
Breath Alcohol Technician Training
Evidential Breath Testing Instruments
Test Results Review and Monitoring
Medical Review Officer Services
Interview Process
Records Retention and Storage
Quality Assurance and Control
Employee and Supervisor Education/Training
Employee Education
Supervisory Training
EAP Counseling
<PAGE>
APPENDIX B
----------
FEES:
- -----
DRUG TEST:
- ----------
$39.00 per test, includes all the services listed in Appendix A, if collected at
a Corning/MetPath or SmithKline Affiliated Collection Site.
$52.00 per test, includes all the services listed in Appendix A, if collected at
an Unaffiliated Collection Site.
ALCOHOL TEST:
- -------------
$23.00 per test
POST-ACCIDENT TEST, IF REQUIRED:
- --------------------------------
At Cost.
EXPERT TESTIMONY, IF REQUIRED:
- ------------------------------
$100.00 per hour, plus reasonable travel expenses.
DEFINITIONS:
- ------------
"Affiliated Collection Site" means a place designated by Corning/MetPath or
SmithKline where pursuant to the regulations employees present themselves for
the purpose of providing specimens of their urine to be analyzed for the
presence of drugs and no collection fee is charged.
"Unaffiliated Collection Site" a place designated by DataMed International, that
is outside Corning/MetPath's or SmithKline's Affiliated Collection Site network,
where pursuant to the regulations employees present themselves for the purpose
of providing specimens of the urine to be analyzed for the presence of drugs and
a collection fee is charged.
EXHIBIT 10.12
DRAFT
Global Med Technologies, Inc.
SOFTWARE LICENSE AGREEMENT
SAFETRACE(TM) and EDEN-OA(R) SOFTWARE
Customer Number B -
Agreement Number SA -
LICENSOR: LICENSEE:
Global Med Technologies, Inc.
d/b/a Wyndgate Technologies
11121 Sun Center Drive, Suite C
Rancho Cordova, California 95670
<PAGE>
Table of Contents
1. ARTICLE 1 - CREATION OF LICENSE RELATIONSHIP...........................3
2. ARTICLE 2 - USAGE FEE AND MAINTENANCE SERVICES.........................4
3. ARTICLE 3 - LICENSE START-UP ACTIVITIES................................4
4. ARTICLE 4 - MAINTENANCE SERVICES.......................................5
5. ARTICLE 5 - CONSULTING SERVICES........................................8
6. ARTICLE 6 - INVOICING, PAYMENTS, TAXES AND OTHER CHARGES...............9
7. ARTICLE 7 - WARRANTY OF TITLE, PATENTS AND COPYRIGHTS.................10
8. ARTICLE 8 - INTELLECTUAL PROPERTY MATTERS.............................10
9. ARTICLE 9 - USE OF TRADEMARKS.........................................12
10. ARTICLE 10 - CONFIDENTIALITY PROVISIONS..............................12
11. ARTICLE 11 - WARRANTIES AND REMEDIES.................................13
12. ARTICLE 12: - OTHER RESPONSIBILITIES AND RIGHTS......................16
13. ARTICLE 13: BREACH; TERMINATION.....................................17
14. ARTICLE 14: GENERAL PROVISIONS......................................18
15. ARTICLE 15: DEFINITIONS.............................................19
EXHIBIT A - LICENSED PRODUCTS AND PROGRAM MATERIALS......................23
EXHIBIT B - FEE PAYMENT AND INSTALLATION SCHEDULE FOR LICENSED
PRODUCTS AND PROGRAM MATERIALS...............................25
EXHIBIT B-1 - TRAINING MATERIAL PRICE LIST...............................27
EXHIBIT C - DESIGNATED ENVIRONMENT.......................................28
EXHIBIT D - CONSULTING SERVICES..........................................29
EXHIBIT D-1 - CONSULTING SERVICES RATES AND AMOUNTS......................32
EXHIBIT D-2 - IMPLEMENTATION & TRAINING SCHEDULE STATEMENT OF WORK.......33
EXHIBIT E - SAFETRACE SUBSYSTEMS SPECIFICATIONS.........................34
EXHIBIT F - DESIGNATED REPRESENTATIVES...................................35
2
<PAGE>
SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("Agreement") is made effective on the _____ day
of ___ , 199...., the "Effective Date", and in consideration of the covenants,
representations and warranties set forth herein and other good and
consideration, between the following Parties:
LICENSOR: Global Med Technologies, Inc., a Colorado corporation doing business
as Wyndgate Technologies, of 11121 Sun Center Drive, Suite C, Rancho Cordova,
California 95670 (hereinafter referred to as "Wyndgate").
LICENSEE: _______________________________ Blood Center, a 501(c)(3) tax exempt
non-profit organization, having a principal place of business at
_______________________________________________ (hereinafter referred to as
"Customer".
Defined Terms are set out in Article 15 below.
1. ARTICLE 1 - CREATION OF LICENSE RELATIONSHIP
1.1. Background: Wyndgate owns the Licensed Products (Licensed Products),
namely, the collection of computer programs and related materials known
under the trademarks SAFETRACE(TM) and EDEN-OA(R) identified in Exhibit A,
Licensed Products and Program Materials excluding Third-Party Products, and
Exhibit E, EDEN-OA and SAFETRACE Subsystem Specifications incorporated by
reference herein. Licensed Products as used in this Agreement means the
computer software, including Programs, Program Materials and system
documentation known under the trademarks as SAFETRACETM and EDEN-OA(R).
Customer desires to acquire a license to exercise certain licensed rights
with respect to using the Licensed Products and to obtain continuing
support, maintenance, consulting and software and enhancements from
Wyndgate as set forth below.
1.2. License Grant
1.2.1. Licensed Rights Granted: Subject to the terms and conditions of
this Agreement, Wyndgate hereby grants to Customer its Affiliates and
Customer and its Affiliates hereby accept the license under any and
all intellectual property rights owned or as otherwise may be asserted
by Wyndgate to engage in the following Licensable Activities (the
"License"):
a) Internal Use: Internal Use of the Licensed Products by
Customer and its Affiliates including Programs, Program
Materials and System Documentation on the Designated
Environment;
b) Back-up Copies: Copy the Licensed Products for purposes of
back-up solely in accordance with this Agreement; and
1.2.2. Scope of License Grant: The License is non-exclusive and
extends to the United States and to Canada only.
1.3. No Other Rights Granted: Apart from the License Rights enumerated in
this Agreement, the License does not include a grant to Customer of any
rights to engage in any Licensable activities or any ownership right,
title, or interest, or any security interest or other interest, in any
intellectual property rights relating to the Licensed Products or in any
copy of any part of the Licensed Products.
3
<PAGE>
1.4. Term of License: Unless sooner terminated in accordance with Article
13 below, the License Term shall be for five (5) years from the Effective
Date of this Agreement.
1.5. Extension of License Term:
1.5.1. Automatic Extension: The License Term will be automatically
extended for successive five (5) year intervals, each interval
referred to herein as a "License Term Extension". License may be
terminated by either Party by giving the other Party no less than
ninety (90) days prior written notice of termination. Such termination
will terminate the Customer's right to use the Licensed Products.
1.6. License Fee
1.6.1. Initial License Fee: Customer agrees to pay Wyndgate a per
Blood Unit drawn "Initial License Fee" as specified in Exhibit B, Fee
Payment and Installation Schedule for Licensed Products and Program
Materials, annexed hereto and incorporated by reference herein. The
Initial License Fee in Exhibit B includes SAFETRACE Base Customer
Fees. Customer agrees to pay Wyndgate a License Fee for each
additional Designated Environment hereunder defined as part of this
Agreement. 1.6.2. License Fee Basis: The basis for the License Fee is
further described in Exhibit B, Section 1.1.
2. ARTICLE 2 - USAGE FEE AND MAINTENANCE SERVICES
2.1. Usage Fee: In addition to the License Fees specified in Article 1
hereof, Customer shall pay to Wyndgate during the License Term, a "Usage
Fee" as further described in Exhibit B. Payment of the Usage Fee to
Wyndgate includes the right of the Customer for continued Use of and
Maintenance Services on the Licensed Products. Customer may provide Blood
Unit processing services to its clients using the Licensed Products as long
as the Usage Fee for such use of the Licensed Products is paid to Wyndgate
The Usage Fee does not include SAFETRACE Base Customer Fees. 2.2. Usage Fee
Basis: The Usage Fee shall be based on the actual number of Blood Units
processed and the number of Accession Samples processed by Customer during
the previous quarter, and shall be calculated as specified in Exhibit B
2.3. Usage Fee Beginning: The Usage Fees will begin thirty (30) days from
the Date of Installation of the Licensed Products. The Initial Usage Fee is
further described in Exhibit B. 2.4. Usage Fee Changes: On each Date of
Installation anniversary date, Wyndgate shall have the right to increase
the Usage Fee Basis for the next year, and the Usage Fee rates specified in
Exhibit B, in either an amount not to exceed five percent (5%) or by the
All Urban Consumer Price Index (CPI-U), U.S. Cities Average, All Items
(1982-1948 = 100) percentage, whichever is higher. 2.5. Usage Fee
Maintenance Services: Article 4 of this Agreement sets forth the
Maintenance Services covered by the Usage Fee.
3. ARTICLE 3 - LICENSE START-UP ACTIVITIES
3.1. Installation of Licensed Products: At the location designated by
Customer ("Customer Site"), Wyndgate shall install the Licensed Products in
a "Designated Environment" as set forth in Exhibit C. Installation Services
are not included as part of the License Fee or Usage Fee. The Initial
Installation of the Licensed Products shall be performed in accordance with
Exhibit D-2, Implementation and Training Statement of Work, Exhibit B, Fee
Payment and Installation Schedule and with a "Consulting Services Statement
of Work" as set forth in Exhibit D.
3.2. Installation Complete: Installation shall be complete when Wyndgate
demonstrates to Customer that Wyndgate has completed execution of
verification routines demonstrating that the Licensed Products operate in
the Designated Environment. The Consulting Services Fees, travel and
related expenses for the Installation of the Licensed Products at the
Customer's Site shall be paid by Customer. Wyndgate shall be reimbursed for
all such expenses by Customer in accordance with Article 6 below.
