Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
(Amendment No.__________)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S. 240.14a-11(c) or S. 240.14a-12
GLOBAL MED TECHNOLOGIES, INC.
----------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6 (i) (4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________
________________.
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
________________.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________
________________.
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
________________.
(5) Total fee paid:
_______________________________________________________________
________________.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
<PAGE>
(1) Amount previously paid: ______________________________________
________________.
(2) Form, Schedule or Registration Statement No.: _________________
________________.
(3) Filing Party: _________________________________________________
________________.
(4) Date Filed: ___________________________________________________
________________.
-2-
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
12600 WEST COLFAX, SUITE A-500
LAKEWOOD, COLORADO 80215
(303) 238-2000
- -------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER __, 1997
- -------------------------------------------------------------------------
AUGUST __, 1997
TO THE SHAREHOLDERS OF GLOBAL MED TECHNOLOGIES, INC.:
An Annual Meeting of Shareholders of Global Med Technologies, Inc., a
Colorado corporation (the "Company"), will be held at the Company's offices
at 12600 West Colfax, Suite A-500, Lakewood, Colorado 80215 on September
__, 1997 at 10:00 a.m., Mountain Time, to consider and take action on:
1. The election of four (4) directors to serve until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified. (Each shareholder entitled to vote at the meeting has the right
to vote the number of shares held by him for each of the four (4) director
nominees. Election of the director nominees requires the affirmative vote
of a majority of the votes cast at the Annual Meeting.)
2. To consider and vote upon a proposal to approve the sale of the
Company's DataMed International division ("DataMed") to National Medical
Review Offices, Inc. for $1,200,000, the assumption of certain liabilities
and other conditions as more fully described in the attached Proxy
Statement.
3. Such other business as may properly come before the meeting, or
any adjournment or adjournments thereof.
The discussion of the proposals of the Board of Directors set forth
above is intended only as a summary, and is qualified in its entirety by
the information relating to the proposals set forth in the accompanying
Proxy Statement.
Only shareholders of record at the close of business on August __,
1997, will be entitled to notice of and to vote at this annual meeting, or
any adjournment or adjournments thereof.
Date: September __, 1997 By Order of the Board of Directors:
Michael I. Ruxin, M.D., Chairman of the
Board of Directors and Chief Executive
Officer
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT
YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE
<PAGE>
GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE
EVENT YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
-4-
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER __, 1997
AUGUST __, 1997
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH A SOLICITATION OF
PROXIES (IN THE FORM ENCLOSED) BY THE BOARD OF DIRECTORS OF GLOBAL MED
TECHNOLOGIES, INC. (THE "COMPANY") TO BE USED AT THE ANNUAL MEETING OF
SHAREHOLDERS AT 10:00 A.M. (MOUNTAIN TIME), ON SEPTEMBER __, 1997 AT THE
COMPANY'S OFFICES AT 12600 WEST COLFAX, SUITE A-500, LAKEWOOD, COLORADO
80215. THE PROXY AND PROXY STATEMENT ARE BEING MAILED TO SHAREHOLDERS ON
OR ABOUT AUGUST __, 1997.
REVOCABILITY OF PROXY
If the enclosed Proxy is executed and returned, it will be voted on
the proposal as indicated by the shareholder. The Proxy may be revoked by
the shareholder at any time prior to its use by notice in writing to the
Secretary of the Company, by executing a later dated proxy and delivering
it to the Company prior to the meeting or by voting in person at the
meeting.
SOLICITATION
The cost of preparing, assembling and mailing the Notice of Meeting,
Proxy Statement and Proxy (the "Proxy Materials"), miscellaneous costs with
respect to the Proxy Materials and solicitation of the Proxies will be paid
by the Company. The Company also may use the services of its directors,
officers and employees to solicit Proxies, personally, by telephone or
otherwise, but at no additional salary or compensation. The Company
intends to request banks, brokerage houses and other custodians, nominees
and fiduciaries to forward copies of the Proxy Materials to those persons
for whom they hold such shares and request authority for the execution of
the Proxies. The Company will reimburse them for the reasonable
out-of-pocket expenses incurred by them in so doing.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS THEREOF
Shareholders of record at the close of business on August __, 1997
will be entitled to vote on all matters. On the record date the Company
had 8,135,755 shares of Common Stock, $.01 par value (the "Common Stock"),
outstanding. The holders of the Common Stock are entitled to one vote per
share. The Company has no class of voting securities outstanding other
than its Common Stock. One third of the issued and outstanding shares of
the Company's Common Stock entitled to vote, represented in person or by
proxy, constitutes a quorum at any shareholders' meeting. Broker non-votes
and abstentions will be counted for purposes of determining a quorum;
however, they will not be counted as votes cast. Therefore, such votes
will not affect
<PAGE>
the outcome of the voting on Proposal Number One relating to the election
of the Company's directors or Proposal Number Two relating to the sale of
DataMed.
The following table sets forth certain information as of August 18,
1997 regarding the ownership of the Company's Common Stock by (i) each
person known by the Company to be the beneficial owner of more than five
percent (5%) of the Company's Common Stock, (ii) each director and
executive officer of the Company, and (iii) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Title Beneficial Ownership(1) of Class
- --------------------- ----- ----------------------- --------
<S> <C> <C> <C>
Michael I. Ruxin, M.D.(9 Chairman of the Board 906,250(2) 11.1%
12600 W. Colfax and CEO
Suite A-500
Lakewood, CO 80215
Joseph F. Dudziak President and COO 66,914(3) 0.8%
12600 W. Colfax
Suite A-500
Lakewood, CO 80215
William J. Collard (9) Secretary/Treasurer, 613,006(4) (5) 7.5%
11121 Sun Center Drive Director and Wyndgate
Suite C President (11)
Rancho Cordova, CA 95670
Gerald F. Willman, Jr. (9) Director and Wyndgate 882,514(6) 10.9%
11121 Sun Center Drive Vice President (11)
Suite C
Rancho Cordova, CA 95670
Bart K. Valdez Acting Chief Financial 8,800(8) 0.1%
12600 W. Colfax Ave. Officer and Director of
Suite A-500 DataMed Operations (11)
Lakewood, CO 80215
Lori J. Willman (9) 882,514(7) 10.9%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
-2-
<PAGE>
Gordon E. Segal (9) Director 256,250(10) 3.1%
340 W. 57th, Apt. 9J
New York, NY 10019
All Directors and Executive 2,714,051 34.3%
Officers as a group (6 persons)
</TABLE>
- --------------------
(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 6,250 shares underlying warrants issued in connection with
the purchase of the Company's 10% notes. In May, 1996 the Company
issued $751,200 principal amount of convertible 10% notes accruing
interest at 10% per annum until maturity, which was March 6, 1997, in
connection with its 10% note offering (the "10% Notes").
(3) Includes options exercisable from June 28, 1996 until June 27, 2005 to
purchase 40,000 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 1,081 shares from accrued interest on the 10% Notes and
12,500 shares underlying warrants issued in connection with the
purchase of the 10% Notes. Does not include 85,000 shares underlying
the unvested portion of Mr. Dudziak's options.
(4) Includes 15,000 shares underlying warrants issued in connection with
the purchase of the 10% Notes.
(5) William J. Collard has granted individual options to an employee of
Wyndgate to purchase all or any part of 1,633 of his shares of the
Company, exercisable until September 21, 2005.
(6) Includes 346,481 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 536,033 shares owned by Gerald F. Willman, Jr., the spouse of
Lori J. Willman.
(8) Includes 2,800 shares underlying warrants issued in connection with
the purchase of the 10% Notes, options exercisable from June 5, 1995
until June 4, 2005 to purchase 4,000 shares at $2.45 per share and
options exercisable from September 21, 1995 until September 20, 2005
to purchase 2,000 shares at $2.45 per share. Does not include 44,000
shares underlying the unvested portion of Mr. Valdez's options.
(9) On November 14, 1996, Michael I. Ruxin, William J. Collard, Gerald F.
Willman, Jr., Lori J. Willman, Timothy J. Pellegrini and Gordon Segal
(collectively, the "Shareholders") entered into a Proxy and Right of
First Refusal Agreement (the "Shareholders Agreement") with ODSI
pursuant to which each of the Shareholders
-3-
<PAGE>
granted an irrevocable proxy to ODSI to vote their shares of the
Company's Common Stock (i) in favor of a proposal to approve any
definitive agreement between the Company and ODSI relating to the
Technology, or (ii) on any other proposal relating to the sale of any
of the stock of the Company or all or substantially all of the assets
of the Company or any of the Technology, unless prior to the date of
the shareholders' meeting, the definitive agreement has been
terminated under certain conditions. Unless earlier terminated, the
proxy granted by each of the Shareholders expires November 14, 1997.
Each of the Shareholders also granted ODSI a right of first refusal to
purchase the Shareholder's shares until November 14, 1997, in the
event such Shareholder proposes to transfer, dispose of, or otherwise
sell such Shareholder's shares to any third party or grant to any
third party an option or other right to buy any shares of the
Company's Common Stock held by such Shareholder. In July 1997, ODSI
relinquished the right of first refusal in connection with the
Company's extension of ODSI's right to negotiate with the Company, on
a non-exclusive basis, with respect to the Technology.
(10) Includes 6,250 shares underlying warrants issued in connection with
the 10% Notes. Does not include 10,000 shares underlying unvested
options.
(11) The Company consists of two divisions, Wyndgate Technologies
("Wyndgate") and DataMed International ("DataMed"), both of which
operate under their respective trade names.
CHANGE IN CONTROL
- -----------------
No change in control of the Company has occurred since the beginning
of the last fiscal year.
-4-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following are the current directors and executive officers of the
Company:
Officer or
Name Age Position Director Since
---- --- -------- ---------------
Michael I. Ruxin, M.D. 51 Chairman of the Board 1989
and CEO
Joseph F. Dudziak 59 President and COO 1995
William J. Collard 56 Secretary/Treasurer, 1995
Director and Wyndgate
President
Gerald F. Willman, Jr. 40 Director and Wyndgate 1995
Vice-President
Bart K. Valdez 34 Acting Chief Financial 1996
Officer and DataMed
Director of Operations
Gordon E. Segal 45 Director 1997
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 of clinics until 1993.
Five years after Dr. Ruxin left CBL management, in 1993, CBL filed a
Petition under Chapter 7 of the Federal Bankruptcy Code 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
-5-
<PAGE>
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.,
which merged with the Company in May, 1995, 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 Wyndgate 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.
GERALD F. WILLMAN, JR. has been a director of the Company and the Vice
President of Wyndgate 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 M.B.A.
degree from National University.
BART K. VALDEZ, has been the Director of Operations for DataMed since
October 1996 and the Principal Financial Officer since June 1997. He was
Director of Finance and Operations and also acted as the Principal
Financial Officer for the Company from June 1995 through mid-October 1996.
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. 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 in Finance from the University of Colorado.
GORDON E. SEGAL, M.D., has been a director of the Company since April,
1997. Since December 1995, he has been co-founder and principal of M & S
Ventures, a privately held investment venture capital firm specializing in
biotechnology and health care companies. From January 1992 to December
1995, Dr. Segal was a private venture capitalist. Dr. Segal received a
B.A. degree in 1973 from Southern Methodist University and an M.D. degree
in 1978 from the University of Tennessee. Dr. Segal is a licensed physician
in New York and is a board certified anesthesiologist.
-6-
<PAGE>
The directors of the Company are elected to hold office until the next
annual meeting of shareholders or until a successor has been elected and
qualified. Officers of the Company are elected annually by the Board of
Directors and hold office until their successors are duly elected and
qualified.
No arrangement or understanding exists between any of the above
officers and directors pursuant to which any one of those persons was
selected to such office or position. None of the directors hold
directorships in other companies.
During the last fiscal year the Company's Board of Directors held four
(4) meetings and took unanimous action through nine (9) sets of minutes of
action. All directors attended all four meetings held.
The Company has no nominating committee.
The Company's Audit/Systems Committee acts as the liaison between the
Company and its independent public accountants. Dr. Ruxin is currently the
only member of this committee. The Audit Committee did not hold any
meetings during 1996. 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 have met once 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.
-7-
<PAGE>
FAMILY RELATIONSHIPS
- --------------------
There are no family relationships among the Company's officers and
directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), requires the Company's executive officers and directors, and persons
who own more than 10% of the outstanding common stock of the Company to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC") and Nasdaq. As the Company was not subject
to the Exchange Act during fiscal 1996, no reports were required to be
filed under Section 16(a).