3.2.1. Installation and Use of Licensed Products on Other Than the
Designated Environment: Installation of the Licensed Products may be
4
<PAGE>
made on other than the Designated Environment if the Designated
Environment is not yet available for such installation. Customer may
request, in writing, to Wyndgate that such installation be made on a
substitute environment on a temporary basis. Such request shall be
subject to written approval by Wyndgate, such approval not to be
unreasonably withheld.
a) Installation by Wyndgate on other than the Designated
Environment shall be considered as the Date of Installation
and Customer will be invoiced according to Exhibit B.
b) In an emergency situation, should the Designated Environment
become incapable of executing the Licensed Products, then
Customer may move the Licensed Products in question, without
additional consideration to Wyndgate, on a temporary basis,
to a substitute computer system until the Designated
Environment becomes operational, or permanently to a
substitute computer system of the same model as the
Designated Environment in question. Customer shall notify
Wyndgate within five (5) business days after any such
movement of the Licensed Products to a temporary or
substitute computer system.
c) On a semi-annual basis, Customer shall have the right to run
the Licensed Products in order to test a backup or
substitute computer system.
d) In anything other than emergency situations, Customer shall
obtain written consent from Wyndgate if, at any time during
the term of this Agreement, Customer desires to install
and/or use the Licensed Products on any environment other
than the Designated Environment specified in Exhibit C, such
consent shall not be unreasonably withheld. After obtaining
such consent, and verifying that the Licensed Products
properly run in the new environment, the new environment
shall be considered the Designated Environment for all
purposes under this Agreement.
3.3. Delivery of Program Materials: Wyndgate shall deliver to Customer upon
Installation those Program Materials listed in Exhibit A, Licensed Products
and Program Materials.
4. ARTICLE 4 - MAINTENANCE SERVICES
4.1. Maintenance Services: In consideration for payment by Customer of the
annual Usage Fee, Wyndgate shall provide Maintenance Services to Customer
of the Licensed Products in the Customer's Designated Environment.
Maintenance Services include providing machine-readable media for selected
problem fixes, enhancements, feature additions or updates but does not
include any installation, implementation or training by Wyndgate.
Installation, Implementation and Training Services will be provided under a
Statement of Work as described in Exhibit D, Consulting Services. The
machine readable media may be provided on magnetic tape, magnetic disk,
optical disk, or other applicable media. The media may be hand delivered,
mailed or electronically transmitted by Wyndgate via remote access to the
Customer's Designated Environment at Customer's option. Should Customer
require hand delivered media when electronic remote access could have been
used, Customer will be charged a Services fee for such hand delivered
media.
4.2. Maintenance Services Description
4.2.1. Commencement of Maintenance Services: Maintenance Services
under this Agreement will commence upon Date of Installation of the
Licensed Products on the Designated Environment at the Customer's
Site.
4.2.2. Maintenance Services Products: The software products covered by
Maintenance Services are the Licensed Products.
4.2.3. Maintenance Services Environment: Maintenance Services are
limited to support and maintenance of the Licensed Products used on
the Designated Environment. Customer, without Wyndgate's review and
approval, may change the hardware, firmware, compilers, utility
programs or operating system so the computer system operates
differently from the original installation. In any of those cases,
technical support requested in writing by Customer from Wyndgate to
ensure that the Licensed Products operate properly would be considered
a reinstallation of software and would be Consulting Services (See
Exhibit D) for which Customer will be charged a Fee, subject to the
Statement of Work approval process.
5
<PAGE>
4.3. Base Maintenance Services
4.3.1. Maintenance Services Updates: Program changes, error correction
and updates will be supplied as notices of change and/or program
source code. Changes to the documentation will be supplied as
corrections to be entered into manuals; as new pages to be added or
substituted for pages in the manuals; as replacement manuals and/or as
updates to the on-line documentation. Unless otherwise agreed, all
machine readable materials will be provided in the same mode, format,
density, code, and media as provided with the original installation or
last change, whichever is later.
4.3.2. Maintenance Services Support Functions: Maintenance Services
include telephone and written consultation during Wyndgate's normal
business hours as specified in Section 4.6. At Wyndgate's option and
with the Customer's written concurrence, technical staff may be
required at the Customer's site. If the Customer requests technical
staff on-site when the Customer did not give Wyndgate the opportunity
to solve the problem remotely and the problem could have been handled
remotely, all labor, direct travel and related out-of-pocket expenses
will be paid by the Customer. Wyndgate will respond to all reports of
software errors in accordance with this Article 4. The Customer agrees
to provide to Wyndgate, the data and information necessary and
requested by Wyndgate to identify completely the reported error
including, but not limited to: before and after results; copies of
files; dumps of programs; listings of source programs used to compile
the programs causing or preceding the identification of the error and
any transactions and/or data files used as the basis of the data being
processed; and/or remote access to the Customer's Designated
Environment for analysis and for providing fixes to problems. If the
reported error cannot be identified through telephone consultation,
the Customer may be asked to provide these materials prior to any
further technical support being provided. If the reported error is not
caused by an error in the Licensed Products, this technical support
will be invoiced to Customer at current rates for Consulting Services
plus any related costs including telephone, postage, express delivery,
and out-of-pocket travel expenses. In any situation in which on-site
technical support potentially may be invoiced, the Customer's written
approval is required prior to work beginning.
4.3.3. Maintenance Services Deliverables: Customers shall receive:
a) Feature Abstract Memoranda: Feature Abstract Memoranda
describe features planned (though not necessarily committed)
for inclusion in an upcoming release. Feature Abstract
Memoranda may be distributed 1-3 months prior to an actual
release. They also describe the procedures to be followed to
order a release.
b) Software Availability Bulletins: Software Availability
Bulletins formally announce the availability of new releases
and describe the features contained in the releases.
c) Standard Release Media: Standard Release Media consists of
the media (magnetic tapes or disks, optical disks or other
applicable media) containing the products described in a
Software Availability Bulletin.
d) Standard Release Documentation: Two (2) copies of new pages
and/or manuals will be available upon request to Customers
to reflect corrections to known errors, changes in system
operation, and/or new feature availability. Any additional
copies will be available for a service charge.
e) System Creation Instructions: The System Creation
Instructions provide step-by-step instructions a Customer
must follow to install and test a new release of the
Licensed Products.
4.3.4. Problem Evaluation And Resolution Assistance: Problem
Evaluation and Resolution Assistance will assist Customers in
evaluating the nature, extent, and severity of problems encountered.
This assistance is provided in order to minimize the time between
problem identification and problem resolution. Customer must be
available to provide assistance to Wyndgate for Problem Evaluation and
Resolution Assistance. Wyndgate acknowledges and agrees that it is of
6
<PAGE>
the utmost importance that the Licensed Products be reliable and that
Wyndgate understands the effect that such reliability has on system
availability for Customer operations. Response time for all service
calls (time between placement of a service call and Wyndgate personnel
responding appropriately) shall be a maximum of two (2) hours
regardless of the nature of the call for service and regardless of the
portion of the Licensed Products affected. Every error reported is
prioritized by the Customer in terms of criticality according to the
following classification structure:
a) Super Critical: This classification is reserved for Licensed
Product(s) malfunctions that occur in the Licensed Products
Core Subsystems. Wyndgate staff will work around the clock,
including Saturdays, Sundays, and holidays, until Super
Critical problems are resolved. Following twenty four (24)
hours of unsuccessful attempts to resolve the problem,
Wyndgate may place one or more persons on-site to work
directly with Customer staff to identify and remedy the
problem. Remedies may include work around processes to
circumvent a problem.
b) Urgent: This classification is assigned to a problem in
which a Customer encounters a Licensed Products malfunction
that, while inconvenient, can be circumvented through other
means. Errors in this classification receive prompt
attention and resolution as soon as practicable.
c) Minor: This classification is assigned to a problem for
which a Customer encounters a Licensed Product malfunction,
with no urgency existing for correction. Errors in this
classification will be corrected as soon as resources
permit.
4.4. Notices/Reports: Wyndgate will provide access to problem status for
Customer of all errors and problems reported in the Licensed Products. Such
status shall include a reasonably detailed summary of the outstanding
errors and problems and may include the estimated time to correct them.
4.5. Testing: After updating, enhancing, or correcting problems and errors
in the Licensed Products and prior to delivering such software to its
Customers, Wyndgate shall perform on its own internal system, quality
assurance tests, including as required, unit, subsystem and integrated
tests, in order to assure proper functioning of the Licensed Products. Upon
written request by Customer, and with a Consulting Services Statement of
Work, Wyndgate will assist the Customer in testing of Licensed Products at
the Customer's site. Customer will be charged a fee for any such Services.
4.6. Helpline Support: Wyndgate maintains a telephone Helpline. This can be
used by Customers to report problems they are experiencing with the
Licensed Products. Customer may place telephone calls to the Helpline
during Wyndgate's normal business hours, from 8:00 A.M. to 5:00 P. M.
Pacific Time Zone (prime time) and receive direct responses from Wyndgate's
application technicians. Customer has extended twenty-four (24) hour access
to Wyndgate's Support Specialists for non-prime time via Customer call-back
by a paged Wyndgate Support Specialist.
4.6.1. Helpline Support Assigned Contacts: Customer will designate
Assigned Contacts to interface with Wyndgate's Helpline Support.
Customer may have up to four (4) Assigned Contacts for the Licensed
Products specified in this Agreement. Assigned Contact names will be
communicated by Customer to the Wyndgate Designated Representative,
Consulting Services and Statement of Work, identified in Exhibit F.
4.7. Additional Maintenance Services Terms and Conditions
4.7.1. Updates/Upgrades/New Versions:
a) Updates: Future updates of the Licensed Products (which are
releases as may be made available commercially by Wyndgate
with numbers of X.n where X = the current version and n =
the number of the latest release) will be provided to
Customer as part of Maintenance Services.
b) Upgrades/New Versions: Future versions of the Licensed
Products (which are releases as may be made available
commercially by Wyndgate with numbers of (X+1).n only if
such versions have a major functionality not available in
Version X) may be licensed by the Customer as an upgrade to
the Licensed Products currently licensed, for a License Fee
per new version, at a discounted price, such discount to be
not less than twenty-five percent (25%) of Wyndgate's then
current License Fee list price for the new version.
7
<PAGE>
c) Upgrade/New Version Availability: The License Fee for each
upgrade shall cover the upgrade to only the original copy or
copies of the Licensed Products licensed to the Customer on
the Designated Environment. Customer may determine when to
install upgrades or new versions of the Licensed Products.
However, in order to retain Maintenance Services, Customer
shall be required to install all upgrades and new versions
of the Licensed Products, and cannot skip installing an
upgrade or new version. Upgrades to any back-up copies of
the Licensed Products made by the Customer under the
Agreement shall be the Customer's election of this option to
upgrade or not. Installation of an upgrade will be provided
by Wyndgate under a Consulting Services Statement of Work
and Customer will be charged a fee. Installation of an
upgrade is not included in the upgrades License Fee or Usage
Fee.
4.7.2. Support for Other Than the Current Version: The Current Version
(the currently available Version) of Licensed Products will become the
supported version covered by the Customer's Maintenance Services.