-8-
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
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 fiscal years ended December 31, 1994, 1995 and 1996:
<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, 1996 $195,000 -0- -0- -0- $ 16,520(1)
Chairman and CEO 1995 $190,000 -0- -0- -0- $ 16,520(1)
1994 $180,000 -0- -0- -0- $ 8,216(2)
Joseph F. Dudziak, 1996 $110,000 -0- -0- 25,000(3) $ 4,800(4)
President and COO 1995 $105,000 -0- -0- 100,000(3) $ 4,800(4)
1994 -0- -0- -0- -0- $ -0-
William J. Collard, 1996 $100,000 -0- -0- -0- $180,400(5)
Secretary/Treasurer 1995 $100,000 -0- -0- -0- $ 30,400(5)
and Director, 1994 $ 75,000 $ 100(6) -0- -0- $ -0-
Wyndgate President
</TABLE>
- ----------
(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. In September 1996, Mr. Dudziak
received options to purchase 25,000 shares exercisable at $2.50 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
estimated 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. In 1996,
Mr. Collard received $175,000 under his non-compete agreement and
reimbursement for a vacation in the approximate amount of $8,000.
(6) In 1994, Mr. Collard received a performance bonus of $100.
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, 1996:
-9-
<PAGE>
OPTION GRANTS IN 1996
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted in 1996 Price Date
---- ------- ------- ----- -----
Joseph F. Dudziak 25,000(1) 10.8% $2.50 09/30/06
Bart K. Valdez 30,000(2) 13.0% $2.50 09/30/96
____________
(1) Options to purchase 5,000 shares vest each year Mr. Dudziak remains in
the employ of the Company, beginning September 30, 1997 and continuing
each September 30 thereafter. Once vested, the options are
exercisable for a ten year period.
(2) Options to purchase 6,000 shares vest each year Mr. Valdez remains in
the employ of the Company, beginning September 30, 1997 and continuing
each September 30 thereafter. Once vested, the options are
exercisable for a ten year period.
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, 1996 as there was no public market for
the Company's Common Stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
- --------------------------------------------------
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.
The covenant not to compete will terminate the later of five years from the
date of the agreement or the term of the agreement; hence, the Company will
not receive any benefit from the covenant not to compete unless the
agreement is terminated prior to May 24, 2000. 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. 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
-10-
<PAGE>
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, 1995, 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. The covenant not to compete will terminate the later of five years
from the date of the agreement or the term of the agreement; hence, the
Company will not receive any benefit from the covenant not to compete
unless the agreement is terminated prior to May 24, 2000. 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.
The Company also agreed to reimburse Mr. Collard for a vacation in the
approximate amount of $8,000, which was paid in 1996.
On June 28, 1995, the Company entered into a two year 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
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or an annual cost-of-living increase. However, if increased, his salary
may not be decreased 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, which were not met. 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. In May, 1997, the Company paid
Mr. Dudziak approximately $25,000 for moving expenses incurred in 1995 in
connection with his employment by the Company. The employment agreement
with Mr. Dudziak has expired; however, he is continuing to be employed
under the same terms.
COMPENSATION OF DIRECTORS
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STANDARD ARRANGEMENTS. Members of the Company's Board of Directors
are not compensated in their capacities as directors. However, the Company
reimburses all of its officers, directors and employees for accountable
expenses incurred on behalf of the Company.
OTHER ARRANGEMENTS. The Company has no other arrangements pursuant to
which any director of the Company was compensated during the year ended
December 31, 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1996, Gordon Segal, 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. 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.
In March 1997, Drs. Segal and Ruxin, and Messrs. Collard and Valdez were
repaid the principal amounts of their 10% Notes, plus interest thereon.
Joseph F. Dudziak converted his 10% Note, plus the accrued interest
thereon, into a total of 14,414 shares of Common Stock ($3.75 per share).
The Board of Directors of the Company has adopted resolutions that no
business transaction, loan or advance will be made by the Company to any
officer, director or holder of more than 5% of the Company's Common Stock,
or any affiliate thereof, unless it has been established that a bona fide
business purpose exists, 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,
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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 Company believes that all ongoing
transactions with the Company's affiliates are on terms no less favorable
than could be obtained from unaffiliated third parties.
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. 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 personally guaranteed the Company's $1 million line of
credit and various leases totaling approximately $1.2 million. The line of
credit was repaid from the proceeds of the Company's February 1997 public
offering.
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 June 1995, the Company agreed to pay approximately $35,000 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. This amount was paid in 1997.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The following four (4) persons are to be nominated as directors of the
Company for a term of one year and until the election and qualification of
their successors: Michael I. Ruxin, M.D., William J. Collard, Gerald F.
Willman, Jr. and Gordon E. Segal. These four nominees for directors
constitute the Company's current Board of Directors. The persons named in
the proxy intend to vote for Dr. Ruxin and Messrs. Collard, Willman and
Segal who have been recommended for election by the Board of Directors of
the Company, unless a shareholder withholds authority to vote for any or
all of the nominees. If any nominee is unable to serve or, for good cause,
will not serve, the persons named in the proxy reserve the right to
substitute another person of their choice as nominee in his place. Each of
the nominees has agreed to serve if elected.
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INFORMATION ABOUT DIRECTOR NOMINEES
For information about the director nominees, see DIRECTORS AND
EXECUTIVE OFFICERS.
VOTE REQUIRED
Each shareholder entitled to vote at the meeting has the right to vote
the number of shares held by him for each of the four (4) director
nominees. Election of the director nominees requires the affirmative vote
of a majority of the votes cast at the Annual Meeting.
PROPOSAL NUMBER TWO
SALE OF DATAMED INTERNATIONAL DIVISION
The Company has entered into an Asset Purchase Agreement (the
"Agreement"), subject to shareholder approval and other conditions, with
National Medical Review Offices, Inc. ("NMRO"). Under the terms of the
Agreement, the Company will sell NMRO the assets of the Company's DataMed
International division ("DataMed"). NMRO has advised the Company that it
intends to resell DataMed to Substance Abuse Technology, Inc. ("SAT"), a
publicly held corporation, following closing of the Agreement.
In consideration for DataMed assets it is purchasing, NMRO will (i)
pay the Company $1.2 million in cash, (ii) assume certain capital lease
obligations, (iii) assume certain accounts payable and accrued expenses
related to DataMed and (iv) be assigned certain accounts receivable related
to DataMed. The Company and Michael I. Ruxin will agree that neither will
compete in the substance abuse testing business, and that each will
maintain confidentiality of the trade secrets of such business and will
agree not to solicit NMRO's employees. The Company expects that NMRO
and/or SAT will hire certain of DataMed's employees, including Bart K.
Valdez, Acting Chief Financial Officer of the Company and Director of
Operations for the DataMed, following the closing.
The terms of the Agreement with NMRO resulted from arm's length
negotiations between representatives of the Company and representatives of
NMRO.
NMRO is a privately held corporation engaged exclusively in substance
abuse testing. Its corporate offices are located at 5750 Wilshire
Boulevard, Suite 275, Los Angeles, California 90036, telephone number
(800) 733-6676. It has regional offices located in Overland Park, Kansas
and Bloomington, Minnesota.
SAT is a publicly held corporation with corporate offices located at
4517 N.W. 31st Avenue, Ft. Lauderdale, Florida 33309, telephone number
(954)739-9600.
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DATAMED
The Company is comprised of two operating divisions, Wyndgate
Technologies ("Wyndgate") and DataMed. Wyndgate designs, develops, markets
and supports health care information management software products for blood
banks, hospitals and other facilities. Revenues are derived from the
licensing of software, the provision of consulting and other value-added
support services and the sale of related hardware and software obtained
from vendors. DataMed is in the business of substance abuse testing and
medical surveillance management services, including medical review officer
functions, data management, record storage and coordination of all
substance abuse testing program elements. Revenues for DataMed are derived
from the provision of substance abuse testing management services and the
coordination of laboratory and collection site services for substance abuse
tests. The Company, through its operating divisions, serves international,
national and regional clients in a variety of industries.
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 controlled substances.
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 storage. DataMed arranges for
specimens to be tested by a qualified laboratory and monitors the
performance of: testing laboratories; specimen collection providers; MROs;
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.
In the Company's experience, many substance abuse testing programs for
Fortune 1000 companies are internally managed. Companies contract with
laboratory and collection sites and utilize internal resources to manage
substance abuse processes. 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.
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.
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Currently, the specimen substance abuse testing industry has several
large nationally known laboratories, such as Quest Diagnostics, Inc., 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.
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 has been to help a company
increase total program quality and decrease total program costs. DataMed
coordinates or actively manages the specimen collection process, the
laboratory testing process, the medical review officer 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 storage. DataMed's services can be purchased
independently or as a management package. DataMed has two basic levels of
management services: ProScreen(TM) and ProScreen Plus(TM).
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) allows DataMed to function as a company's substance
abuse department.
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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.
International companies are also potential customers. DataMed
currently provides substance abuse testing management services to a number
of 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. 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.
CONSIDERATION REGARDING THE PROPOSED SALE
From inception to June 30, 1997, the Company incurred cumulative net
losses of approximately $11.1 million. DataMed has incurred cumulative
losses of approximately $6.1 million through June 30, 1997, which includes
a loss of approximately $880,000 for the six months ended June 30, 1997.
During late 1996 and early 1997, the Company terminated contracts with
certain small accounts in an effort to make DataMed more efficient.
Despite these efforts, however, the Company continued to incur losses from
DataMed of approximately $150,000 per month, which management realized
could not be reduced or avoided while continuing to service DataMed's
customer base. As a result, in January 1997, the Company began to more
seriously consider indications of interest it received from others
regarding the possible sale of the DataMed.
Because the Company's marketing and sales efforts are and will
continue to be focused primarily on current and future Wyndgate products
and services, revenues from DataMed were expected to become a smaller
portion of revenues in relation to total revenues over the long term. The
Directors believe that the sale of DataMed furthers the Company's
strategic goals and is in the best interests of the Company's shareholders.
On April 29, 1997, the Company received an offer for DataMed from
NMRO for $750,000 and assumption of certain liabilities. The offer was not
accepted by the Company, and expired by its terms on May 2, 1997.
On June 16, 1997, the Board met to consider offers to purchase
DataMed which it had received from NMRO and SAT. NMRO's offer provided for
the payment of $1.025 million at closing and the assumption of unspecified
obligations in exchange for DataMed's customer list, all accounts
receivable, prepaid expenses, furniture, fixtures and equipment and certain
other assets. The offer from SAT was for $1.05 million, payable at
closing, and the assumption of
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current trade payables in exchange for the assets comprising DataMed.
After considering both offers, the Board directed management to communicate
with NMRO and SAT regarding certain questions the Board had pertaining to
the specific assets to be acquired and specific liabilities to be assumed,
including certain capital lease obligations, of DataMed.
At its Board meeting on June 18, 1997, the Board considered new and
more specific offers from NMRO and SAT. NMRO's new offer for DataMed's
assets was $1.2 million payable at closing, and the assumption of accounts
payable, capitalized leases, including the remaining portion of DataMed's
current office lease, accounts payable related to DataMed, and accrued
payroll and accrued vacation pay for DataMed employees, the majority of
which would be employed by NMRO. NMRO's offer also provided that the
Company would enter into non-compete and confidentiality agreements related
to the substance abuse testing business and an agreement not to solicit
NMRO's employees. SAT's new offer was for $1.05 million payable at closing
and 200,000 "stock grants" in exchange for all accounts payable, capital
leases, including the lease for the current premises used by DataMed and
DataMed's accounts receivable. Both NMRO and SAT were willing to assume
DataMed's operations until an agreement could be consummated. Both NMRO
and SAT may employ Bart K. Valdez, Acting Chief Executive Officer for the
Company and Director of Operations for DataMed. After consideration of
both offers, the Board directed the Chairman and CEO of the Company to
contact the principals of both NMRO and SAT and to communicate certain
additional questions which the Board had identified, as well as the
following, which the Board determined to be important to its final
decision:
(i) The purchaser would purchase DataMed's assets for the purchase
price agreed to, and there would be no reduction in the purchase price if
DataMed customers did not subsequently enter into contracts with the
purchaser for substance abuse testing services. The Board considered this
important because DataMed's current contracts with its customers are not
assignable, and therefore each customer would have the option of
contracting with the purchaser of DataMed's assets or another company for
substance abuse testing services.
(ii) The demonstration of an ability to pay the purchase price,
including the deposit of some portion of the purchase price in an escrow
account prior to closing.
(iii) Assumption of the operations of DataMed by July 11, 1997, or
sooner if possible.
The Board of Directors met again on June 20, 1997. The Board received
a new offer from SAT, increasing its offer to $1.1 million in cash and
250,000 "stock grants," which the Board had been advised by SAT meant the
issuance of restricted stock to be issued. The Board compared SAT's offer
to NMRO's offer of $1.2 million, and considered whether the 250,000 shares
of SAT stock substantially increased the purchase price. In this regard,
the Board reviewed information concerning the number of shares of common
stock outstanding of SAT, recent trading price of SAT's common stock, and
recent daily trading volume, and the financial condition of SAT as reported
in SAT's report for the nine months ended December 31, 1996 filed
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with the Securities and Exchange Commission, which showed a cumulative loss
in excess of $48 million.
The Board of Directors determination to accept NMRO's offer to
purchase DataMed was based upon consideration of the following principal
factors:
(i) NMRO's reputation in the substance abuse testing industry and the
fact that NMRO had been engaged solely in that business for eight years;
(ii) NMRO's current market position in the substance abuse testing
industry, and the Board's belief that more of DataMed's customers would
enter into subsequent contracts for substance abuse testing services with
NMRO because of its position in the industry;
(iii) The unaudited financial information which had been provided
to the Company by NMRO showed that NMRO had retained earnings. SAT, on the
other hand, showed a cumulative loss in excess of $48 million as of
December 31, 1996. The Board believed NMRO would be better able to service
DataMed's customer contracts and to fund DataMed's expected losses.
(iv) NMRO's agreement to assume the risk that DataMed customers would
enter into subsequent contracts for substance abuse testing services with
NMRO after the transaction was completed, and that there would be no
reduction in the purchase price to be paid for DataMed if DataMed's
customer(s) did not subsequently contract with NMRO for such services;
(v) NMRO agreed to assume the operations of DataMed as of June 30,
1997; and
(vi) NMRO agreed to assume and pay accounts payable and accrued
expenses incurred by DataMed as of June 30, 1997, and assume certain
capital lease obligations.
On June 20, 1997, the Company sent a response to NMRO's June 18, 1997
offer which modified certain of the terms in NMRO's offer and contained
additional provisions, all of which were agreed to by NMRO. Together,
NMRO's June 18, 1997 letter and the Company's June 20, 1997 letter
comprised a letter of intent (the "Letter of Intent"). Included in the
Company's letter was a modification to the "Exclusive Dealings" paragraph
of NMRO's letter which stated that, as a public company, the Company had a
fiduciary duty to its shareholders to obtain the best offer possible for
DataMed, taking into account the ability of the proposed purchaser to
provide satisfactory services that DataMed is under contract to perform,
as well as the total consideration to be received.
On June 26, 1997, the Company received a new, verbal offer from SAT
for $1.6 million plus the assumption of accounts payable and other
scheduled liabilities. The Company advised NMRO of the new offer from
SAT, and was advised by NMRO that NMRO could not match the amount offered
by SAT. NMRO further advised the Company that NMRO would initiate
litigation against the Company and the Board of Directors for breach of the
Letter of Intent if the Company accepted the $1.6 million offer from SAT.
The Board of Directors met on June 26,
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1997, and voted to accept SAT's offer, provided that SAT would agree to
indemnify the Company and the Board of Directors against any and all costs
and expenses incurred in connection with any litigation instituted by NMRO
arising out of the Letter of Intent and certain other conditions. SAT
declined to proceed with its offer in light of the Company's
indemnification requirement.
On July 7, 1997, the Company and NMRO entered into an Interim
Management Agreement (the "Management Agreement") which provides for NMRO
to control and direct the operations and business of DataMed from July 1,
1997 to the date the DataMed sale is closed. The Management Agreement is
summarized below. On July 8, 1997, the Chairman and CEO of the Company was
notified by the President of NMRO that NMRO was assigning it rights and
obligations under the Management Agreement to SAT, which assignment
occurred on July 15, 1997. The Company received a copy of a press release
from SAT which stated that SAT had entered into an agreement to purchase
DataMed from NMRO for $1.6 million, and that NMRO would serve as SAT's sole
source provider of medical review officer services for a period of five
years.
All negotiations between the Company and NMRO and the Company and SAT
were arms-length.
ASSET PURCHASE AGREEMENT
On August 18, 1997, the definitive Asset Purchase Agreement was signed
by the Company and NMRO. The following is a summary of what the Company
believes are material features of the Asset Purchase Agreement.
Shareholders are advised to carefully read the Asset Purchase Agreement
attached hereto as Exhibit A.
PURCHASED ASSETS. NMRO will purchase from the Company all of the
assets associated with DataMed at June 30, 1997. The assets include
accounts receivable, accrued accounts receivable (unbilled revenue),
pre-paid expenses, customer list of DataMed, customer contracts, furniture,
fixtures and equipment, names, telephone numbers, trade names and
copyrighted materials.
PURCHASE PRICE. In consideration for the Assets, NMRO shall pay
$1,200,000 at closing, $600,000 of which has been placed in an escrow
account, and assume certain obligations of DataMed at June 30, 1997.
Included in the obligations assumed by NMRO are accounts payable (excluding
intercompany payables), certain accrued expenses not to exceed
approximately $127,000, capitalized leases of approximately $500,000, a new
lease on approximately 10,500 square feet of office space in which
DataMed's operations are located, accrued payroll and vacation pay for
DataMed employees and certain sales commissions.
FINANCING OF SALE. NMRO has advised the Company that it received the
$600,000 which has been placed in escrow from SAT. The additional $600,000
of the purchase price will also be paid by SAT.
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EMPLOYEES. At Closing, NMRO or SAT will offer to employ certain
employees of DataMed then actively employed by the Company at compensation
levels to be negotiated, provided that NMRO or SAT may make changes in job
description and other terms to meet operational objectives. Included in
the employees expected to be employed is Bart K. Valdez, Acting Chief
Financial Officer and Director of Operations of DataMed.
CONDITIONS. Each party's obligations pursuant to the Asset Purchase
Agreement are subject to certain conditions, including the consent of the
Company's shareholders.
TERMINATION. The Asset Purchase Agreement may be terminated by
mutual consent of both parties prior to the Closing Date. The Asset
Purchase Agreement may also be terminated by either of the parties on the
Closing Date in the event that all of the conditions precedent to a party's
obligation to consummate the Closing have not been satisfied on or before
the Closing Date.
The Asset Purchase Agreement may be terminated by the Company in the
event (i) a voluntary or involuntary proceeding involving NMRO is commenced
under the United States Bankruptcy Code or if NMRO makes or commences
negotiations for partial or complete assignment of its assets for the
benefit of creditors; (ii) a receiver, custodian, examiner or trustee is
appointed for any of NMRO's property or assets; (iii) NMRO is terminated,
liquidated or dissolved; (iv) in the event the Company's shareholders do
not approve the sale of DataMed within the time required, but only if the
Company is not in breach of any material duty or obligation imposed upon
the Company under the Asset Purchase Agreement and no event has occurred
which with the giving of notice or the passage of time would constitute a
breach by Company of any such material duty or obligation; (v) NMRO
defaults in the performance of any material duty or obligation imposed on
it pursuant to the Asset Purchase Agreement, which default is not corrected
after written notice is given to NMRO by the Company. If the Company
terminates the Asset Purchase Agreement as a result of any of the
foregoing, except the failure of the Company's shareholders to approve the
Asset Purchase Agreement, or if the Company terminates the Asset Purchase
Agreement following the failure to satisfy any of its conditions precedent
set forth therein, then the Asset Purchase Agreement and the Management
Agreement will terminate, the Company will not be obligated to reimburse
NMRO for its Expenses (as defined in the Management Agreement), and the
Company will assume all rights (including rights to accounts receivable of
DataMed) and all obligations and liabilities (including accounts payable)
relating to the operation of DataMed after the date of such termination.
If the Company terminates the Asset Purchase Agreement because the
Company's shareholders do not approve the Asset Purchase Agreement, then
the Company retains all rights and all obligations and liabilities relating
to the operation of DataMed prior to the Closing, and the Company will
reimburse NMRO for its Expenses, as defined in the Management Agreement.
The Asset Purchase Agreement may be terminated by NMRO in the event
(i) a voluntary or involuntary proceeding against the Company is commenced
under the United States Bankruptcy Code or if the Company makes or
commences negotiations for partial or complete assignment of its assets for
the benefit of creditors; (ii) a receiver, custodian, examiner or trustee
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is appointed for any of the Company's property or assets; (iii) the Company
is terminated, liquidated or dissolved, except if a third party expressly
assumes the obligations and succeeds to the interests of the Company under
the Asset Purchase Agreement; (iv) in the event the Company's shareholders
do not approve the Asset Purchase Agreement and the transactions
contemplated therein within the time required, but only if NMRO is not then
in breach of any material duty or obligation imposed upon NMRO, and no
event has occurred which the giving of notice or the passage of time would
constitute a breach by NMRO of any such duty or obligation; or (v) the
Company defaults in the performance of any material duty or obligation
imposed on it pursuant to the Asset Purchase Agreement, which default is
not corrected after written notice is given to the Company by NMRO. If
NMRO terminates the Asset Purchase Agreement as a result of any of the
foregoing or following the Company's failure to satisfy the conditions
precedent set forth in the Asset Purchase Agreement (except the requirement
to obtain the consents of other persons the Company will retain all rights
(including rights to accounts receivable of DataMed) and all obligations
and liabilities (including accounts payable) prior to the Closing, and the
Company will reimburse NMRO for its Expenses, as defined in the Management
Agreement.
INTERIM MANAGEMENT AGREEMENT. Effective at Closing, the existing
Interim Management Agreement (the "Management Agreement"), which was
entered into between the Company and NMRO on July 7, 1997, effective July
1, 1997, will terminate. Under the Management Agreement, NMRO assumed the
direction and control of the business and operations of DataMed. Under the
Management Agreement, NMRO has the right (i) to sell, assign, dispose of or
transfer any or all of the assets or contractual obligations of DataMed,
(ii) reduce DataMed's work force, (iii) assign or transfer DataMed's
administrative responsibilities, (iv) administer DataMed's contracts with
its customers, service providers, vendors or purchasers of services or
supplies, including negotiating, amending, maintaining and entering into
such contracts, but not the termination of any such contract, or any
service provided by DataMed to any customer, without the prior consent of
the Company, (v) to bill for services rendered by DataMed and collect
accounts receivable of the Company relating to DataMed and (vi) to fix,
change or relocate the offices used by DataMed. NMRO also agreed to pay
and discharge all Expenses (as defined below) incurred by NMRO in the
operation of DataMed.
As compensation for its management services, NMRO receives a monthly
management fee in an amount equal to the Net Income (which is defined as
Revenues less Expenses, as determined on an accrual basis in accordance
with generally accepted accounting principles consistently applied).
Revenues are defined as all fees and payments to which the Company is
entitled during the term of the Management Agreement in connection with the
provision of services or supplies by DataMed, investment income and any
other income collected by or on behalf of DataMed during the term of the
Management Agreement. Expenses are defined as all expenses which were
fully disclosed and recorded on DataMed's June 30, 1997 balance sheet and
profit and loss statement, expenses incurred in the ordinary course of
operation of DataMed during the term of the Management Agreement and other
non-reimbursed or insured expenses. Excluded from the definition of
Expenses in the Agreement are (i) interest on borrowed funds, (ii) legal
accounting and other consulting expenses incurred by the Company, (iii)
property taxes
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and taxes based on the Company's income, (iv) insurance expenses (other
than health insurance for employees providing services exclusively to
DataMed), (v) judgments and expenses of litigation (except legal actions
initiated by NMRO to collect accounts receivable of DataMed), (vi) bank
changes on Company accounts, (vii) employee bonuses or compensation
increases for employees of DataMed not disclosed on the June 30, 1997
profit and loss statement; (viii) compensation and benefits paid to Company
employees whose services are not rendered exclusively to DataMed, (ix)
intercompany charges or allocations for overhead and loans, as mutually
agreed by the parties, and (x) expenses paid by the Company relating to
DataMed's operations that are not disclosed and recorded in the June 30,
1997 profit and loss statement of DataMed.
Based upon the historical financial results of DataMed, the Company
and NMRO anticipate that the operations of DataMed during the term of the
Managment Agreement will result in a Net Loss. Any Net Loss is to be the
sole responsibility of NMRO if the Company's shareholders approve Proposal
Number Two to sell DataMed to NMRO. If the Management Agreement is
terminated by NMRO pursuant to NMRO's right to terminate (as described
below), then the Company shall be solely responsible for the Net Loss
incurred in the operation of DataMed. If the Company is obligated to
reimburse NMRO for any Net Losses, the Company has the right to have the
Net Loss reviewed and verified by the Company's independent certified
public accountants.
The Management Agreement may be terminated by the Company in the event
(i) a voluntary or involuntary proceeding involving NMRO is commenced under
the United States Bankruptcy Code or negotiations for partial or complete
assignement of its assets for the benefit of creditors are commenced, (ii)
a receiver, custodian, examiner or trustee is appointed for any of NMRO's
property or assets, (iii) NMRO is terminated, liquidated or dissolved, (iv)
NMRO defaults in the performance of any material duty or obligation under
the Management Agreement and such default is not cured within 30 days after
written notice thereof is provided to NMRO, and (v) if the Company's
shareholders do not approve the Proposal to sell DataMed to NMRO. The
Management Agreement may be terminated by NMRO in the event (i) the
Company's shareholders do not approve Proposal Number Two, (ii) a voluntary
or involuntary proceeding involving the Company is commenced under the
United States Bankruptcy Code, or the Company is terminated, liquidated or
dissolved (except if a third party expressly assumes the obligations and
succeeds to the interests of the Company thereunder), (iii) a receiver,
custodian, examiner or trustee is appointed for any of the Company's
property or assets or (iv) the Company defaults in the performance of a
material duty or obligation under the Management Agreement, which default
is not cured within 30 days of written notice of such default is provided
to the Company. If NMRO terminates the Management Agreement pursuant to
any such provision, the Company shall retain all rights (including rights
to accounts receivable of DataMed) and all obligations and liabilities
(including accounts payable) relating to the operation of DataMed, and will
reimburse NMRO's Expenses.