Support for prior versions of Licensed Products will be discontinued
no sooner than eighteen (18) months from the availability date of the
Current Version. Support for versions other than the Current Version
will include error correction only. In no event, however, shall
Wyndgate be obligated to support a version or release that violates
current regulatory requirements.
4.7.3. Effect of Upgrades: Following any election by the Customer to
upgrade the Licensed Products, the new version will become the then
licensed version maintained and supported by Wyndgate.
4.7.4. Payment Required: Maintenance Services including the
availability of upgrades and new versions of the Licensed Products
will be provided only if the Customer has complied with all terms and
conditions for the license of the Licensed Products including
continuous payment of amounts due for the Licensed Products and for
the Usage Fees. If Customer discontinues the payment of Usage Fees and
later requests Licensed Product updates or version upgrades, Customer
will be required to pay the then current License Fee for the Licensed
Products prior to receiving the updates or version upgrades.
4.8. Security Compliance: Wyndgate shall be informed by Customer and shall
at all times comply with the use, security and access policies as such may
be in effect from time-to-time at Customer's facility.
4.9. Invoicing for Maintenance Services: Maintenance Services provided
Customer under this Agreement shall be considered as paid for under
Customer's Usage Fee, as defined in Article 2 and Exhibit B and/or as
specified in a Consulting Services Statement of Work.
5. ARTICLE 5 - CONSULTING SERVICES
5.1. Consulting Services: Wyndgate shall provide, on a contract basis,
Consulting Services to Customer at Customer's option. The Consulting
Services include Wyndgate-provided personnel for project management,
installation, training, data conversion, design, development or other
assistance, including validation, to the Customer. Consulting Services are
defined by a Statement of Work. Consulting Services are on a time and
material ("T&M") basis unless otherwise specifically stated in the
Statement of Work. Program Materials or Programs provided on a Consulting
Services basis will include a Consulting Services fee. See Exhibit D, D-1
and D-2 regarding Consulting Services terms and conditions.
5.2. The Statement of Work: When Wyndgate accepts a Customer order for a
Project, whether under Maintenance Services or as a Consulting Service,
Wyndgate agrees to provide the Services described in the Statement of Work
(SOW). Wyndgate requires a separate Statement of Work, signed by both
Parties, for each Project.
Wyndgate will manage the Project unless the Statement of Work specifies
that the Customer will manage it. If the Customer is responsible for
managing the Project, then Wyndgate will provide Consulting Services only
to assist Customer. The Statement of Work includes:
8
<PAGE>
a) Both Parties' respective responsibilities;
b) An estimated schedule which Wyndgate provides for planning
purposes;
c) The specific conditions, if any, (called the "Completion
Criteria") that Wyndgate is required to meet to fulfill its
obligations; and
d) Applicable charges.
Each Party agrees to make reasonable efforts to carry out its respective
responsibilities according to the estimated schedule. However, if
Completion Criteria are applicable, then the Project is complete when
Wyndgate meets those criteria.
5.2.1. Changes to the Statement of Work: When both Parties agree to
change a Statement of Work, Wyndgate will prepare a written
description of the change (called a "Change Authorization"). The
Change Authorization becomes effective when signed by Customer. It
need not be signed by Wyndgate, unless either Party requests such
signature(s). Any change in the Statement of Work may affect the
charges, estimated schedule, or other terms. Depending on the scope of
the requested change, and after obtaining advance written approval by
Customer and a Statement of Work, Wyndgate may charge Customer for the
effort to analyze it. Wyndgate will then give the Customer a written
estimate of the charges for the analysis. Wyndgate will perform the
analysis only on Customer's written authorization.
5.2.2. Personnel: Each Party will authorize a person to represent it
during the Project. The Designated Representative, Consulting Services
and Statement of Work, identified in Exhibit F will be the authorized
person unless otherwise specified in the Statement of work. Each will:
a) Address all notices to the other's representative; and
b) Promptly notify the other in writing if this person is
replaced.
Wyndgate will make every reasonable effort to honor Customer's request
regarding the assignment of its personnel to a Customer project.
However, Wyndgate reserves the right to determine the assignment of
its personnel.
5.2.3. Ownership And License: During a Project, Wyndgate may deliver
to Customer work product (called "Program Materials" or "Materials"),
and excluding Third Party Products, such as programs, program
listings, programming tools, documentation, reports, and drawings in
which Wyndgate will have all rights (including intellectual property
rights), title, and interest (including ownership of copyright),
unless otherwise agreed to by the Parties. Customer is granted a
License under this Agreement, Article 1, for Programs delivered as
part of Consulting Services, unless otherwise stated in the Statement
of Work.
5.2.4. Materials: The Statement of Work will specify the Materials
created during the Project which are applicable to the Project.
Wyndgate will deliver one copy of the Materials to Customer. Wyndgate
shall deliver to Customer upon Installation those Program Materials
listed in the Statement of Work.
5.2.5. Copyright Notice: Each Party agrees to reproduce the copyright
notice and any other legend of ownership on any copies made under the
licenses granted in this Part.
6. ARTICLE 6 - INVOICING, PAYMENTS, TAXES AND OTHER CHARGES
6.1. Invoicing: Wyndgate shall invoice:
a) License Fee as defined in Exhibit B; and
b) Initial Usage Fee within thirty (30) days of the Date of
Installation of the Licensed Products; and
c) Usage Fee thereafter, as further defined in Exhibit B during
the term of this Agreement; and
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d) Usage Fees for Programs or Program Materials delivered to
Customer under a Consulting Services Statement of Work, at
the Date of Installation anniversary date during the term of
this Agreement; and
e) All Consulting Services Fees on a monthly basis, after they
are incurred for the customer, or as stated in the Statement
of Work; and
f) All other charges when or after they are incurred for the
Customer.
6.2. Payments/Past Due Balances: Payments are due as specified on the
invoice. Past due balances will be assessed an interest charge of one and
one-half percent (1 1/2%) per month and interest will be accrued monthly on
any past due balance. Customer shall not be considered in breach of this
Agreement for unpaid amounts disputed in good faith, if Customer provides
Wyndgate a written description of any disputed amounts prior to five (5)
days of the date such amounts are otherwise payable and pays undisputed
amounts in a timely manner.
6.3. Professional Service Fees: All Wyndgate installation, training and
implementation support, consulting, data conversion and related travel
expenses will be invoiced to Customer as they are incurred. Training and
Testing materials will be invoiced to Customer when they are shipped.
6.4. Expenses: All references in this Agreement, or in any Exhibit to the
Agreement, to travel expenses, travel related expenses, or other expenses
shall mean expenses which are reasonably incurred, which are necessary and
which are reasonable in amount. All related out-of-pocket travel expenses
will be invoiced to Customer as incurred.
6.5. Taxes: Customer agrees to pay amounts equal to any applicable taxes
resulting from any transaction under this Agreement. This does not include
taxes based on Wyndgate's net income or payroll. Customer is responsible
for any applicable personal property taxes for each Program or Program
Materials from the date they are received by Customer.
6.6. Shipping Charges: Customer agrees to pay amounts equal for all
reasonable shipping charges resulting from transactions under this
Agreement.
6.7. Additional Charges: Depending on the particular Program, Program
Materials, Services, or circumstances, additional charges may apply subject
to prior written agreement of Customer. For Wyndgate to receive
reimbursement for such charges, all such charges must be pre-approved by
Customer in writing.
7. ARTICLE 7 - WARRANTY OF TITLE, PATENTS AND COPYRIGHTS
7.1. The Program or Program Materials Warranty of Title: Wyndgate warrants
that the Licensed Products, excluding any Third-Party Products, are the
sole and exclusive property of Wyndgate, that the Licensed Products,
excluding any Third-Party Products, are original with Wyndgate, and that
Wyndgate is not aware of any infringement or potential infringement of the
Proprietary Rights of any third parties, whether such Proprietary Rights
are by way of patent, copyright, trademark, trade secret or otherwise.
8. ARTICLE 8 - INTELLECTUAL PROPERTY MATTERS
8.1. NON-INFRINGEMENT KNOWLEDGE REPRESENTATION
8.1.1. Knowledge Representation re., Non-Infringement: Wyndgate makes
a Knowledge Representation to Customer BUT DOES NOT WARRANT, that the
exercise of License rights pursuant to this Agreement will not
infringe any valid and subsisting Intellectual Property Right owned by
persons other than the Customer.
8.1.2. No-Knowledge Representation re, Combination Use: Wyndgate makes
a No-Knowledge Representation that it is not aware of the possibility
that Combination Use of the Licensed Products will infringe any valid
and subsisting Intellectual Property owned by persons other than the
Customer. The Parties agree that Wyndgate has no duty to investigate
or to warn Customer of any such possibility of infringement by
Combination Use. As used in this Agreement, "Combination Use" of
Licensed Products means use of the Licensed Products in combination or
in conjunction with any of the following, unless such use is shown to
be infringing when not in combination or conjunction with any of the
following, or unless such use is expressly described in the user
documentation or expressly identified as non-infringing in this
Agreement:
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a) Any Software other than the Licensed Products in question,
any apparatus other than the Designated Environment; and/or
b) Any "Non-use Activities" by any person. "Non-use Activity"
is defined as use of the Licensed Products for other than
the business of processing Blood Units or Accession Samples.
8.1.3. Exclusive Remedy re., Infringement: Customer's sole remedy with
respect to allegations or proof of infringement of third-party
Intellectual Property Rights by the Licensed Products and/or its use
by Customer regardless of any alleged negligent misrepresentations by
Wyndgate in making the Non-Infringement Knowledge Representation, TO
THE EXCLUSION OF ALL OTHER REMEDIES THEREFOR, will be for Customer to
invoke the infringement defense provisions of Section 8.3.
8.2. Limited Covenant to Defend: As a covenant separate from the
non-infringement Knowledge Representation, Wyndgate, at its own expense and
subject to the terms and conditions of this Article 8, will defend claims
brought against Customer in the United States and Canada by third parties,
that any of the following activities by Customer constitutes infringement
of an Intellectual Property Right under the laws of the United States or
any of its states or Canada:
a) Any making or distribution of copies of the Licensed
Products that is expressly permitted by this Agreement (but
not the creation of derivative works except as may be
expressly agreed otherwise in writing by Wyndgate) EXCEPT
FOR the making and/or distribution of copies of any
alteration or modification of the Licensed Products created
by any person other than Wyndgate.
b) Use of the Licensed Product (unaltered and unmodified by any
person other than Wyndgate) in accordance with the Program
Materials for a purpose (or to achieve an effect) that is
described in the Program Materials and consistent with the
terms and conditions of this Agreement.
8.3. Conditions for Wyndgate Defense: To be entitled to defense by Wyndgate
against a third-party infringement claim:
a) Customer shall promptly advise Wyndgate of the existence of
the claim by the most expeditious reasonable means,
immediately upon learning of the assertion of the claim
against Customer (whether or not litigation or other
proceeding has been filed or served); and
b) Customer shall permit Wyndgate to have the sole right to
control the defense and/or settlement of all such claims, in
litigation or otherwise, and indemnify Customer. Customer
shall have the right, at Customer's expense, to engage
separate legal counsel to monitor and advise Customer
regarding such defense.
8.4. Avoidance of Infringement: Upon receipt of notification of claim of
infringement from a third party, Wyndgate will have the right to make
reasonable changes in the Licensed Products to avoid such infringement.
8.5. Infringement Injunctions Obtained by Third Parties: If a third-party
infringement claim of which Wyndgate was notified is sustained in a final
judgment from which no further appeal is taken or possible and such final
judgment includes an injunction prohibiting Customer from continued use of
the Licensed Product or portions thereof, then Wyndgate shall in its sole
election and at its expense, either:
a) Procure for Customer the right to continue to use the
Licensed Product pursuant to this Agreement; or
b) Replace or modify the Licensed Product to make it
non-infringing.
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8.6. Third-Party Products: Wyndgate shall transfer to Customer any and all
warranties or indemnities under Third-Party Products furnished by Wyndgate
but not developed or manufactured by Wyndgate.
9. ARTICLE 9 - USE OF TRADEMARKS
9.1. Ownership: Wyndgate represents that it is the owner of a
trademark for the name "SAFETRACETM" and of a registered
trademark for the name "EDEN-OA(R)" (the "Trademarks") which
relate to the Licensed Products.
9.2. Use of Trademark: Any use or display by Customer of Wyndgate's
Trademarks shall be under the supervision of, and with prior written
consent of, Wyndgate.
9.3. Right to Change Trademark: Wyndgate reserves the right to change its
Trademarks relating to the Licensed Products at any time. Wyndgate shall
provide written notice to Customer of any intent to change the Trademarks
and shall provide to Customer any such versions of new or altered
Trademarks to replace those trademarked materials Customer was previously
permitted to use.
10. ARTICLE 10 - CONFIDENTIALITY PROVISIONS
10.1. Licensed Products as Confidential/Proprietary Information: The
Parties acknowledge that the Licensed Products and Licensed Documentation
will be deemed Confidential/Proprietary Information (as defined below)
whose use and disclosure is restricted by this Article 10.
10.2. Definition of Confidential/Proprietary Information: As used herein,
the term "Confidential/ Proprietary Information" means information that:
a) is disclosed in writing or other tangible form to a
Receiving Party by a Disclosing Party or a person having an
obligation of confidence to the Disclosing Party (or, if the
disclosure is made orally, is reduced to or summarized in
such a writing or other tangible form within thirty (30)
days after such oral disclosure) and is designated in such
writing or tangible form as proprietary in a writing by or
on behalf of Disclosing Party; and
b) is marked "Confidential"; and
c) is not generally known in the relevant industry segment; and
d) affords the possessors of the information a commercial or
business advantage over others who do not have the
information.
10.3. Illustrative Types of Confidential/Proprietary Information: Subject
to the requirements of this Article 10, the term "Confidential/Proprietary
Information" may include, by way of illustration but without limitation
except as expressly set forth herein (the following enumeration of examples
shall not be construed, in itself to grant a Receiving Party by implication
of any rights with respect to any particular item of
Confidential/Proprietary Information):
a) any and all information relating to Customer's, donors or
medical records; or
b) any and all information relating to products manufactured by
a Disclosing Party, processes therefor, apparatus and
maintenance thereof, research, research programs, computer
software, manufacturing techniques, processes, program
files, manuals, documentation, developments of experimental
work, flow charts, drawings, techniques, source and
executable codes, standards, specifications, improvements,
inventions, customer information, accounting data,
statistical data, research projects, development and
marketing plans, strategies, forecasts, customer lists,
sales plans and sales and marketing information, and the
like, that is/are in the possession of or may be required by
or on behalf of Proprietor, including similar information
with respect to any subsidiary or related companies of the
Proprietor; and
c) the fact of a Disclosing Party's selection and use of
particular information in connection with this Agreement and
its subject matter, whether or not the particular
information is publicly available.
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10.4. Exclusions from Confidential/Proprietary Information Status: The term
"Confidential/ Proprietary Information" does not include any information
that, through no fault of the Receiving Party, is or becomes:
a) described in an issued or published U.S. or non-U.S. patent;
or
b) developed independently by or on behalf of the Receiving
Party as shown by documentary evidence; or
c) disclosed to the Receiving Party by a third party not having
an obligation of confidence to the Disclosing Party of the
information as shown by documentary evidence.
Each Party shall have the right to disclose its relationship to
the other under this Agreement pursuant to Section 12.1.
No combination of information will be deemed to be within any of
the foregoing exceptions, however, regardless of whether the
component parts of the combination are within one or more
exceptions, unless the combination itself and its economic value
and principles of operation are themselves so excepted.
10.5. Non-Disclosure Obligation: Except as may be otherwise permitted by
this Agreement, no Receiving Party shall use or disclose any
Confidential/Proprietary Information to any third party without the prior
written consent of the Disclosing Party.
10.5.1. Need To Know: A Receiving Party may disclose appropriate
portions of Confidential/ Proprietary Information to those of its
personnel who have a substantial need to know the specific information
in question in connection with the Receiving Party's exercise of
rights or performance of obligations under this Agreement. All such
personnel will be instructed by the Receiving Party that the
Confidential/Proprietary Information is subject to the obligation of
confidence set forth by this License Agreement.
10.6. Confidential Customer Information: Further, the Parties recognize the
Customer is a blood center, that the information available within the
offices of Customer is highly confidential and that its exposure could
expose Customer to liability, and that such disclosure might also adversely
effect donors to Customer, and that under certain circumstances, disclosure
of such information by Wyndgate employees will expose such employees to
criminal prosecution and/or civil liability for damages.
11. ARTICLE 11 - WARRANTIES AND REMEDIES
11.1. Warranty Period Inception: The Warranty Period begins upon the Date
of Installation of the Licensed Products.
11.2. Warranty Period Expiration: The Warranty Period expires if and when
the License is terminated and/or if Customer ceases to pay the Usage Fees.
11.3. As Documented Warranty: Wyndgate warrants to Customer, subject to the
remedy limitations set forth below in Section 11.8 and the warranty
exclusions set forth in Section 11.8, that during the Warranty Period, the
Licensed Products will operate in all material respects in accordance with
the Specification in Exhibit E and the Program Materials. Such warranty is
referred to herein as the "As-Documented Warranty".
11.4. No Surreptitious-Code Warranty: Wyndgate warrants that no portion of
the Licensed Products contains or will contain any code which would, or is
designed to, disable the Licensed Products (or any component of the
Licensed Products) automatically after the passage of time or under the
control of a person other than Customer personnel (such as a back-door,
time bomb, or drop dead device), nor any code which would permit
unauthorized access to the Licensed Products (the "No Surreptitious-Code
Warranty").
11.5. Instances of Non-Compliance: No instances of non-compliance with the
Program Materials whether or not regarded as material by Customer, will be
deemed to be a breach of that warranty unless reported to Wyndgate by
Customer prior to the expiration of the Warranty Period.
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11.6. Attempt to Correct Breach of Warranty: Upon receipt of notice of such
alleged breach of the As-Documented Warranty, Wyndgate will attempt to
correct the breach, and Customer may attempt to correct the breach itself
in either case in accordance with the maintenance provisions of Article 4.
11.7. Customer's Remedies: Customer's sole remedies for the breach of the
As-Documented Warranty, to the exclusion of all other remedies therefor, in
contract, tort, or otherwise, will be the procedures set out in this
Article 11.
11.8. Physical Media Warranty: Wyndgate warrants to Customer, subject to
the warranty exclusions set forth in this Article that each Licensed Copy
of the Licensed Products provided by Wyndgate is and will be free from
physical defects in the media that tangibly embodies the Copy (the
"Physical Media Warranty"), subject to the provisions of this Article. The
Physical Media Warranty does not apply to defects discovered more than
ninety (90) days after the date of delivery of the Licensed Copy by
Wyndgate and does not apply to defects arising from acts of non-Wyndgate
personnel, misuse, theft, vandalism, fire, water, Acts of God, or other
peril.
11.8.1. Replacement Copy Provided: Customer's sole remedy for breach
of the Physical Media Warranty, to the exclusion of all other remedies
therefor, will be replacement by Wyndgate of any Licensed Copy
provided by Wyndgate that does not comply with the warranty at
Wyndgate's expense, including shipping and handling costs.
11.9. Limitation of Warranties: Wyndgate's warranties are limited, and
apply only, as follows
11.9.1. Wyndgate's warranties do not extend to operation of the
Licensed Products on any hardware configuration or in any operating
environment, other than as defined in the Designated Environment,
initially specified in Exhibit C.
11.9.2. Wyndgate's warranties do not extend to operation of Licensed
Products with any computer program other than as defined in the
Designated Environment.
11.9.3. Except as may be expressly agreed in writing by Wyndgate,
Wyndgate's warranties do not apply to:
a) Any copy of the Licensed Products that is modified,
including local modifications, by any Person other than
Wyndgate or its authorized representative; nor
b) Any modifications or changes to the Control Logic not made
by Wyndgate or its authorized representative; nor
c) Use of the Licensed Products other than in accordance with
the most current operating instructions provided by
Wyndgate; nor
d) Errors caused by defects, problems, or failures of hardware
or software not provided by Wyndgate; nor
e) Errors caused by negligence of Customer or any other person
except Wyndgate or its authorized representative; nor
f) The implementation, administration and management of
Customer's security practices.
11.9.4. Without limiting the generality of exclusions set forth in
this Article, Wyndgate's Warranties do not include any warranty:
a) that the functions performed by the Licensed Products will
meet Customer's requirements or will operate in the
combinations that may be selected for use by Customer other
than in the Designated Environment; nor
b) that the operation of the Licensed Products will be
error-free in all circumstances; nor
c) that all defects in the Licensed Products that are not
material with respect to the functionality thereof as set
forth in the Program Materials will be corrected; nor
d) that the operation of the Licensed Products will not be
interrupted for short periods of time by reason of defect
therein or by reason of fault on the part of Wyndgate.