The Management Agreement also provides that the Company would assign
Bart K. Valdez, Acting Chief Financial Officer of the Company and Director
of DataMed Operations, to
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provide services on behalf of DataMed. The Management Agreement provides
that Mr. Valdez may not allocate in excess of eight hours per week of his
time to the Company and shall not be required to travel more than twice for
the Company during the term of the Management Agreement, each of which may
be for a maximum of three days.
CONDITIONS. Each party's obligations pursuant to the Asset Purchase
Agreement is subject to certain conditions, including the consent of the
Company's shareholders.
CONFLICTS OF INTEREST
The Chairman and Chief Executive Officer of the Company, Dr. Michael
I. Ruxin, is a guarantor of certain capital lease obligations of the
Company totalling approximately $1.1 million. The sale of DataMed will
result in the termination of a portion of such capital lease obligations,
and NMRO and/or SAT will enter into new capital lease agreements. As a
result, Dr. Ruxin will be released from his guarantees of approximately
$500,000 of capital lease obligations.
ADDITIONAL INFORMATION REGARDING THE COMPANY AND DATAMED
For additional information regarding the Company and DataMed, see the
Company's Annual Report delivered with this proxy statement, which includes
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996. Also enclosed for the information of shareholders is a copy of
the Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 1997.
BUSINESS OF THE COMPANY AFTER THE SALE OF DATAMED
Following the sale of DataMed, the Company's principal line of
business will be that of the Wyndgate.
Even if the shareholders approve the sale of DataMed, the Company
expects to continue to incur losses until 1999, and possibly thereafter,
until its existing SAFETRACE(R) software product is fully implemented and
fully operational within the Company's customers information system
environment and until its transfusion management information system
software product, which is currently under development, is established in
its markets. Wyndgate has historically incurred, and expects to continue
to incur, losses related to its operations, including the continued costs
for research and development of new software products and the expansion of
sales and marketing resources. The timing and amounts of the Company's
expenditures will depend upon a number of factors, including the progress
of the Company's research and development process, the status and timing of
regulatory approval, the timing of market acceptance of the Company's
products, the level of support needed by the Company's customers to
implement the software products they license from Wyndgate, and the efforts
required to develop the Company's sales and marketing organization.
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FEDERAL INCOME TAX CONSEQUENCES
The sale of DataMed is expected to result in a gain to the Company for
federal income tax purposes which may or may not be offset by the Company's
net operating loss (NOL) carryforwards. The sale of DataMed should not by
itself result in the imposition of federal income taxes upon the Company's
shareholders.
RIGHTS OF SECURITY HOLDERS
The proposed sale of DataMed does not result in material differences
in the rights of shareholders of the Company.
VOTE REQUIRED
Each shareholder entitled to vote at the meeting has the right to vote
the number of shares held by him for or against the Proposal. Approval of
the sale of DataMed requires the affirmative vote of a majority of the
Common Stock outstanding on the Record Date. Consequently, the failure to
return a properly executed proxy card or failure to vote in person at the
Shareholders Meeting will have the same effect as a vote against the
Proposal. Similarly, "broker non-votes" will have the same effect as a
vote against the Proposal.
RIGHTS OF DISSENTING SHAREHOLDERS
Under Article 113 of the Colorado Business Corporation Act (the
"Act"), all shareholders have dissenters' rights and are entitled to the
fair value of any or all of their shares of Common Stock as of the
consummation of the sale of DataMed, exclusive of any element of value
arising from the expectation or accomplishment of the sale of DataMed, by
following the procedures specified in the Act. The following is a summary
of the material provision of the Act, to be read in conjunction with the
full text of the Act. The following summary does not purport to be
complete and is qualified in its entirety by reference to Appendix A.
The Act provides that, in order to exercise dissenters' rights, a
shareholder must file a written notice of intent to demand payment to be
paid fair value for his or her shares of Common Stock with the Company at
its executive offices before the vote on the sale of DataMed is taken at
the Annual Meeting, must refrain from voting in favor of the sale, and must
continuously hold his or her shares of Common Stock through the
consummation of the sale. This written demand for payment will be
sufficient if it reasonably informs the Company as to the identity of the
shareholder and that the shareholder intends thereby to demand payment for
his or her shares. Voting against the sale of DataMed, abstaining from
voting or failing to vote with respect to the sale of DataMed will not
constitute a demand for payment within the meaning of the Act.
A demand for payment must be executed by or for the shareholder of
record, fully and correctly, as such shareholder's name appears on the
certificate for his shares of Common Stock. If the Common Stock is owned
of record in a fiduciary capacity, such as by a trustee, guardian, or
custodian, such demand must be executed by the fiduciary. If the Common
Stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand
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must be executed by all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute the demand for payment for
a shareholder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in exercising that demand,
he or she is acting as agent for the record owner or owners.
A record owner, such as a broker, who holds Common Stock as a nominee
for others, may exercise the right of dissent with respect to the shares of
Common Stock held for all or less than all beneficial owners of such shares
of Common stock as to which he or she is the record owner by filing a
written demand to be paid fair value for the shares with the Company at its
executive offices before the vote on the sale is taken at the Annual
Meeting. In such case, the written demand must set forth the number of
shares covered by such demand. Where the number of shares is not expressly
stated, the demand will be presumed to cover all shares of Common Stock
outstanding in the name of such record owner.
After the consummation of the sale of DataMed, the Company will mail
a notice of the sale of DataMed to each shareholder who has properly made
demand for payment by following the above described steps (the "Dissenting
Shareholders"). The Notice ("Notice") will state where and when a demand
for payment shall be sent and certificates deposited by Dissenting
Shareholders in order to obtain payment, will supply a form for demanding
payment ("Demand") which includes a request for certification of the date
on which the Dissenting Shareholder or the person on whose behalf the
Dissenting Shareholder dissents, acquired beneficial ownership of the
shares and will be accompanied by a copy of the Act. Dissenting
Shareholders will have 30 days from the mailing date of the Notice to
submit to the Company their Demand and deposit their shares for payment.
A Dissenting Shareholder who fails to submit a Demand or fails to deposit
his or her shares, as required by the Notice, shall have o right under the
Act to receive payment for such shares.
If the Company has not completed the sale of DataMed and remitted
payment for shares within 60 days after the date set for submission of the
Demand and depositing of shares, the Company will return the shares that
have been deposited. After the deposited shares have been returned, the
Company may at any later time, send a new Notice regarding demand for
payment conforming to the Notice requirement set forth above.
Immediately upon the completion of the sale of DataMed, or upon
receipt of a Demand, if the sale of DataMed has already been completed, the
Company will remit to a Dissenting Shareholder who has submitted a Demand
and who has deposited his or her shares, the amount which the Company
estimates to be the fair value of the shares. The Company's estimate of
fair value will be based upon the value of a share immediately before the
completion of the sale of DataMed, excluding any appreciation or
depreciation in anticipation of the sale of DataMed, as required under
Colorado law. Accompanied with the payment will be a copy of the Company's
audited Balance Sheet and Statement of Income for its fiscal year ended
December 31, 1996, a copy of the Company's latest available interim
financial statements, a statement of the Company's estimate of fair value
of the shares, a statement as to how interest was calculated and a Notice
of Dissenter's Rights to Demand Supplement Payment along with copies of the
Act.
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If the Company fails to make payment within 60 days of the date of the
Notice, or if a Dissenting Shareholder believes that the amount paid is
less than the fair value of his or her shares, a Dissenting Shareholder
may, within 30 days after the date of mailing of the Company's payment mail
to the Company his or her own estimate of the value of the shares and
demand payment of the deficiency ("Deficiency Demand"). Failure to make a
Deficiency Demand within such 30 day period waives any right that a
Dissenting Shareholder may have with respect to payment of any such
deficiency. In the event any Deficiency Demand remains unsettled 60 days
after the Company's receipt of such a demand, the Company must file a
petition requesting that the fair value of the shares and interest thereon
be determined by the District court for the City and county of Denver,
Colorado. All Dissenting Shareholders whose Deficiency Demands have not
been settled will be made a party to such action and will receive a copy of
the petition filed with the court. The Denver District Court will have
full jurisdiction of the matter and may in it discretion appoint one or
more persons as appraisers to receive evidence and to recommend a decision
on the question of fair value. Dissenting Shareholders made a party to the
action are entitled to conduct discovery in the same manner as provided in
other civil suits in the State of Colorado. Such Dissenting Shareholders
shall be entitled to judgement for the amount by which the fair value of
their shares is found to exceed the amount previously remitted. The costs
and expenses of such a proceeding including reasonable compensation and
expenses of appraisers shall be determined by the Court and assessed
against the Company, except that any part of the costs and expenses may be
apportioned and assessed as the Court may deem equitable against all or
some of the Dissenting Shareholders who are parties and whose actions in
demanding supplemental payment is found by the Court to be arbitrary,
vexatious or not in good faith. Fees and expenses of counsel and of
experts for the respective parties may be assessed as the Court deems
equitable against the Company and in favor of any or all Dissenting
Shareholders if the Company fails to comply substantially with the
requirements of the Act and maybe assessed against either the Company or a
Dissenting Shareholder, in favor of any other party, if the Court finds
that such party acted arbitrarily, vexatiously or not in good faith with
respect to his or her Dissenting Shareholder rights. Further, if the Court
finds that the services of counsel of any Dissenting Shareholder were of
substantial benefit to other Dissenting Shareholders similarly situated and
should not be assessed against the Company, the Court may award to the
counsel reasonable fees to be paid out of the amounts awarded to the
Dissenting Shareholders who were benefitted.
If the Company fails to file a petition with the Denver District Court
as provided above, each Dissenting Shareholder who has made a Deficiency
Demand and who has not already settled his or her claim, shall be paid by
the Company the amount demanded by such shareholder with interest and may
file suit for such amount in an appropriate court.
Notwithstanding the above, the Company may elect to withhold payment
from any Dissenting Shareholder with respect to shares of which such
Shareholder was not the beneficial owner on the date of the first
announcement to news media or to shareholders of the terms of the sale of
DataMed. With respect to such shares, the Company has the option, upon
completion of the sale of DataMed, to state to each such Dissenting
Shareholder its estimate of the fair value of the shares, state the rate of
interest to be used, and offer to pay the resulting amounts on
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receiving such Dissenting Shareholder's agreement to accept them in full
satisfaction. If such Dissenting Shareholder disagrees with the Company's
determination of fair value and interest, he or she may, within 30 days
after the date of the Company's mailing of its offer, mail to the Company
his or her own estimate of fair value and interest and demand payment of
that amount. Such Dissenting Shareholder's failure to do so shall result
in his or her entitlement to no more than the Company's offer. If such
Dissenting Shareholder makes a demand for such payment, the Company shall
be required to file a petition in the manner as set forth above with
respect to other Dissenting Shareholders.
The provisions of the Act are technical in nature and complex.
Shareholders desiring to exercise dissenters' rights and to obtain payment
of the fair value of their shares of Common Stock should consult counsel,
since the failure to comply strictly with the provisions of the Act may
defeat their dissenters' rights.
COMPANY'S RELATIONSHIP WITH
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A representative of Ernst & Young LLP, Denver, Colorado, the Company's
independent certified public accountants, may be present at the Annual
Meeting to respond to appropriate questions and to make a statement if he
so desires. The Company intends to select Ernst & Young LLP as its
independent certified public accountants to perform an audit of the
accounts of the Company for the fiscal year ending December 31, 1997.
FINANCIAL INFORMATION
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1996, including Audited Financial Statements, and its Form
10-QSB for the quarter ended June 30, 1997 are being sent to shareholders
with this Proxy Statement.
OTHER MATTERS
Management does not know of any other matters to be brought before the
meeting. However, if any other matters properly come before the meeting,
it is the intention of the appointees named in the enclosed form of proxy
to vote in accordance with their best judgment on such matters.
ANNUAL REPORT
The Company's Annual Report to Shareholders which contains the Form
10-KSB for the fiscal year ended December 31, 1996 is enclosed herewith,
and is incorporated by reference in this Proxy Statement.
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SHAREHOLDER PROPOSALS
Any shareholder proposing to have any appropriate matter brought
before the 1998 Annual Meeting of Shareholders must submit such proposal in
accordance with the proxy rules of the Commission. Such proposals should
be sent to the Secretary of the Company not later than February 24, 1998 to
be considered for inclusion in the 1998 Proxy Statement.
By Order of the Board of Directors:
GLOBAL MED TECHNOLOGIES, INC.
-------------------------------
Date: August ___, 1997 Michael I. Ruxin, M.D.
Chairman of the Board of
Directors
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APPENDIX A
COLORADO BUSINESS CORPORATION ACT
ARTICLE 113
DISSENTERS' RIGHTS
PART 1
Right of Dissent - Payment for Shares
7-113-101 DEFINITIONS.-- For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or
foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent
that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans or, if none, at the
legal rate as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent such
owner is recognized by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholders" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.--(1) A shareholder, whether or not
entitled to vote, is entitled to dissent and obtain payment of the fair
value of his or her shares in the event of any of the following corporate
actions:
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(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation, or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102(2).
(2) A shareholder, whether or not entitled of vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in
the event of:
(a) An amendment to the articles of incorporation that materially and
adversely affects rights in respect of the shares because it:
(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters, or abolishes a right in respect of redemption
of the shares, including a provision respecting a sinking fund for their
redemption or repurchase; or
(b) An amendment to the articles of incorporation that affects rights
in respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights; or
(II) Reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so created
is to be acquired for cash or the scrip is to be voided under section 7-106-104.
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(3) A shareholder is entitled to dissent and obtain payment of the
fair value of the shareholder's shares in the event of any corporate action
to the extent provided by the bylaws or a resolution of the board of
directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate
action creating such entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by any one person
and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number,
if any, of each person on whose behalf the record shareholder asserts
dissenters' rights. The rights of a record shareholder under this
subsection (1) are determined as if the shares as to which the record
shareholder dissents and the other shares of the record shareholder were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the
corporation that the beneficial shareholder and the record shareholder or
record shareholders of all shares owned beneficially by the beneficial
shareholder have asserted, or will timely assert, dissenters' rights as to
all such shares as to which there is no limitation on the ability to
exercise dissenters' rights. Any such requirement shall be stated in the
dissenters' notice given pursuant to section 7-113-203.
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PART 2
Procedure for Exercise of Dissenters' Rights
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to
a vote at a shareholders' meeting, the notice so the meeting shall be given
to all shareholders, whether or not entitled to vote. The notice shall
state that shareholders are or may be entitled to assert dissenters' rights
under this article and shall be accompanied by a copy of this article and
the materials, if any, that under articles 101 to 117 of this title, are
required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this
subsection (1) to shareholders not entitled to vote shall not affect any
action taken at the shareholders' meeting for which the notice was to have
been given.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant
to section 7-107-104, any written or oral solicitation of a shareholder to
execute a writing consenting to such action contemplated in section
7-107-104 shall be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under this
article, by a copy of this article, and by the materials, if any, that,
under articles 101 to 117 of this title, would have been required to be
given to shareholders entitled to vote on the proposed action if the
proposed action were submitted to a vote at a shareholders' meeting.
Failure to give notice as provided by this subsection (2) to shareholders
not entitled to vote shall not affect any action taken pursuant to section
7-107-104 for which the notice was to have been given.
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant
to section 7-107-104, a shareholder who wishes to assert dissenters' rights
shall not execute a writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--(1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who
are entitled to demand payment for their shares under this article.
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(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under section 7-113-102 and
shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action:
(b) State an address at which the corporation with receive payment
demands and the address of a place where certificates for certificated
shares must be deposited:
(c) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received.
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made:
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given:
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is
given a dissenters' notice pursuant to section 7-113-203 and who wishes to
assert dissenters' rights shall, in accordance with the terms of the
dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection
(1) of this section retains all rights of a shareholder, except the right
to transfer the shares, until the effective date of the proposed corporate
action giving rise to the shareholder's exercise of dissenters' right and
has only the right to receive payment for the shares after the effective
date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
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(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in
the dissenters' notice is not entitled to payment for the shares under this
article.
7-113-205 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for
payment under section 7-113-204 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares,
the corporation may restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall
be applicable to shareholders who own uncertificated shares.
7-113-106 PAYMENT.--(1) Except as provided in section 7-113-208, upon
the effective date of the corporate action creating dissenters' rights
under section 7-113-102 or upon receipt of a payment demand pursuant to
section 7-113-204, whichever is later, the corporation shall pay each
dissenter who complied with section 7-113-204, at the address stated in the
payment demand, or if no such address is stated in the payment demand, at
the address shown on the corporation's current record of shareholders for
the record shareholder holding the dissenter's shares, the amount the
corporation estimates to be the fair value of the dissenter's shares, plus
accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall
be accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim of full-year period, which financial
statements need not be admitted;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.-(1) If the effective date of the
corporate action creating dissenters' rights under section 7-113-102 does
not occur within sixty days after the date set by the corporation by which
the corporation must be receive the payment demand
-35-
<PAGE>
as provided in section 7-113-203, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more than sixty days
after the date set by the corporation by which the corporation by which the
corporation must receive the payment demand as provided in section 7-113-203,
then the corporation shall send a new dissenters' notice, as provided
in section 7-113-203, and the provisions of sections 7-113-204 to 7-113-209
shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) The corporation may, in or
with the dissenters' notice given pursuant to section 7-113-203, state the
date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action creating dissenters' rights under
section 7-113-102 and state that the dissenter shall certify in writing, in
or with the dissenter's payment demand under section 7-113-204, whether or
not the dissenter (or the person on whose behalf dissenters' rights are
asserted) acquired beneficial ownership of the shares before that date.
With respect to any dissenter who does not certify in writing, in or with
the payment demand, that the dissenter or the person on whose behalf the
dissenter asserts dissenters' rights acquired beneficial ownership of the
shares before such date the corporation may, in lieu of making the payment
provided in section 7-113-206, offer to make such payment if the dissenter
agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section
shall include or be accompanied by the information required by section
7-113-206 (2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR
OFFER.--(1) A dissenter may give notice to the corporation in writing of
the dissenter's estimate of the fair value of the dissenter's shares and of
the amount of interest due and may demand payment of such estimate, less
any payment made under section 7-113-206, or reject the corporation's offer
under section 7-113-208 and demand payment of the fair value of the shares
and interest due, if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207(1).
-36-
<PAGE>
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required
by subsection (1) of this section within thirty days after the corporation
made or offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301 COURT ACTION.-(1) If a demand for payment under section
7-113-209 remains unresolved, the corporation may, within sixty days after
receiving the payment demand, commence a proceeding and petition the court
to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the sixty-day period,
it shall pay to each dissenter whose demand remains unresolved the amount
demanded.
(2) The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this
state where the corporation's principal office is located or, if it has no
principal office in this state, in the district court of the county in
which its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of
the domestic corporation merged into, or whose shares were acquired by, the
foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unresolved parties to the
proceeding commenced under subsection (2) of this section as in an action
against their shares, and all parties shall be served with a copy of the
petition. Service on each dissenter shall be by registered or certified
mail, to the address stated in such dissenter's payment demand, or if no
such address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder
holding the dissenter's shares, or as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive.
The court may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers
have the powers described in the order appointing them, or in any amendment
to such order. The parties to the proceeding are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if
any, by which the court finds the fair value of the dissenter's shares,
plus interest, exceeds the amount paid by the corporation, or for the fair
value, plus interest, of the dissenter's shares for which the corporation
elected to withhold payment under section 7-113-208.
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<PAGE>
7-113-302 COURT COSTS AND COUNSEL FEES.-(1) The court in an appraisal
proceeding commenced under section 7-113-301 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs
against the corporation: except that the court may assess costs against all
or some of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in
favor of any other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to said counsel reasonable fees to be paid
out of the amounts awarded to the dissenters who were benefitted.
-38-
<PAGE>
__________________________________________________________________________
PROXY
__________________________________________________________________________
GLOBAL MED TECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER __, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of
Global Med Technologies, Inc. (the "Company") hereby constitutes and
appoints Michael I. Ruxin, M.D. and Joseph F. Dudziak, or either of them,
as attorneys and proxies to appear, attend and vote all of the shares of
the Common Stock of Global Med Technologies, Inc. standing in the name of
the undersigned at the Annual Meeting of Shareholders of Global Med
Technologies, Inc. to be held at the Company's office at 12600 West Colfax,
Suite A-500, Lakewood, Colorado 80215, on September __, 1997, at 10:00
a.m., Mountain Time, and at any adjournment or adjournments thereof:
1. To elect the following four (4) directors to serve until the next
Annual Meeting of Shareholders and until their successors have been elected
and qualified: Michael I. Ruxin, William J. Collard, Gerald F. Willman,
Jr. and Gordon Segal. (Each shareholder entitled to vote at the meeting
has the right to vote the number of shares held by him for each of the four
(4) director nominees. Election of the director nominees requires the
affirmative vote of a majority of the votes cast at the Annual Meeting.)
For all nominees _______.
Withhold authority to vote for all nominee(s) ______.
Withhold authority to vote for nominee(s) named below:
_______________________________
_______________________________
2. To approve the sale of DataMed to National Medical Review
Offices, Inc. pursuant to the Asset Purchase Agreement, dated August 18,
1997.
For ________ Against ________
3. To transact such other business as may properly come before the
meeting.
-39-
<PAGE>
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH
RESPECT TO PROPOSALS ONE AND TWO. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED HEREBY WILL BE VOTED FOR PROPOSALS ONE AND TWO. THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ANY OTHER
BUSINESS.
Please mark, date and sign your name exactly as it appears hereon and
return the Proxy in the enclosed envelope as promptly as possible. It is
important to return this Proxy properly signed in order to exercise your
right to vote if you do not attend the meeting and vote in person. When
signing as agent, partner, attorney, administrator, guardian, trustee or in
any other fiduciary or official capacity, please indicate your title. If
stock is held jointly, each joint owner must sign.
Date: ____________, 1997
______________________________
Signature(s)
Address if different from that on
label:
______________________________
Street Address
______________________________
City, State and Zip Code
______________________________
Number of shares
Please check if you intend to be present at the meeting: ________
-40-
ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 18, 1997
BY AND BETWEEN
GLOBAL MED TECHNOLOGIES, INC.
A COLORADO CORPORATION
("SELLER")
AND
NATIONAL MEDICAL REVIEW OFFICES, INC.