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11.9.5. Without limiting the generality of the exclusions set forth in
this Section and except as otherwise provided in this Agreement,
Customer will be exclusively responsible as between the Parties for,
AND WYNDGATE MAKES NO WARRANTY OR REPRESENTATION WITH RESPECT TO:
a) determining whether the Licensed Products will achieve the
results (except as such results are expressed in this
Agreement and the Appendices hereto) desired by Customer;
b) procuring, installing, operating and maintaining computer
hardware to run the Licensed Products;
c) training Customer's Personnel in the computer operations,
other than such Wyndgate-provided training as is expressly
set forth in a Consulting Services Statement of Work under
this Agreement;
d) insuring the accuracy of any data input used with the
Licensed Products;
e) establishing adequate data back-up provisions for backing up
Customer's data; and
f) establishing adequate operational back-up provisions (e.g.,
alternate manual operation plans) in the event of a defect
or malfunction that impedes the anticipated operation of the
Licensed Products.
11.10. DISCLAIMER OF ALL OTHER WARRANTIES AND REPRESENTATIONS: THE EXPRESS
WARRANTIES AND EXPRESS REPRESENTATIONS SET FORTH IN THIS AGREEMENT ARE IN
LIEU OF, AND WYNDGATE DISCLAIMS ANY AND ALL OTHER WARRANTIES, CONDITIONS,
OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WITH RESPECT TO
THE LICENSED PRODUCTS OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED
WARRANTIES OR CONDITIONS OF TITLE, MERCHANTABILITY, OR FITNESS OR
SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT WYNDGATE KNOWS, HAS REASON TO
KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE),
WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE,
OR BY COURSE OF DEALING. IN ADDITION, WYNDGATE EXPRESSLY DISCLAIMS ANY
WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN CUSTOMER WITH RESPECT
TO THE LICENSED PRODUCTS OR ANY PART THEREOF.
11.11. Damage Recovery: Circumstances may arise where, because of a default
on the part of either Party, the other Party will be entitled to recover
damages. In each such instance, regardless of the basis on which Customer
is entitled to claim damages from Wyndgate, Wyndgate is liable only for:
a) Patents, copyrights, trademarks, trade secrets or other
proprietary rights referred to in Wyndgate's patent and
copyright terms described above; and
b) Damage to real property and tangible personal property but
not to exceed the amount paid Wyndgate for the Initial
License Fee.
11.12. Items for which Wyndgate is not liable: Under no circumstances is
Wyndgate liable for any loss of the following:
a) Loss of, or damage to, Customer's records or data except
when directly caused by Wyndgate's staff working on
Customer's Designated Environment(s); or
b) Economic consequential damages (including lost profits or
savings) or incidental damages even if Wyndgate is informed
of their possibility.
11.13. Items for which Customer and Wyndgate are not liable: Under no
circumstances is either party liable for any of the following:
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a) Third-party claims against the other party for losses or
damages, including bodily injury or death (other than the
indemnity obligations specified herein); or
b) Punitive damages, economic consequential damages (including
lost profits or savings) or incidental damages, even if the
charged Party is informed of their possibility.
12. ARTICLE 12: - OTHER RESPONSIBILITIES AND RIGHTS
12.1. Trademarks: Neither Party will use the other's trademark, trade name,
or other designation in any promotion or publication without prior written
consent. Customer may disclose that Wyndgate is their vendor and Wyndgate
may disclose that Customer has licensed the Product for internal use.
12.2. Licenses: Each Party grants the other only the licenses specified. No
other licenses (including licenses under patents) are granted.
12.3. Compliance Period: Each Party will allow the other thirty (30) days
after written notification to comply before it claims that the other has
not met its obligations.
12.4. Customer Agrees:
12.4.1. That Customer is solely responsible for the results obtained
from the Licensed Products and Services except to the extent, if any,
caused by or arising from:
a) an inherent defect(s) in any Licensed Product(s) or Service,
b) Wyndgate's breach of any agreement, obligation, covenant,
representation or warranty, or
c) the negligence or other wrongful act or omission of
Wyndgate, its employees or agents. This provision shall not,
in any manner, reduce, lessen, extinguish or detract from
any duty, responsibility, liability, or other obligation of,
or on the part of, Wyndgate, arising under or based upon any
other provision of this Agreement or otherwise at law or in
equity subject to the limitations of liability provisions in
Article 11 hereof.
12.4.2. To provide Wyndgate with full, free, and safe access to
Customer facilities and the Designated Environment for Wyndgate to
fulfill its obligations, subject to CustomerOs security procedures. If
Customer becomes aware of any unsafe conditions or hazardous materials
to which Wyndgate personnel would be exposed at any of Customer
facilities, Customer agrees to promptly notify Wyndgate;
12.4.3. To, at Customer's written request, have Wyndgate do a Licensed
Products system audit every two (2) years from the Installation Date.
Wyndgate will verify that the Licensed Products system is installed
and implemented properly. This will be a Consulting Service and
Customer will be charged a fee.
12.5. Customer Additional Rights: Customer may have additional rights under
certain laws (such as consumer laws) which do not allow the exclusion of
implied warranties, or the exclusion or limitation of certain damages. If
these laws apply, Wyndgate's exclusions or limitations may not apply to
Customer.
12.6. Assignment: Neither Party to this Agreement shall assign this
Agreement or any of its rights under or interest in, this Agreement and
shall not delegate or assign any of its obligations or the performance of
any of its obligations, without the prior written consent of the other
Party, which consent shall not be unreasonably withheld, provided, that
either Party may freely assign this Agreement to any company controlling,
controlled by or under common control with such Party or succeeding to the
entire business of such Party. This Agreement will be binding upon and
inure to the benefit of the Parties, their successors and assigns.
12.7. Wyndgate Regulatory Compliance
12.7.1. Knowledge Representation: Wyndgate hereby acknowledges and
agrees that Wyndgate is and the Licensed Products may be subject to
governmental and relevant trade organization regulations and
accreditation requirements relating to the manufacture, design,
operation and distribution of the Licensed Products including medical
device regulations promulgated by the U. S. Food and Drug
Administration ("FDA"). Wyndgate makes the Knowledge Representation
that the manufacture, design, operation and distribution of the
Licensed Products is in compliance with all known applicable
governmental and trade organization regulation, accreditation
requirements and standards of practice as now in effect consisting of:
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a) registration by Wyndgate with the FDA as a medical device
manufacturer and listing of devices in commercial
distribution with FDA;
b) compliance by Wyndgate with applicable current good
manufacturing practices ("cGMP's") with respect to the
Licensed Products;
c) submission, and active pursuit of clearance of, a premarket
notification ("510(k)") for the Licensed Products; and
d) compliance by Wyndgate with applicable labeling requirements
with respect to the Licensed Products.
Wyndgate covenants and agrees during the term hereof to comply with
governmental regulation, accreditation requirements and standards of
practice applicable to Wyndgate's performance of any obligation under
this Agreement with respect to the Licensed Products, including
regulations applicable to the category of software under which the FDA
and relevant regulation agencies classify Wyndgate. If existing or
future regulations deemed by the FDA or relevant regulatory agencies
applicable to Wyndgate require a revision or modification of the
Licensed Products, Wyndgate agrees to implement such revisions or
modifications, unless the implementation of any such required revision
or modification is being contested in good faith by Wyndgate. Wyndgate
shall provide a copy of such revision or modification as an update or
new version to Customer as promptly as possible.
12.7.2. Wyndgate Notifications to Customer: Wyndgate will notify
Customer of any Licensed Product FDA Form 483 or Warning Letter issued
as a result of an FDA inspection or the FDA compliance activity and
will provide Customer with a copy of such FDA Form 483 or Warning
Letter. Wyndgate will notify Customer of any known Licensed Product
related death, serious injury or serious illness or any reported
Licensed Product malfunction, the reoccurrence of which could result
in a death, serious injury or serious illness. Wyndgate will also
notify Customer immediately of known or reported errors in the
Licensed Product functionality which results in substantial loss of
data integrity.
13. ARTICLE 13: BREACH; TERMINATION
13.1. Agreement Termination: Either Party may terminate this Agreement if
the other does not comply with any one of its material terms, provided the
Party who is not complying is given thirty (30) days' written notice in
which to cure such non-compliance.
13.2. Restrictive Successors and Assignees: Any terms of this Agreement,
which by their nature extend beyond its termination, remain in effect until
fulfilled, and apply to respective successors and assignees.
13.3. Dispute Resolution Procedures: This Section will govern any dispute
between the Parties arising from or relating to the subject matter of this
Agreement that is not resolved by Agreement between the respective
personnel of the Parties responsible for administration and performance of
this Agreement.
13.3.1. Prior to the filing of any suit with respect to such dispute
the Party believing itself aggrieved will call for aggressive
management involvement in the dispute negotiation by notice to the
other Party.
13.3.2. If a resolution is not achieved by negotiators at any given
management level at the end of their allotted time, the allotted time
for the negotiators at the next management level, if any, will begin
immediately.
13.3.3. If a resolution is not achieved by negotiators at the final
management level within their allotted time, all disputes arising out
of or relating to the subject matter of this Agreement that are not
resolved by agreement between the parties will be arbitrated in
accordance with the Patent Arbitration Rules of the American
Arbitration Association.
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13.3.4. Judgment on the arbitration award in accordance with this
Agreement may be entered in any State or Federal Court of competent
jurisdiction.
13.3.5. The arbitration shall be held at a neutral site to be agreed
upon between the Parties.
13.4. Surrender of Licensed Products: Upon termination or expiration of
this Agreement for any reason except as specified in Paragraph 13.5 below,
Use of the Licensed Products by Customer shall be limited to archival and
conversion purposes ("Transition Use"). Customer's Transition Use shall be
completed within one hundred twenty (120) days. Immediately thereafter,
Customer shall surrender to Wyndgate all copies of the Licensed Products
remaining in the possession of Customer or any person acquiring any such
copy through Customer; or at Customer's option with Wyndgate's written
consent, destroy and provide Wyndgate with a certificate signed by an
executive officer of Customer attesting to the destruction of all copies of
the Licensed Products.
13.5. License Termination Payments: Each Party shall pay the other Party
within ten (10) business days after the effective date of termination or
expiration of the License any amounts that as of the effective date of
termination were due and owed pursuant to this Agreement.
13.6. Other Unforeseen Circumstances: It is the intention and agreement of
the Parties that the Materials delivered to Customer with the Licensed
Products hereunder will include the Licensed Products Source Code and that
Customer in consideration of the Product License and Usage Fees paid or to
be paid by the Customer during the License Term under this Agreement shall
have the right to Use the Licensed Products and Program Materials in its
internal operations for Blood Unit or Accession Sample processing business
only. Customer will have the right to Use the Licensed Products without
regard for any provision of this Agreement to the contrary, only for
continued internal Use of the Licensed Products in the event that during
the License term, Wyndgate:
a) goes out of business or is adjudicated bankrupt or
insolvent, defaults in the provision of the FDA regulatory
compliance in Section
12.7 herein, or otherwise is unwilling to, is unable to, or does not
provide Maintenance Services with respect to the Licensed Products (other
than due to the failure of Customer to make the Usage Fee payments required
for such Maintenance Services, or if Customer is unable to comply with the
terms of this Agreement.
14. ARTICLE 14: GENERAL PROVISIONS
14.1. Changes to the Agreement Terms: Any change to the terms of this
Agreement shall require the mutual written agreement of both Customer and
Wyndgate. This paragraph does not affect the ability to change prices which
are provided for elsewhere in this Agreement.
14.2. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
14.3. Notices: Any notice required to be given under this Agreement must be
made in writing and may be given by personal delivery, registered or
certified mail, or facsimile transmission. Notice shall be deemed
communicated as of the date of personal delivery or facsimile transmission,
or date which is three days after the postmark of any notice delivered by
registered or certified mail. Mailed notices shall be addressed as set
forth in Exhibit F, Designated Representatives, to the attention of the
Designated Representative, but each Party may change its Designated
Representative and address by written notice to the other Party.
14.4. Captions: Headings of the Articles, Sections and Paragraphs of this
Agreement are for convenience and reference only. The words and the
captions in no way explain, modify, simplify, or interpret this Agreement.
14.5. Entire Agreement: This Agreement contains the entire Agreement
between the two Parties concerning the rights granted and the obligations
assumed in this Agreement. Any oral representations or modifications
concerning this Agreement shall be of no force or effect, except for
subsequent modification in writing signed by the Parties hereto.
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14.6. Amendments: This Agreement may not be modified or amended unless such
amendment or modification is made in writing and executed by Customer's and
Wyndgate's Designated Representative, Agreement. (See Exhibit F.)
14.7. Partial Invalidity: If any term of this Agreement is held by a court
of competent jurisdiction to be void or unenforceable, the reminder of the
Agreement shall remain in full force and effect.
15. ARTICLE 15: DEFINITIONS
15.1. "Affiliate": This term shall mean a legal entity that directly or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, the entity specified. For the purposes
of this definition, control means (a) the legal or beneficial ownership of
(i) fifty percent (50%) or more of the outstanding voting stock or a
company, (ii) fifty percent (50%) or more of the equity of a company,
partnership or joint venture; or (b) the power to exercise a controlling
influence over the management or policies of such entity.
15.2. "Agreement": This Agreement consists of an Agreement which sets forth
the terms and conditions under which the Parties have agreed to install and
maintain certain software and provide training and support for its
customers. The following documents are incorporated as part of this
Agreement as Exhibits:
a) The Licensed Products and Program Materials attached hereto
as Exhibit A;
b) The Fee Payment and Installation Schedule for Licensed
Products and Program Materials attached hereto as Exhibit B;
c) The Designated Environment attached hereto as Exhibit C;
d) The Consulting Services attached hereto as Exhibit D;
e) The Consulting Services Rates and Amounts attached hereto as
Exhibit D-1;
f) The Implementation & Training Schedule Statement of Work
attached hereto as Exhibit D-2.
g) The EDEN-OA and SAFETRACE Subsystems Specifications attached
hereto as Exhibit E; and
h) The Designated Representatives attached hereto as Exhibit F.
15.3. "Accession Sample": This term shall mean blood test samples submitted
for testing to Customer, on an outside or referral basis, that are not
blood test samples related to Blood Units in the Customer's system.
15.4. "Base Customer Fees": This term shall mean the amount received by
Wyndgate from invoices to Customers for the License Fee for the SAFETRACE
blood bank management information system Licensed Products.
15.5. "Blood Unit": A Blood Unit shall mean an individually identified unit
of blood processed from a donor and referenced in the system by the Donor
ID Number or Blood Unit Number.
15.6. "Consulting Services": Consulting Services are services provided to
Customer by Wyndgate, on a chargeable fee basis under this Agreement, as a
Statement of Work. Consulting Services are not included in the Licensed
Products License or Usage Fees. Consulting Services include but are not
limited to:
15.6.1. "Installation Services" are those services associated with
installing the Licensed Products on Customer's Designated Environment,
data conversion, or other such initial Licensed Products
implementation tasks. 15.6.2. "Training Services" those services
associated with training the Customer on the Licensed Products or
related areas (database manager system, hardware operating system,
etc.).
15.6.3. "Professional Services" those professional services associated
with Project Management, reports, additions or modifications to the
Licensed Products, Third-Party Products, data conversion, or with
assisting to define Customer's network, hardware and software systems.
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15.6.4. "Special Maintenance Services" those Professional Services
associated with providing machine-readable media for selected problem
fixes, enhancements, future additions, updates and Consulting Services
Projects which are not included as a part of Maintenance Services
under Article 4.
15.7. "Control Logic": Control Logic shall mean those program algorithms
defined by the Licensed Products' Donor Identification System Logic and
Laboratory Component Labeling and Release Site-Based Logic to help control
and manage blood center operational areas in which the possibility exists
for the undesired release of blood and blood products where the purity,
potency and safety may have been compromised."
15.8. "Core Subsystem(s)": Core Subsystem(s) are the Laboratory,
Distribution and Donor Management portions of the Licensed Products.
15.9. "Customer": Customer is the Licensee designated on page 3 of this
Agreement.
15.10. "Date of Installation": Date of Installation of a Licensed Products
is the day Wyndgate delivers the Licensed Products to Customer and installs
it on the Designated Environment.
15.11. "Designated Environment": Designated Environment is the environment
consisting of systems hardware, operating systems and utility software that
Customer identifies to Wyndgate and Wyndgate agrees to, as described in
Exhibit C, on which Customer intends to use the Licensed Products.
15.12. "Initial": Initial when used to describe the License, License Fees,
Usage Fees, Licensed Products, Special Software Professional Services
(including Installation, Training, Implementation and Consulting Services)
and Fees, and Designated Environment shall mean those Products, Services
and Fees delivered by Wyndgate to Customer with the first installation and
implementation of the Licensed Products on Customer's Designated
Environment.
15.13. "Internal Use": Means use of a copy of the Licensed Products
computer program and associated user documentation in the course of the
Customer's Blood Unit processing business and will be solely used by
Customer's personnel, consultants, third party contractors, Affiliates,
clients and other personnel to whom access is given by Customer in the
regular course of Customer's Blood Unit or Accession Sample processing
business. Internal Use further includes back-up copying rights, namely the
right to create up to three (3) back-up copies of the Licensed Products
solely for back-up purposes but for no other purposes and a reasonable
number of such portions of the System Documentation as are provided by
Wyndgate in non-hard copy media.
15.14. "Knowledge Representation": A representation that, to the best of
the representing Party's knowledge (based on the knowledge of the Party
executing this Agreement on behalf of the representing Party, who need not
have conducted any particular inquiry), the specified matter or matters are
true (see also "No-Knowledge Representation"). A Party making a Knowledge
Representation has a duty to apprise the Party to whom the representation
is made, at the time the representation is made, of any fact that it knows
is necessary to prevent the Knowledge Representation from being misleading.
Except as expressly provided otherwise in this Agreement, a Party making a
Knowledge Representation has no duty to amend or supplement its
representation after the representation is made. A Knowledge Representation
may be referred to using a shorthand expression similar to one used herein
for a corresponding warranty; for example, a term such as "no-infringement
Knowledge Representation" may be used to denote a Knowledge Representation
that no infringement exists.
15.15. "Material Failure": Material Failure is defined as the inability to
conduct daily Blood Center operations due to a failure of any of the
Licensed Product Core Subsystems but does not include Blood Center
operations errors, computer system hardware failures, operating system
failures or errors caused by lack of properly trained Customer personnel.
15.16. "No-Knowledge Representation": A Knowledge Representation that a
specified condition does not exist and does not include any representation
or warranty that any particular investigation has been performed by
Wyndgate in connection with the specified matter.
15.17. "Party": Party or Parties shall be either the Customer or Wyndgate.
15.18. "Product": A Product is a software, computer Program or hardware
device.
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15.19. "Program or Program Materials": Program or Program Materials,
including features and any whole or partial copies, are the following:
a) machine-readable instructions;
b) a collection of machine-readable data, such as a database;
and
c) related materials, including documentation and listings, in
any form.
d) The term "Program" may include Wyndgate Program(s) and any
non-Wyndgate Program that Wyndgate may provide to Customer.
15.20. "source code" (in lower case) means a series of mnemonic or
English-like instructions or statements in an English-like high-level
language such as FORTRAN, C, PASCAL, or LISP, or a relatively low-level
language such as the assembly language for a particular processor. When
capitalized, the term "Source Code" means source code of the Licensed
Products, including complete instructions for compiling and linking every
part of the Source Code into executable form. Such instructions shall
include precise identification of all compilers, library packages, tools
and links used to generate executable code.
15.21. "Project": A Project is Services performed pursuant to a Statement
of Work.
15.22. "Specifications": Specifications are the documentation of each
Program and, in its absence, the representations of functionality, such as
screens and report designs, which have been made by Wyndgate as described
in Exhibit E.
15.23. "Statement of Work": See Section 5.2.
15.24. "Third-Party": Third-Party shall mean Programs, Program Materials or
Products owned and/or developed by other than Wyndgate which the Parties
agree to include in the Designated Environment as specified in Exhibit C
for use in the installation, use, and/or operation of the Licensed
Products.
15.25. "Transaction Documents": For each order Customer places, Wyndgate
will provide to Customer the appropriate Transaction Documents that confirm
the specific details of the order. The following are examples of
Transaction Documents, with examples of the information they may contain:
a) agreements (order or contract for Services or Products);
b) statements of work (work order, change order, project
schedule, responsibilities, and charges);
c) invoices (item, quantity, price, amount due, and other
typical invoice information); and
d) software specifications (document that outlines the general
features of the SAFETRACE blood bank management information
system application or other Products).
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed in their corporate names by their
officers duly authorized as of the day and year first above written.
For Wyndgate: For Customer:
GLOBAL DATA TECHNOLOGIES, INC.