A MICHIGAN CORPORATION
("BUYER")
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
(a) "ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . . 2
(b) "ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . 2
(c) "AFFILIATE. . . . . . . . . . . . . . . . . . . . . . 2
(d) "AGENTS . . . . . . . . . . . . . . . . . . . . . . . 2
(e) "AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 2
(f) "BUSINESS . . . . . . . . . . . . . . . . . . . . . . 2
(g) "CLOSING. . . . . . . . . . . . . . . . . . . . . . . 2
(h) "CLOSING DATE . . . . . . . . . . . . . . . . . . . . 2
(i) "CODE . . . . . . . . . . . . . . . . . . . . . . . . 3
(j) "CONTRACT . . . . . . . . . . . . . . . . . . . . . . 3
(k) "COPYRIGHTS AND TRADENAMES. . . . . . . . . . . . . . 3
(l) "DAMAGES. . . . . . . . . . . . . . . . . . . . . . . 3
(m) "EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . 3
(n) "EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . 3
(o) "ESCROW AGENT . . . . . . . . . . . . . . . . . . . . 3
(p) "ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . 3
(q) "FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 3
(r) "LETTER OF INTENT . . . . . . . . . . . . . . . . . . 3
(s) "LIEN . . . . . . . . . . . . . . . . . . . . . . . . 3
(t) "LEASES . . . . . . . . . . . . . . . . . . . . . . . 4
(u) "MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . 4
(v) "OFFICE LEASE . . . . . . . . . . . . . . . . . . . . 4
(w) "PERSON . . . . . . . . . . . . . . . . . . . . . . . 4
(x) "PREMISES . . . . . . . . . . . . . . . . . . . . . . 4
(y) "SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 4
(z) "TAXES. . . . . . . . . . . . . . . . . . . . . . . . 4
(aa) "TRADE SECRETS. . . . . . . . . . . . . . . . . . . . 4
<PAGE>
ARTICLE II
ASSETS AND LIABILITIES. . . . . . . . . . . . 4
2.1 Included Assets. . . . . . . . . . . . . . . . . . . . . . 4
(a) Fixtures, Furniture and Equipment . . . . . . . . . . 5
(b) Supplies and Consumables. . . . . . . . . . . . . . . 5
(c) Prepaid Expenses. . . . . . . . . . . . . . . . . . . 5
(d) Accounts Receivable . . . . . . . . . . . . . . . . . 5
(e) Accrued Accounts Receivable (Un-billed Revenue) . . . 5
(f) Copyrights and Tradenames . . . . . . . . . . . . . . 5
(g) Business Contracts. . . . . . . . . . . . . . . . . . 5
(h) Leasehold Improvements. . . . . . . . . . . . . . . . 5
(i) Customer List . . . . . . . . . . . . . . . . . . . . 5
(j) Books and Records . . . . . . . . . . . . . . . . . . 6
(k) Telephone Numbers and Internet Addresses. . . . . . . 6
(l) Net Working Capital . . . . . . . . . . . . . . . . . 6
(m) Goodwill. . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . 6
(a) Contracts . . . . . . . . . . . . . . . . . . . . . . 6
(b) Telephone Numbers and Internet Addresses. . . . . . . 6
(c) Copyrights and Tradenames . . . . . . . . . . . . . . 6
2.3 Certain Covenants of Seller Purchased by Buyer . . . . . . 6
(a) Operation of the Business . . . . . . . . . . . . . . 6
(b) Tenant Improvements . . . . . . . . . . . . . . . . . 6
(c) Other Restrictions. . . . . . . . . . . . . . . . . . 7
2.4 Assumed Obligations. . . . . . . . . . . . . . . . . . . . 7
(a) Business Contracts. . . . . . . . . . . . . . . . . . 7
(b) Accounts Payable. . . . . . . . . . . . . . . . . . . 7
(c) Accrued Accounts Payable. . . . . . . . . . . . . . . 7
(d) Accrued Expenses. . . . . . . . . . . . . . . . . . . 7
(e) Leases. . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Specific Excluded Liabilities. . . . . . . . . . . . . . . 7
2.6 Seller's Accrued Accounts Payable. . . . . . . . . . . . . 8
ARTICLE III
PURCHASE PRICE; PAYMENT TERMS. . . . . . . . . . 8
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Payment and Delivery on Closing Date . . . . . . . . . . . 8
3.4 Allocation of Purchase Price . . . . . . . . . . . . . . . 9
ii
<PAGE>
PAGE
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 9
4.1 Representations and Warranties of Seller . . . . . . . . . 9
(a) Organization and Standing . . . . . . . . . . . . . . 9
(b) Corporate Authority . . . . . . . . . . . . . . . . . 9
(c) Binding Effect. . . . . . . . . . . . . . . . . . . . 9
(d) Approvals; Consents . . . . . . . . . . . . . . . . . 9
(e) No Violation. . . . . . . . . . . . . . . . . . . . . 9
(f) Compliance With Laws. . . . . . . . . . . . . . . . . 10
(g) Financial Statements. . . . . . . . . . . . . . . . . 10
(h) Title to Assets . . . . . . . . . . . . . . . . . . . 10
(i) Condition of Premises . . . . . . . . . . . . . . . . 10
(j) Contracts . . . . . . . . . . . . . . . . . . . . . . 11
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . 11
(l) Litigation. . . . . . . . . . . . . . . . . . . . . . 11
(m) No Misleading Statements. . . . . . . . . . . . . . . 11
(n) Operations of the Business. . . . . . . . . . . . . . 12
(o) Hazardous Materials . . . . . . . . . . . . . . . . . 12
(p) Accounts Receivable . . . . . . . . . . . . . . . . . 12
(q) Collection of Accounts Receivable . . . . . . . . . . 12
(r) Accrued Accounts Receivable (Un-billed Revenue) . . . 13
(s) Accounts Payable. . . . . . . . . . . . . . . . . . . 13
(t) Accrued Accounts Payable. . . . . . . . . . . . . . . 13
(u) Accrued Expenses. . . . . . . . . . . . . . . . . . . 13
(v) Leases. . . . . . . . . . . . . . . . . . . . . . . . 13
(w) Accrued Payroll . . . . . . . . . . . . . . . . . . . 13
(x) Accrued Paid Time Off . . . . . . . . . . . . . . . . 13
(y) Sales Commissions . . . . . . . . . . . . . . . . . . 13
(z) Accrued Interest. . . . . . . . . . . . . . . . . . . 14
(aa) Deposit Accounts. . . . . . . . . . . . . . . . . . . 14
(ab) Leases. . . . . . . . . . . . . . . . . . . . . . . . 14
(ac) Employees . . . . . . . . . . . . . . . . . . . . . . 14
(ad) Employee Benefit Plans. . . . . . . . . . . . . . . . 14
(ae) No Agent or Brokers . . . . . . . . . . . . . . . . . 15
(af) Intercompany Obligations. . . . . . . . . . . . . . . 15
(ag) Foreign Person. . . . . . . . . . . . . . . . . . . . 15
4.2 Representations and Warranties of Buyer. . . . . . . . . . 15
(a) Organization and Standing . . . . . . . . . . . . . . 15
(b) Corporate Authority . . . . . . . . . . . . . . . . . 15
(c) Binding Effect. . . . . . . . . . . . . . . . . . . . 15
(d) Approvals; Consents . . . . . . . . . . . . . . . . . 16
iii
<PAGE>
PAGE
----
(e) No Agent or Brokers . . . . . . . . . . . . . . . . . 16
4.3 Survival of Representations and Warranties . . . . . . . . 16
ARTICLE V
COVENANTS OF THE PARTIES . . . . . . . . . . . 16
5.1 Covenants of Seller. . . . . . . . . . . . . . . . . . . . 16
(a) Operation of the Business . . . . . . . . . . . . . . 16
(b) Maintenance of Contracts, Copyrights, Permits, etc. . 16
(c) Proscribed Activities . . . . . . . . . . . . . . . . 16
(d) Insurance . . . . . . . . . . . . . . . . . . . . . . 17
(e) Books and Records; Compliance with Laws . . . . . . . 17
(f) No Organic Change . . . . . . . . . . . . . . . . . . 18
(g) Consent and Approvals . . . . . . . . . . . . . . . . 18
(h) Corporate Name. . . . . . . . . . . . . . . . . . . . 18
(i) Depreciation of Capital Assets. . . . . . . . . . . . 18
(j) Cooperation . . . . . . . . . . . . . . . . . . . . . 18
5.2 Seller's Employees, Employee Benefits. . . . . . . . . . . 18
5.3 Access and Information . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . 19
6.1 Conditions Precedent to Obligations of Buyer . . . . . . . 19
(a) Accuracy of Representations and Warranties. . . . . . 19
(b) Performance of Agreements . . . . . . . . . . . . . . 19
(c) Corporate Action and Approvals. . . . . . . . . . . . 19
(d) Consents of Other Persons . . . . . . . . . . . . . . 20
(e) Office Lease. . . . . . . . . . . . . . . . . . . . . 20
(g) No Material Adverse Change. . . . . . . . . . . . . . 20
(h) Organization of Buyer . . . . . . . . . . . . . . . . 20
(i) Litigation. . . . . . . . . . . . . . . . . . . . . . 20
(j) Changes in Law. . . . . . . . . . . . . . . . . . . . 20
(k) Opinion of Counsel. . . . . . . . . . . . . . . . . . 21
6.2 Conditions Precedent to Obligations of Seller. . . . . . . 21
(a) Accuracy of Representations and Warranties. . . . . . 21
(b) Performance of Agreements . . . . . . . . . . . . . . 21
(c) Shareholder Approval. . . . . . . . . . . . . . . . . 21
(d) Office Lease. . . . . . . . . . . . . . . . . . . . . 22
(e) Litigation. . . . . . . . . . . . . . . . . . . . . . 22
(f) Opinion of Counsel. . . . . . . . . . . . . . . . . . 22
iv
<PAGE>
PAGE
----
ARTICLE VII
CLOSING . . . . . . . . . . . . . . . 22
7.1 Time and Place; Deliveries . . . . . . . . . . . . . . . . 22
7.2 Deliveries by Seller upon Closing. . . . . . . . . . . . . 22
7.3 Deliveries by Buyer upon Closing . . . . . . . . . . . . . 23
7.4 Deliveries by Both Buyer and Seller. . . . . . . . . . . . 23
ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . 23
8.1 Termination By the Parties . . . . . . . . . . . . . . . . 23
8.2 Termination By Seller. . . . . . . . . . . . . . . . . . . 24
8.3 Termination By Buyer . . . . . . . . . . . . . . . . . . . 24
8.4 Effect of Termination. . . . . . . . . . . . . . . . . . . 25
8.5 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX
POST CLOSING COMMITMENTS AND COVENANTS. . . . . . . . 26
9.1 Noncompetition . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Non-Disclosure of Trade Secrets. . . . . . . . . . . . . . 26
9.3 Covenant Not to Solicit. . . . . . . . . . . . . . . . . . 26
9.4 Modification . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE X
INDEMNIFICATION . . . . . . . . . . . . . 27
10.1 Seller's Indemnification . . . . . . . . . . . . . . . . . 27
10.2 Buyer's Indemnification. . . . . . . . . . . . . . . . . . 28
10.3 Indemnification for Taxes. . . . . . . . . . . . . . . . . 28
ARTICLE XI
MISCELLANEOUS PROVISIONS . . . . . . . . . . . 29
11.1 Expenses and Taxes . . . . . . . . . . . . . . . . . . . . 29
11.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 29
11.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . 30
11.6 Severability of Provisions . . . . . . . . . . . . . . . . 30
11.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.8 Exhibits and Schedules . . . . . . . . . . . . . . . . . . 30
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 30
11.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 30
11.11 Amendment; Waiver. . . . . . . . . . . . . . . . . . . . . 30
v
<PAGE>
11.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 30
11.13 Dispute Resolution . . . . . . . . . . . . . . . . . . . . 31
11.14 Attorneys' Fees and Costs. . . . . . . . . . . . . . . . . 31
11.15 Representation By Counsel; Interpretation. . . . . . . . . 31
11.16 Assignment Prohibited. . . . . . . . . . . . . . . . . . . 31
EXHIBIT A Letter of Intent
EXHIBIT B Escrow Agreement
EXHIBIT C Management Agreement
EXHIBIT D Floor Plan
EXHIBIT E Office Lease (Buyer)
EXHIBIT F Noncompetition Agreement
EXHIBIT G Office Lease (Seller)
EXHIBIT H Bill of Sale
EXHIBIT I Assignment and Assumption Agreement
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT, is entered into as of August 18, 1997,
by and between GLOBAL MED TECHNOLOGIES, INC., a Colorado corporation
("SELLER"), and NATIONAL MEDICAL REVIEW OFFICES, INC., a Michigan
corporation ("BUYER"). Buyer and Seller are sometimes referred to herein
individually as the "PARTY" and collectively as the "PARTIES."
RECITALS
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A. Seller owns or leases all of the assets of, and operates a
nationwide business under the names National MRO, DataMed, and DataMed
International (collectively, "DataMed International"), which provides third
party administration and medical review officer services in support of
employer substance abuse testing programs, which Business is presently
conducted at the offices of Seller located at 12600 West Colfax ,
Suite A-500, Lakewood, Colorado 80215-3734;
B. Buyer is in the business of providing medical review services for
employee substance abuse testing programs;
C. Seller and Buyer are parties to that certain Letter of Intent for
Proposed Acquisition dated June 20, 1997, which incorporates by reference
the Term Sheet and other terms of a previous Letter of Intent for Proposed
Acquisition dated June 18, 1997;
D. Seller and Buyer are parties to that certain Fund Escrow
Agreement dated July 3, 1997, pursuant to which Tri-State Bank, a state
chartered commercial bank, holds as escrow agent the amount of Six Hundred
Thousand Dollars ($600,000.00), as a deposit to be applied against the
final purchase price to be paid by Buyer at Closing;
E. Seller and Buyer are parties to that certain Interim Management
Agreement dated July 3, 1997, pursuant to which direction and control of
the operations of the Business have been transferred from Seller to Buyer
as of July 1, 1997, on an interim basis, subject to the Closing of the
transactions when and as required by this Agreement; and
F. Seller desires to sell and Buyer desires to purchase all of the
assets of Seller relating to the Business, except for those assets
specifically excluded pursuant to Section 2.2 herein, and the Parties
further desire to enter into certain additional agreements, in accordance
with the covenants, conditions, and restrictions as set forth herein.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
------------------------------------
1.1 DEFINITIONS. As used in this Agreement, in addition to the terms
defined elsewhere, the following terms shall have the meanings set forth
below, unless the context clearly indicates another meaning:
(a) "ACCOUNTS PAYABLE." Seller's obligations to pay for goods
sold or services rendered to Seller in connection with Seller's operation
of the Business, existing as of June 30, 1997, and recorded on the June 30,
1997, balance sheet of the Business, as set forth on SCHEDULE 2.4(b).
(b) "ACCOUNTS RECEIVABLE." Seller's present and future rights to
payment for services rendered or goods sold in connection with Seller's
operation of the Business, existing as of June 30, 1997, and recorded on
the June 30, 1997, balance sheet of the Business, as set forth on SCHEDULE
2.1(d).
(c) "AFFILIATE." An "AFFILIATE" of, or Person "AFFILIATED"
with, a specified Person, is a Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
(d) "AGENTS." When used with reference to any Person, its
members, shareholders, partners, directors, trustees, officers, employees,
agents, accountants, legal counsel, auditors, and other representatives.
(e) "AGREEMENT." This Asset Purchase Agreement.
(f) "BUSINESS." Seller's nationwide and international business
under the names National MRO, Datamed, and DataMed International, which
provides third party administration and medical review officer services in
support of employer substance abuse testing programs.
(g) "CLOSING." The consummation of and satisfaction by the
Parties (or pursuant to their direction) of the acts, conditions and
transactions contemplated by this Agreement required of each of them on or
before the Closing Date.
(h) "CLOSING DATE." The date established in Section 7.1 for
discharging various conditions by each of the parties hereto and
consummating the transactions described herein.
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(i) "CODE." The Internal Revenue Code of 1986, as amended.
(j) "CONTRACT." Any instrument, mortgage, agreement, contract
or restriction to which either Seller or Buyer is a party, or by which
either Seller or Buyer is bound or which is applicable to a Party or any of
its properties.
(k) "COPYRIGHTS AND TRADENAMES." Trade names, related
trademarks, service marks, copyrights or other intellectual property rights
or items of a similar character or nature, and all registrations or
applications therefor, and any other unregistered names or marks used by
Seller relating to the Business.
(l) "DAMAGES." Any loss, liability, damage (other than special,
remote or speculative damages, including, without limitation, damages for
loss of anticipated future profits or damages based on multiples of
earnings) or expense (including, without limitation, reasonable attorneys'
fees and disbursements).
(m) "EFFECTIVE TIME." The effective time of the Closing which
shall be 12:01 a.m. on the day immediately after the Closing Date.
(n) "EMPLOYEES." The employees of Seller who provide services
for the Business.
(o) "ESCROW AGENT." Tri-State Bank, a state chartered
commercial bank.
(p) "ESCROW AGREEMENT." That certain Fund Escrow Agreement
entered into by and between Seller and Buyer, and dated as of July 3, 1997,
a copy of which is attached as EXHIBIT B.
(q) "FINANCIAL STATEMENTS." The unaudited internal financial
statements maintained by Seller relating to the Business, including,
without limitation, balance sheets and statements of operations for the
Business, and any related schedules and source documents thereto.
(r) "LETTER OF INTENT." That certain Letter of Intent entered
into by and between Seller and Buyer, and dated as of June 20, 1997, which
incorporates by reference the Term Sheet and other terms of a previous
Letter of Intent for Proposed Acquisition dated June 18, 1997, a copy of
which is attached as EXHIBIT A.
(s) "LIEN." Any mortgage, pledge, security interest,
encumbrance, lien, or charge of any kind (including any agreement to grant
any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or any
agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction).
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(t) "LEASES." All leases for personal property (including both
capital and operating leases) set forth on SCHEDULE 2.4(d), including all
amendments and addenda thereto;
(u) "MANAGEMENT AGREEMENT." That certain Interim Management
Agreement entered into by and between Seller and Buyer, and dated as of
July 3, 1997, a copy of which is attached as EXHIBIT C.
(v) "OFFICE LEASE." A lease for a portion of the Premises, by
and between Golden Hill Office Complex, on the one hand ("LANDLORD"), and
each of Seller and Buyer, on the other hand, as a Tenant;
(w) "PERSON." An individual, a partnership, a joint venture, a
corporation, limited liability company, a trust, an unincorporated
organization or any other entity, including, without limitation, any
Affiliate.
(x) "PREMISES." The principal place of business for the
Business located at 12600 West Colfax , Suite A-500, Lakewood, Colorado
80215-3734.
(y) "SHAREHOLDERS." The shareholders of record of Seller as of
the most recent record date of Seller occurring prior to the Closing Date.
(z) "TAXES." All federal, state, county, local, foreign and
other taxes (including, without limitation, income, excise, sales, use,
gross receipts, franchise, employment and payroll related taxes), whether
or not measured in whole or in part by net income, and including related
interest, penalties and additions to tax.
(aa) "TRADE SECRETS." All confidential, proprietary or
privileged information relating to the Business, including, without
limitation, the Customer List as set forth in SCHEDULE 2.1(i), operating
manuals, symbols, trademarks, trade names, service marks, designs,
procedures, processes, and other copyrighted, patented, trademarked, or
legally protectable information, but excluding the Copyrights and
Tradenames identified in Section 2.2(c).
ARTICLE II
ASSETS AND LIABILITIES
----------------------
2.1 INCLUDED ASSETS. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, convey, transfer, assign and deliver to
Buyer, and Buyer agrees to purchase from Seller as of the Closing, all
rights, title and interests of Seller in all assets of Seller, whether
real, personal, mixed, tangible or intangible, except for the Excluded
Assets as defined in Section 2.2 below, owned, leased or used by Seller in
the operation of its Business as of June 30, 1997, which assets shall
entirely consist of the following (collectively, the "ASSETS"):
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(a) FIXTURES, FURNITURE AND EQUIPMENT. All equipment, vehicles,
tools, accessories, maintenance equipment, spare parts, furnishings and
fixtures used in or related to the operation of the Business and existing
as of the Closing Date, whether or not located at the Premises, together
with all rights in all warranties of any manufacturer or vendor with
respect thereto, as set forth in SCHEDULE 2.1(a), and related accumulated
depreciation for both purchased and leased assets as reflected on the June
30, 1997, Financial Statements of the Business;
(b) SUPPLIES AND CONSUMABLES. All pamphlets, brochures, videos,
office supplies and other consumable supplies held for use in connection
with the Business as described in SCHEDULE 2.1(b);
(c) PREPAID EXPENSES. All deposits, prepaid rent, paid premiums
and other prepaid expenses as of the Closing Date, together with any
additions thereto and subject to any reductions therefrom made or accrued
in the operation of the Business after June 30, 1997, through the Closing
Date ("PREPAID EXPENSES"), including, without limitation, those Prepaid
Expenses itemized in SCHEDULE 2.1(c);
(d) ACCOUNTS RECEIVABLE. All of Seller's Accounts Receivable,
as set forth on SCHEDULE 2.1(d), and related allowance for doubtful
accounts as reflected on the June 30, 1997, Financial Statements of the
Business;
(e) ACCRUED ACCOUNTS RECEIVABLE (UN-BILLED REVENUE). All of
Seller's rights to payment for services rendered or goods sold in
connection with Seller's operation of the Business prior to June 30, 1997,
which had not been billed as of June 30, 1997, as set forth on SCHEDULE
2.1(e), and related allowance for doubtful accounts as reflected on the
June 30, 1997, Financial Statements of the Business;
(f) COPYRIGHTS AND TRADENAMES. All Copyrights and Tradenames of
Seller and all variations and derivatives thereof set forth on SCHEDULE
2.1(f), including, without limitation, the right to use the names "National
MRO," "DataMed" and "DataMed International" following the Closing;
(g) BUSINESS CONTRACTS. All of Seller's rights and interests
under those Contracts specifically listed in SCHEDULE 2.1(g) (all such
Contracts collectively, the "BUSINESS CONTRACTS"), including in particular
and without limitation, the Leases;
(h) LEASEHOLD IMPROVEMENTS. All of Seller's rights and
interests in any and all additions for improvements made to the Premises
and included in the Office Lease to which Buyer is a party (the "LEASEHOLD
IMPROVEMENTS");
(i) CUSTOMER LIST. All of Seller's rights and interests in the
list of customers or clients of the Business, as set forth on SCHEDULE
2.1(I);
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(j) BOOKS AND RECORDS. Subject to applicable laws, all of
Seller's interests in all business and financial books of account and
records, personnel records of Employees, and all other records, information
and data in whatever form recorded or preserved, whether on computer tapes
or disk, which are necessary for or related to the prior or to the
continuing operation of the Business from and after the Closing Date (all
such items, the "RECORDS");
(k) TELEPHONE NUMBERS AND INTERNET ADDRESSES. All rights to the
telephone numbers and internet addresses used by the Business as set forth
on SCHEDULE 2.1(k);
(l) NET WORKING CAPITAL. The net working capital of the
Business reconciled as of June 30, 1997, in accordance with SCHEDULE 3.3;
and
(m) GOODWILL. All of Seller's goodwill in the Business
(notwithstanding the absence of any entry on the June 30, 1997 Financial
Statements for goodwill).
2.2 EXCLUDED ASSETS. The following assets of Seller shall not be
included in the Assets and shall not be purchased and sold under this
Agreement:
(a) CONTRACTS. All of Seller's rights and interests in
contracts other than the Business Contracts;
(b) TELEPHONE NUMBERS AND INTERNET ADDRESSES. All of Seller's
rights and interests in the telephone numbers and internet addresses set
forth on SCHEDULE 2.2(b); and
(c) COPYRIGHTS AND TRADENAMES. All Copyrights and Tradenames of
Seller and all variations and derivatives thereof not set forth on SCHEDULE
2.1(f), including, without limitation, the right to use the name "Global
Med" and the globe trademark.
2.3 CERTAIN COVENANTS OF SELLER PURCHASED BY BUYER. In consideration
of the sale of the Assets by Seller and the purchase of the Assets by
Buyer, and as a condition to the consummation of the transaction
contemplated by this Agreement, Seller agrees to the following additional
covenants:
(a) OPERATION OF THE BUSINESS. From the date hereof to the
Closing, and subject to Seller's obligations under the Management
Agreement, Seller agrees to operate Seller's Business only in accordance
with Section 5.1 of this Agreement;
(b) TENANT IMPROVEMENTS. Seller agrees to assume responsibility
for and to pay and discharge all expenses relating to the construction of
tenant improvements necessary to divide the Premises between Seller and
Buyer in accordance with the floor plan attached hereto as EXHIBIT D, with
the sole exception of those expenses incurred in the construction of those
tenant improvements specifically identified on SCHEDULE 2.3(b), which shall
be the responsibility of Buyer; and
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(c) OTHER RESTRICTIONS. Seller agrees to the post-closing
covenants set forth in Article IX hereof.
2.4 ASSUMED OBLIGATIONS. On the Closing Date and as of June 30,
1997, Buyer shall assume and agree to pay, perform and discharge only the
following obligations (the "ASSUMED OBLIGATIONS"), but only to the extent
that the Assumed Obligations have not previously been paid, performed or
discharged:
(a) BUSINESS CONTRACTS. Buyer agrees to pay, perform and
discharge the executory obligations of Seller arising after June 30, 1997,
under the Business Contracts;
(b) ACCOUNTS PAYABLE. Buyer agrees to pay, perform and
discharge Seller's Accounts Payable as recorded on the June 30, 1997,
Financial Statements of the Business, and in the categorical amounts up to
but not exceeding the categorical limits set forth on SCHEDULE 2.4(b) (not
to include any intercompany payables);
(c) ACCRUED ACCOUNTS PAYABLE. Subject to Sections 2.5 and 2.6
below, Buyer agrees to pay in cash, perform and discharge in an amount not
to exceed One Hundred Twenty-Seven Thousand Forty-Three and 58/100 Dollars
($127,043.58) in the aggregate, Seller's accrued accounts payable as
recorded on the June 30, 1997, Financial Statements of the Business and as
set forth on SCHEDULE 2.4(c) (not to include any intercompany payables),
and Seller agrees that Buyer shall be entitled to carry on Buyer's books of
account and records the entire amount ($568,488.00) of such accrued
accounts payable, and Buyer agrees, upon reasonable request by Seller, to
provide Seller with written documentation of Buyer's compliance with its
obligations under this Section 2.4(c);
(d) ACCRUED EXPENSES. Buyer agrees to pay, perform and
discharge Seller's accrued expenses as recorded on the June 30, 1997,
Financial Statements of the Business, and in the categorical amounts up to
but not exceeding the categorical limits set forth on SCHEDULE 2.4(d) (not
to include any intercompany payables); and
(e) LEASES. Buyer agrees to pay, perform and discharge the
executory obligations of Seller arising after June 30, 1997 under the
Leases as set forth on SCHEDULE 2.4(d).
2.5 SPECIFIC EXCLUDED LIABILITIES. Buyer shall not be obligated to
pay, perform, or discharge any obligations of Seller other than the Assumed
Obligations. Without limiting the generality of the foregoing, and except
as expressly included in the Assumed Obligations, Seller shall remain
liable for all of its outstanding liabilities, whether known or unknown,
accrued or unaccrued, including but not limited to: (i) any continuing
obligations it may have for compensation, benefits or taxes or other
employment-related expenses for personnel employed by or under contract
with Seller prior to the Closing, or any such obligations that may arise by
reason of or with respect to the termination of any such personnel, except
as otherwise provided in the Management Agreement; (ii) any liabilities
arising out of or
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relating to Taxes, to the Shareholders, product liability, or the errors or
omissions of Seller, or its Agents; (iii) any intercompany transfers,
costs, payables or any other intercompany obligation(s); (iv) any severance
payment due from Seller to Bart Valdez; (v) Seller's accounts payable in
excess of the categorical limits set forth on SCHEDULE 2.4(b); (vi)
Seller's accrued accounts payable of the Business in excess of One Hundred
Twenty-Seven Thousand Forty-Three and 58/100 Dollars ($127,043.58); and
any other liabilities set forth on SCHEDULE 2.5.
2.6 SELLER'S ACCRUED ACCOUNTS PAYABLE. Within five (5) business days
of receipt by Seller of an invoice from Buyer, Seller agrees to pay to
Buyer an amount or amount(s) equal to all of Seller's accrued accounts
payable of the Business (as set forth on Schedule 2.4(c)) that: (i) have
been paid in cash by Buyer during the period beginning on July 1, 1997 and
ending on March 31, 1998, and are in excess of One Hundred Twenty-Seven
Thousand Forty-three and 58/100 Dollars ($127,043.58) in the aggregate; and
(ii) have received the prior written approval of Bart Valdez. Seller and
Buyer agree that Bart Valdez shall have the exclusive, complete and final
right to determine which accrued accounts payable of the Business are
included within the foregoing category of accrued accounts payable to be
reimbursed by Seller. Buyer agrees, upon reasonable request by Seller, to
provide Seller with written documentation of Buyer's compliance with its
obligations under Section 2.4(c). Seller agrees, upon reasonable request
by Buyer, to provide Buyer with written documentation of Seller's
compliance with its obligations under this Section 2.6.