------------------------------------
By: By:
----------------------------------- ---------------------------------
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Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- ------------------------------
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EXHIBIT A - LICENSED PRODUCTS AND PROGRAM MATERIALS MATERIALS
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. LICENSED PRODUCTS: The following Products have been licensed to
Customer under this Software License Agreement:
1.1.1. EDEN-OA Subsystems:
a) EDEN-OA(R) Environment
1.1.2 SafeTraceSAFETRACETM Application Subsystems:
a) Native Applications
b) Donor Management
c) Donor Recruitment
d) Laboratory
e) Inventory/Distribution
f) Billing
g) Special Procedures
h) Mobile Registration
1.1.2. SAFETRACE Supplemental Subsystems: None.
1.1.3. Program Materials: The following Program and Program Materials
constitute the SAFETRACE system:
a) SafeTraceSAFETRACETM system Source Code
b) EDEN-OA(R) Environment
c) SAFETRACE(TM) Native Applications Subsystem
d) SAFETRACE(TM) Donor Management Subsystem
e) SAFETRACE(TM) Donor Recruitment Subsystem
f) SAFETRACE(TM) Laboratory Subsystem
g) SAFETRACE(TM) Inventory/Distribution Subsystem
h) SAFETRACE(TM) Billing Subsystem
i) SAFETRACE(TM) Special Procedures Subsystem
j) SAFETRACE(TM) Mobile Donor Registration Subsystem
Wyndgate will provide, as part of the License Fees, two (2)
copies of the Program Materials, one (1) copy of the SAFETRACE
system Source Code and, copies of the Instructor Guide and
Training Materials as defined in the Statement of Work when the
option is chosen.
1.2. THIRD-PARTY PRODUCTS: The following Third-Party Software Programs or
Program Materials will be included in the Designated Environment and are
either licensed to the Customer under this Software License Agreement or
may be licensed directly from the Third-Party vendor:
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1.2.1. Main Server:
a) Validation Test System (Optional)
b) Validation Test Materials (Optional)
c) Automatic Back-up System (Optional)
1.2.1.1. Microcomputer -Mobile Base PC Server:
1.2.2. Microcomputer-Mobile Laptop PC's:
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EXHIBIT B - FEE PAYMENT AND INSTALLATION SCHEDULE FOR
LICENSED PRODUCTS AND PROGRAM MATERIALS
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. LICENSE FEE AND PAYMENT
1.1.1. SAFETRACE Licensed Product Fees and Payments: The License Fee
will $______________________ per blood unit drawn for the twelve (12)
month period preceding the Effective Date of this Agreement. The
License Fee is invoiced in two (2) parts, including the SAFETRACE Base
Customer Fees and any License Fee for Programs delivered under a
Consulting Services Statement of Work:
a) Fifty (50) percent (%) due and payable upon signing of this
Agreement (Effective Date) in the amount of
$_______________________.
b) Fifty (50) percent (%) due and payable thirty (30) days from
the Date of Installation of the Licensed Products in the
amount of $__________________________ .
Total Licensed Products Fee Due: $___________________________ .
1.1.2. Third-Party Product Fees and Payments: The License Fees for any
Third-Party Products provided by Wyndgate will be one hundred (100)
percent (%) due and payable upon the Date of Installation of the
Third-Party Products.
Total Third-Party Product Fees Due: $ __________________- .
1.2. USAGE FEE, PAYMENT AND CHANGES
1.2.1. Licensed Products Usage Fee: The Usage Fee will be invoiced
quarterly, in advance, including any Usage Fees for Programs delivered
under a Consulting Services Statement of Work. The Initial Usage Fee
is due thirty (30) days from the Date of Installation of the Licensed
Products. The Accession Sample Usage Fee will be priced at
$__________________ per sample per year.
The Initial Usage Fee is $___________________ per unit per quarter
based on the number of Blood Units drawn in the preceding quarter and
$______________________ per Accession Sample per quarter based on the
number of Accession Samples processed in the preceding quarter.
1.2.2. Third-Party Products Usage Fees: Third-Party Product Usage Fees
are invoiced annually, in advance. The initial Third-Party Product
Usage Fee is due and invoiced immediately upon the Date of
Installation of the Third-Party Products. The initial Third-Party
Product Usage Fee is $ _____________________ .
1.2.3. Changes in Usage Fees: The Usage Fee is subject to change based
on Article 2 of this Agreement.
1.3. TRAINING AND TRAINING MATERIAL
1.3.1. Training Services: Training Professional Services are defined
in Exhibit D.
1.3.2. Training Materials Pricing: Training Materials including
Student Workbooks, Instructor Manuals and system diagrams are
available from Wyndgate at Wyndgate's then current list price. The
prices in effect as of the Effective Date of this Agreement are shown
in Exhibit B-2.
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1.3.3. Training Material Included: The Training Professional Services
includes one (1) Student Workbook for each student attending a
Wyndgate taught class. Additional Student Workbooks can be purchased
from Wyndgate at Wyndgate's then current list price. Instructor
Manuals are not included in the Training Professional Services Fees,
the License Fee or the Usage Fee. Instructor Manuals may be purchased
from Wyndgate at Wyndgate's then current list price.
1.3.4. Training Material Maintenance: Training Material Maintenance is
not included in either the License Fee or Usage Fee.
1.4. TESTING AND MATERIALS
1.4.1. Licensed Product Testing and Validation Materials Pricing:
Licensed Product Testing and Validation Materials are available from
Wyndgate at Wyndgate's then current list price.
1.4.2. Availability of and Charges for Test Scripts and Corresponding
Worksheets: Wyndgate can provide test scripts that test the SAFETRACE
control logic steps. As of the Effective Date of this Agreement, and
for a period of one (1) year, these test scripts, in an "as is"
condition, can be purchased from Wyndgate by Customer for
$______________________ . Wyndgate will customize these test scripts
and corresponding worksheets to Customer's specifications for an
amount to be mutually agreed upon by Customer and Wyndgate in a
separate Statement of Work.
1.4.3. Licensed Product Testing and Materials Maintenance: Licensed
Product Testing and Materials maintenance is not included in the
License Fee, Usage Fee or Professional Services Fees, unless
specifically stated otherwise in the Statement of Work. Wyndgate will
provide updates to Licensed Product Testing and Materials only under a
separate Statement of Work to be defined at the time the updates are
required.
1.5. INSTALLATION SCHEDULE
To be determined by the Implementation and Training Schedule
Statement of Work, Exhibit D-1.
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EXHIBIT B-1 - MATERIAL PRICE LIST
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.0 Materials Price List: The Material Price List in effect as of the
Effective Date of this Agreement is as follows:
Document
Number Document Price
------ -------- -----
1. D-0001 EDEN-OA(R) Environment $ 125.00
2. D-0002 SAFETRACE(TM) Native Applications Subsystem $ 75.00
3. D-0003 SAFETRACE(TM) Donor Management Subsystem $ 75.00
4. D-0004 SAFETRACE(TM) Donor Recruitment Subsystem $ 75.00
5. D-0005 SAFETRACE(TM) Laboratory Management Subsystem $ 75.00
6. D-0006 SAFETRACE(TM) Inventory Distribution Subsystem $ 75.00
7. D-0007 SAFETRACE(TM) Billing Subsystem $ 75.00
8. D-0008 SAFETRACE(TM) Special Procedures Subsystem $ 75.00
9. D-0009 EDEN-OA(R)Administration Guide $ 75.00
10. D-0010 SAFETRACE(TM) Installation Guide $ 75.00
11. D-0011 EDEN-OA(R)Security Subsystem $ 75.00
12. D-0012 Project Standards and Methodologies $ 75.00
13. D-0013 SAFETRACE(TM) A Unit's Travel Guide $ 75.00
14. D-0014 SAFETRACE(TM) Donor Identification System
Logic and Laboratory $ 350.00
Component Labeling and Release Site-Based Logic
15. D-0025 EDEN-OA(R)Screen Generator Reference manual $ 75.00
16. D-0039 SAFETRACE(TM) Mobile Donor Registration
Administration (Optional) $ 125.00
17. D-0042 SAFETRACE(TM) Instructor Guides and Data Base
(Optional) $ 25,000.00
2.0 Materials Price Changes: The Materials prices are subject to change
twelve (12) months from the Effective Date of this Agreement and will
be based on Wyndgate's then current list price.
3.0 Material Maintenance: Maintenance Services for the Materials are not
included in the Usage Fees or License Fees. Updates to the Program
Materials provided under this Agreement are defined in Article 4 of
this Agreement.
4.0 Shipping and Handling: Customer will pay all shipping and handling as
defined in this Agreement, for Materials ordered from Wyndgate.
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EXHIBIT C - DESIGNATED ENVIRONMENT
Agreement Number: ______________________
Customer Number: ______________________
Customer:
The Designated Environment of Customer consists of that system hardware and that
system software described below:
1.1. SYSTEM HARDWARE: (To be mutually agreed upon by Customer and Wyndgate)
1.1.1. Minicomputer System Configuration to be mutually agreed to by
Customer and Wyndgate within forty-five (45) business days of the
signing of this Agreement.
1.1.2. Microcomputer -Mobile Base PC (Optional) Configuration to be
mutually agreed to by Customer and Wyndgate within forty-five (45)
business days of the signing of this Agreement.
1.1.3. Microcomputer -Mobile PC's (Optional) Configuration to be
mutually agreed to by Customer and Wyndgate within forty-five (45)
business days of the signing of this Agreement.
1.2. SYSTEM SOFTWARE:
1.2.1. Minicomputer
Configuration to be mutually agreed to by Customer and Wyndgate within
forty-five (45) business days of the signing of this Agreement.
Initial preliminary requirements are for one (1) Minicomputer and:
a) Test System (Optional)
b) Automatic Back-up System (Optional)
1.2.2. Microcomputer -Mobile Base PC Server (Optional)
Configuration to be mutually agreed to by Customer and Wyndgate within
forty-five (45) business days of the signing of this Agreement.
Initial preliminary requirements are for one (1) Mobile PC Server:
1.2.3. Microcomputer-Mobile Laptop PC's (Optional)
Configuration to be mutually agreed to by Customer and Wyndgate within
forty-five (45) business days of the signing of this Agreement.
Initial preliminary requirements are for __________ (______) mobile
PC's:
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EXHIBIT D - CONSULTING SERVICES
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. Consulting Services: Wyndgate may provide, on a contract basis,
Consulting Services to Customer. The Consulting Services could include
Wyndgate-provided personnel for project management, installation, training,
data conversion, design, development or other assistance, including
validation, to the Customer. Consulting Services which involve the
determination of computer systems requirements, performance or systems
software options for the Customer are to be done under a specific Statement
of Work and will be chargeable to the Customer. Consulting Services are
defined by a Statement of Work. Consulting Services are on a Time and
Material (T&M) basis unless otherwise specifically stated in the Statement
of Work. Program Materials or Programs provided on a Consulting Services
basis will include a Special Maintenance Services fee.
1.2. Installation Services: Wyndgate provides, on a contract basis,
Installation Services to Customer for installing the Licensed Products on
the Designated Environment. The Installation Services may include either
on-site consulting or remote access to the Customer's Designated
Environment by Wyndgate. The Installation Services provides for staff
support and is often employed during initial system start-up or when a
Customer requires assistance due to loss of key staff, computing equipment
reconfiguration or relocation, or system failures.
1.3. Training Services: Training Services are often employed during initial
system start-up, when major changes have been made to the Licensed Products
or when the Customer has to train a number of new staff. Training may be
on-site, at Wyndgate's facilities or at other mutually agreeable
facilities. Wyndgate's Training Services do not certify competency.
1.4. Professional Services: Professional Services include any technical
support including Project Management, data conversion, design, development,
report development, modifications to the Licensed Product(s) or
supplemental Services or other assistance, including validation, to the
Customer. The Professional Services may include various aspects of Training
or Installation Services mentioned previously and extends them to include a
Project Manager and one or more Product Specialists acting as a team to
assist in the implementation/operation/development of application software
Products. Professional Services require a Statement of Work.
1.4.1. Project Manager: While the specific duties and responsibilities
of the Project Manager are developed in concert with the Customer,
typical duties and responsibilities may include, but are not limited
to:
a) Overall or partial Project administration
b) Resource scheduling
c) Budget administration and/or monitoring
d) Coordination of Implementation activities
e) Coordination of Licensed Product modification activities
f) Coordination of data conversion activities
g) Coordination of database design and development activities
h) Coordination of Licensed Product implementation activities
with Customer leadership
i) Development of progress reports and planning documents
j) Publication of, or contribution to, implementation
publications (e.g. manuals, flyers, newsletters)
k) Training coordination
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1.4.2. Product Specialists: Product Specialists often provide support
during system implementation, transition or development. They work
closely with the Customer's implementation team, under the direction
of the Project Manager, and provide first-level support during system
implementation. Product Specialists could provide operating systems
and networking support or other assistance to Customer staff in
implementing, modifying, and fine tuning the Licensed Products.
1.5. Special Maintenance Services: Those Professional Services associated
with providing machine-readable media for selected problem fixes,
enhancements, future additions, updates, and Consulting Services Projects
which are not included as a part of the Usage Fee under Article 2 and
Maintenance Services under Article 4.
1.6. Charges and Statement of Work: Before each Consulting Service is
rendered, a Statement of Work will be prepared. Wyndgate and Customer will
mutually agree on the amount of Consulting and the scope and Program
Materials Wyndgate will provide to Customer. Consulting Services provided
by Wyndgate will be invoiced to Customer, at Wyndgate's then current per
day/per person rate, plus travel and related expenses. See Agreement,
Article 5, for Statement of Work requirements.
1.7. SPECIAL TERMS AND CONDITIONS:
1.7.1. Expenses: The type and nature of the expenses which are likely
to be incurred with respect to a Consulting Service shall be estimated
and set forth in the Statement of Work prepared by Wyndgate and given
to the Customer before the Consulting Service is rendered. The
Statement of Work must be signed by the Customer before Wyndgate
provides the Services comprehended by the Statement of Work, such
signature constituting authorization for Wyndgate to render the
Consulting Services described in the Statement of Work.
1.7.2. Consulting Services and Special Maintenance Service Charges:
The charges for Special Maintenance Services are included as part of
the Statement of Work.
1.7.3. Invoicing, Payments, Taxes and Other Charges: Invoicing
Payments, Taxes and other Charges related to Consulting Services are
subject to this Agreement, Article 6.
1.8. Services Termination: Customer may terminate a Consulting Services
project on thirty (30) days' written notice to Wyndgate. Wyndgate may
terminate a Consulting Services Project if Customer does not meet Customer
obligations concerning it, and if, after the dispute resolution procedure
has been followed, has not rectified the failure within thirty (30) days.
Upon termination, Wyndgate will stop the work on the Project in an orderly
manner as soon as practical.
Customer agrees to pay Wyndgate for all Services Wyndgate provides and any
Materials Wyndgate delivers through the Project's termination, provided
Wyndgate has properly obtained a Statement of Work and complied therewith.
Payment includes any charges Wyndgate may incur in termination of
subcontracts used in the provision or performance of any Product or Service
contemplated by this agreement.
1.9. PRICES AND PRICE CHANGES
1.9.1. Price Increases, Special Maintenance Service Annual Usage Fee,
One-Time, Daily and Hourly Rate Charges: Wyndgate may, on an annual
basis, automatically increase recurring Special Maintenance Service
Annual Usage Fee charges, other one-time charges, daily and hourly
rates by giving Customer thirty (30) days' written notice. However, an
increase to one-time charges does not apply to the Customer if:
a) Wyndgate receives and accepts the Customer order before the
announcement date of the increase, or
b) Wyndgate has an agreement not to increase prices at this
time for a Product or Service that the Customer purchases.
1.9.2. Price Decreases: Customer receives the benefit of a decrease in
charges for amounts which become due on or after the effective date of
the decrease.
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1.10. Consulting Services Rates: Consulting Services Rates and Amounts are
specified in Exhibit D-1.
1.11. Fees: License Fees and/or Special Maintenance Service Annual Usage
Fees for Consulting Services Projects will be specified in a Consulting
Services Statement of Work.
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EXHIBIT D-1 - CONSULTING SERVICES RATES AND AMOUNTS
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. CONSULTING SERVICES RATES
1.1.1. Rates: The rates for Consulting Services will be based on the
level of personnel provided. The per day, per person rates as of the
Effective Date of this Agreement are:
a) System Specialist: $ _________________________ per eight
hour day
b) Training: $ _________________________________ per student
per day with a minimum of four (4) students per class.
1.1.2. Rate Changes: The above rate is subject to change as specified
in Exhibit D, Section 1.9 of this Agreement.
1.1.3. Minimum Charge: The minimum time for which Customer will be
invoiced is for one-half (1/2) day (four (4) hours) if the work is
performed at Wyndgate's facilities and the minimum is one (1) day
(eight (8) hours) if the work is performed at the Customer's site.
Time in excess of the minimum is invoiced at the daily rate or in
one-eighth (1/8) increments thereof.
1.1.4. Travel and Related Expenses: Customer will be invoiced for all
travel and travel related expenses incurred as provided for in Article
6 of this Agreement.
1.2. CONSULTING SERVICES PROVIDED
1.2.1. Initial Installation Services Provided: Wyndgate will provide
the Installation of the Licensed Products on the Designated
Configuration as part of the Implementation Statement of Work and
according to the Implementation and Training Schedule Statement of
Work, Exhibit D-2 to be mutually agreed upon by Customer and Wyndgate
within forty-five (45) business days from the Effective Date of this
Agreement.
1.2.2. Initial Training Services Provided: Wyndgate will provide
Customer Training on the Licensed Products as part of the
Implementation Statement of Work and according to an Implementation
and Training Schedule Statement of Work, Exhibit D-2 to be mutually
agreed upon by Customer and Wyndgate within forty-five (45) business
days from the Effective Date of this Agreement. Training will take
place according to an Implementation and Training Schedule Statement
of Work to be mutually agreed upon by Customer and Wyndgate within
forty-five (45) business days from the Effective Date of this
Agreement.
1.2.3. Initial Implementation Services Provided: Wyndgate will provide
the Customer Implementation and Data Conversion Services on the
Licensed Products as part of and according to the Implementation and
Training Schedule Statement of Work, Exhibit D-2, to be mutually
agreed upon by Customer and Wyndgate within forty-five (45) business
days from the Effective Date of this Agreement. Implementation and
Data Conversion Services will take place according to an
Implementation Schedule Statement of Work to be mutually agreed upon
by Customer and Wyndgate within forty-five (45) business days from the
Effective Date of this Agreement.
1.2.4. Initial Special Development Professional Services Provided
To be mutually agreed upon by Customer and Wyndgate within
forty-five (45) business days from the Effective Date of this
Agreement.
Customer and Wyndgate will mutually agree, within forty-five (45)
business The Client Testing Function will be delivered one hundred and
twenty (120) business The Special Development Professional Services
Fee for the Client Testing Function is Fifteen Thousand Dollars
($15,000) and is due and payable when Wyndgate certifies to Customer's
reasonable satisfaction that the Client Testing Function is ready for
use. The Usage Fee for the Licensed Products will include Maintenance
Service for the Client Testing Function.
1.2.5. Initial Special Maintenance Services Provide
Not Applicable.
32
<PAGE>
EXHIBIT D-2 - IMPLEMENTATION & TRAINING SCHEDULE STATEMENT OF WORK
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. IMPLEMENTATION SCHEDULE: The Preliminary Implementation and Training
Schedule will be further defined and mutually agreed upon by Customer and
Wyndgate within forty-five (45) business days from the Effective Date of
this Agreement.
33
<PAGE>
EXHIBIT E - SAFETRACE SUBSYSTEMS SPECIFICATIONS
Agreement Number: ______________________
Customer Number: ______________________
Customer:
To be included with this Agreement
34
<PAGE>
EXHIBIT F - DESIGNATED REPRESENTATIVES
Agreement Number: ______________________
Customer Number: ______________________
Customer:
1.1. Designated Representatives: Under Article 14 of this Agreement, each
Party will specify designated representatives.
1.2. Designated Representative Agreement: Each Party specifies and
authorizes the following Designated Representative to represent their
respective organizations in all matters related to this Agreement.
FOR WYNDGATE: FOR CUSTOMER:
Name: Joseph F. Dudziak Name:
-------------------------------
Address: 12600 W. Colfax Address:
-------------------------------
Suite A500 -------------------------------
Lakewood CO 80215-3734 -------------------------------
Telephone: (303) 238-2000 ext. 1270 Telephone:
-------------------------------
Fax: (303) 239-0082 Fax:
-------------------------------
1.3. Designated Representative, Consulting Services and Statement of Work:
Each Party specifies and authorizes the following Designated Representative
to represent their respective organizations in all matters related to
Consulting Services and Statements of Work. (For either Party, the
Designated Representative for Consulting Services and Statements of Work
may be changed for a specific Statement of Work by including the
representatives name, address, telephone number and fax number in the
Statement of Work, and identifying the individual as the Designated
Representative.)
FOR WYNDGATE:FOR CUSTOMER:
Name: William J. Collard Name:
-----------------------------
Address: 11121 Sun Center Drive Address:
-----------------------------
Suite C
-----------------------------
Rancho Cordova, CA 95670
-----------------------------
Telephone: (916) 638-3336 Telephone:
-----------------------------
Fax: (916) 638-3214 Fax:
-----------------------------
35
EXHIBIT 24.1
Included in Exhibit 5
EXHIBIT 24.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to use
of our reports dated May 15, 1996, in the Registration Statement (Form SB-2) and
related Prospectus of Global Med Technologies, Inc. for the registration of
3,132,443 shares of its common stock and 1,000,000 warrants.
/S/ ERNST & YOUNG LLP
------------------------------
ERNST & YOUNG LLP
Denver, Colorado
September 6, 1996
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