ARTICLE III
PURCHASE PRICE; PAYMENT TERMS
-----------------------------
3.1 PURCHASE PRICE. The aggregate purchase price for the Assets (the
"PURCHASE PRICE") shall be the sum of One Million Two Hundred Thousand
Dollars ($1,200,000.00).
3.2 ESCROW DEPOSIT. Pursuant to the Escrow Agreement, Buyer has
deposited with the Escrow Agent Six Hundred Thousand Dollars ($600,000.00)
(the "DEPOSIT"). Notwithstanding any other provision of this Agreement or
breach hereof by either Party, in the event the Closing has not been
accomplished before October 31, 1997, or such other date as the Parties may
establish by amendment of this Agreement, the Parties agree that Buyer then
shall have the option, exercisable in Buyer's sole and complete discretion,
to terminate this Agreement in accordance with Section 8.3(d), with the
effect as set forth in Section 8.4(a).
3.3 PAYMENT AND DELIVERY ON CLOSING DATE. Buyer and Seller agree
that on the Closing Date:
(a) Buyer shall instruct the Escrow Agent to transfer the
Deposit to Seller; and
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(b) Buyer shall pay to Seller the amount of Six Hundred Thousand
Dollars ($600,000.00), by wire transfer of immediately available funds to
the Seller's account at a bank specified by Seller prior to the Closing
Date; and
(c) Net working capital of the Business shall be reconciled as
of June 30, 1997, and paid to Buyer in accordance with SCHEDULE 3.3.
3.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price payable by
Buyer for the Assets shall be allocated as set forth in SCHEDULE 3.4. The
allocation set forth in SCHEDULE 3.4 is in accordance with Paragraph 1060
of the Code, and Buyer and Seller agree to file an IRS Form 8594 with
respect to the transactions contemplated hereby on the basis of such
allocation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to Buyer as follows:
(a) ORGANIZATION AND STANDING. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Colorado, and has no Affiliate organization except as otherwise
set forth on SCHEDULE 4.1(a).
(b) CORPORATE AUTHORITY. Seller has corporate power and
corporate authority to own and lease the Assets and its other properties as
the Assets and such properties are now owned and leased by Seller, to
conduct the Business and its businesses as and where such businesses have
been and are now being conducted, and to enter into and deliver this
Agreement and perform the transactions contemplated herein.
(c) BINDING EFFECT. This Agreement when executed and delivered
will constitute Seller's legal, valid and binding obligation enforceable in
accordance with its terms, except to the extent that the enforceability
against Seller of this Agreement in accordance with its terms may be
limited in accordance with principles of equity or applicable insolvency,
bankruptcy or other similar laws affecting creditors' rights generally.
(d) APPROVALS; CONSENTS. All approvals, resolutions,
authorizations, consents, actions or orders required of Seller for the
authorization, execution and delivery of, and for the consummation of the
transactions contemplated by, this Agreement, have been obtained or will be
obtained prior to the Closing, except solely for the approval of the
Shareholders as required by Section 6.1(c) and Section 6.2(c) of this
Agreement.
(e) NO VIOLATION. Except as disclosed on SCHEDULE 4.1(e) to
this Agreement, the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement, and the
fulfillment of and compliance with the
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terms and provisions hereof do not conflict with or violate any judicial
or administrative order, award, judgment or decree applicable to Seller,
conflict with any of the terms, conditions or provisions of Seller's
Articles of Incorporation or Bylaws or other organizational documents or
any Contract, or require any approval, consent or authorization which has
not been obtained from any federal, state or local court, or any creditor
of Seller or any other person or entity, or give any party with rights
under any Contract, judgment, award, or order, the right to terminate,
modify or otherwise change the rights or obligations of Seller thereunder.
(f) COMPLIANCE WITH LAWS. Seller has complied, and is in
material compliance with, all material laws, regulations, rules and orders
affecting its operations, except as noted on SCHEDULE 4.1(f).
(g) FINANCIAL STATEMENTS. Seller has furnished Buyer with its
Financial Statements for the Business for the last three (3) fiscal years,
and for the six months ended June 30, 1997. Such Financial Statements are
kept on an accrual basis, have not been audited, reviewed, or otherwise
verified by an independent third party, and are derived from the original
books of accounts and records of Seller, and except for the June 30, 1997
Financial Statements, form part of the audited consolidated financial
statements of Seller. Except for certain items related to intercompany
transfers and intercompany costs, all such Financial Statements, audited or
unaudited, are complete and correct in all material respects, and present
fairly the results of operations of the Business for the respective periods
covered, and the balance sheets present fairly the financial condition of
the Business as of their respective dates. There has been no material,
adverse change in the properties or condition (financial or otherwise) of
the Business other than as reflected in the June 30, 1997 Financial
Statements furnished hereunder or in SCHEDULE 4.1(g). There are no
contingent liabilities which, if determined adversely, would have a
material adverse effect on the Business other than those accrued for in the
Financial Statements furnished hereunder or in SCHEDULE 4.1(g).
(h) TITLE TO ASSETS. Seller has good, valid and marketable
title, as owner or lessee, to all of the Assets. All of the Assets are
free and clear of Liens and are not subject to any options to purchase or
limitations of any nature whatsoever, except as listed in SCHEDULE 4.1(h).
Subject to Seller's usual capitalization policy applied consistently with
Seller's past practices in the conduct of the Business in the ordinary
course, all assets of Seller, whether real, personal, mixed, tangible or
intangible, except for the Excluded Assets as defined in Section 2.2 below,
owned, leased or used by Seller in the operation of its Business as of June
30, 1997, are reflected in the June 30, 1997 Financial Statements of the
Business delivered to Buyer pursuant to Section 4.1(g).
(i) CONDITION OF PREMISES. No condemnation action has been
taken or threatened with respect to the Premises or any part thereof, nor
has any of the Premises been the subject of any assessments for work or
improvements either completed or to be completed, and Seller has no
knowledge or belief that there is any pending or contemplated
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condemnation or assessment or other specified tax or assessment relating to
any of the Premises.
(j) CONTRACTS. SCHEDULE 2.1(g) is a complete and accurate list
of all Contracts, whether written or oral, that relate to or may affect the
Business, the Assets or the operation of any thereof, other than any
Contract that in the aggregate involves an annual expenditure of less than
Five Thousand Dollars ($5,000.00), or annual revenues of less than Ten
Thousand Dollars ($10,000.00), and can be terminated on thirty (30) days'
notice. Seller has made available to Buyer complete and accurate copies of
such Contracts. To Seller's knowledge, Seller is not in default under any
Contract nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute a default by Seller under any
Contract.
(k) TAXES.
(i) Seller has filed or caused to be filed all annual
reports and returns which are required to be filed relating to the
Business, and has paid all Taxes shown to be due and payable on said annual
reports and returns or on any assessments made against it, except for
returns which have been appropriately extended, and, to the best knowledge
of Seller, Seller has paid all other Taxes, fees or other charges imposed
on it relating to the Business by any government authority, agency or
instrumentality which have become due and payable (other than those
contested by Seller in good faith through appropriate proceedings and with
respect to which reserves in conformity with generally accepted accounting
principles have been provided on the books of Seller) and no tax liens have
been filed.
(ii) Seller through its payroll services vendor, ADP, has
withheld proper and accurate amounts from its Employees in full and
complete compliance with the tax withholding provisions of the Code and
other applicable federal, foreign, state or local laws, and has filed
proper and accurate federal, foreign, state and local returns and reports
for all years and periods (and portions thereof) for which any such returns
and reports were due with respect to Employee income tax, withholding
taxes, social security taxes and unemployment taxes.
(l) LITIGATION. To Seller's knowledge, there are no
investigations, actions, lawsuits, claims, arbitrations or proceedings,
either judicial, administrative or otherwise, pending or to the knowledge
of Seller, threatened against or affecting the Assets or the operation of
the Business, by or before any court, governmental department, commission,
board, bureau, agency, mediator, arbitrator or other person or
instrumentality.
(m) NO MISLEADING STATEMENTS. Nothing herein contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If any
change of the information contained in any Exhibit or Schedule shall change
between the date of this Agreement and the Closing, Seller shall promptly
notify
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Buyer of such changes, in accordance with Section 11.3 hereof and the
Exhibit or Schedule shall be amended accordingly.
(n) OPERATIONS OF THE BUSINESS. From the date of execution of
the Letter of Intent through the date of execution of the Management
Agreement, Seller has operated the Business only in the usual, regular and
ordinary course and manner consistent with past practices, and has not
entered into agreements or transactions with any Person, including any
Affiliate (except for Buyer), or incurred obligations which would or could
reasonably be expected to have a material, adverse impact on the
operations, financial status or condition, or prospects of the Business.
From the date of execution of the Management Agreement, Seller has
operated, and will continue through the Closing Date to operate, the
Business in accordance with and subject to the Management Agreement and in
accordance with and subject to Section 5.1 hereof.
(o) HAZARDOUS MATERIALS. Hazardous Materials for purposes of
this Agreement shall mean all substances which are hazardous or toxic or
which are otherwise regulated under any federal, state or local laws,
rules, regulations or ordinances governing the existence, clean-up or
remedial contaminated property, the protection of the environment from
soil, air or water pollution or the generation, handling or disposal of
hazardous substances. The Premises upon which the Business is conducted
are free from any and all Hazardous Materials, other than those used,
handled, generated, manufactured, stored, treated, transported or disposed
of in compliance with all applicable safety laws and environmental laws as
in force and effect on the date hereof. Neither Seller nor any third party
have used, handled, generated, manufactured, treated, stored, emitted,
released, threatened release, discharged, transported or disposed of any
Hazardous Materials on, under, above, about or from the Premises except in
compliance with all applicable safety and environmental laws as in force
and effect on the date thereof.
(p) ACCOUNTS RECEIVABLE. SCHEDULE 2.1(d) is a complete and
accurate list of all Accounts Receivable of the Business as of June 30,
1997, which Accounts Receivable are reflected on the June 30, 1997,
Financial Statements delivered to Buyer pursuant to Section 4.1(g), and
which represent sales actually made in the ordinary course of Seller's
Business. Seller has delivered to Buyer a complete and accurate aging list
of all Accounts Receivable of the Business.
(q) COLLECTION OF ACCOUNTS RECEIVABLE. From the date of
execution of the Letter of Intent through the date of execution of the
Management Agreement, Seller has diligently collected its Accounts
Receivable in the usual, regular and ordinary course and manner consistent
with past practices, and deposited such Accounts Receivable into existing
Deposit Accounts, as identified in paragraph 4.1(s) below, and has not
entered into agreements or transactions or incurred obligations which would
or could reasonably be expected to have a material, adverse impact on the
collection of the Accounts Receivable of the Business, from and after the
date of execution of the Management Agreement.
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(r) ACCRUED ACCOUNTS RECEIVABLE (UN-BILLED REVENUE). SCHEDULE
2.1(e) is a complete and accurate list of all of Seller's rights to payment
for services rendered or goods sold in connection with Seller's operation
of the Business prior to June 30, 1997, which have not been billed as of
June 30, 1997.
(s) ACCOUNTS PAYABLE. SCHEDULE 2.4(b) is a complete and
accurate list of all Accounts Payable of the Business as of June 30, 1997,
which Accounts Payable are reflected on the June 30, 1997, Financial
Statements delivered to Buyer pursuant to Section 4.1(g), and which
represent payment obligations actually incurred in the ordinary course of
Seller's Business.
(t) ACCRUED ACCOUNTS PAYABLE. SCHEDULE 2.4(c) is a complete and
accurate list of all of Seller's accrued accounts payable that are recorded
on the June 30, 1997, Financial Statements of the Business, and which
represent payment obligations actually incurred in the ordinary course of
Seller's Business.
(u) ACCRUED EXPENSES. SCHEDULE 2.4(d) is a complete and
accurate list of all of Seller's accrued expenses that are recorded on the
June 30, 1997, Financial Statements of the Business, and which represent
payment obligations actually incurred in the ordinary course of Seller's
Business.
(v) LEASES. SCHEDULE 2.4(e) is a complete and accurate list of
all Seller's Leases (including both capital and operating leases), and
which represent obligations actually incurred in the ordinary course of
Seller's Business.
(w) ACCRUED PAYROLL. SCHEDULE 2.4(d) is a complete and accurate
list of Seller's accrued payroll for its Employees of the Business as of
June 30, 1997, which payroll is reflected on the June 30, 1997, Financial
Statements delivered to Buyer pursuant to Section 4.1(g), and which
represent payment obligations actually incurred in the ordinary course of
Seller's Business.
(x) ACCRUED PAID TIME OFF. SCHEDULE 2.4(d) is a complete and
accurate list of Seller's accrued paid time off for its Employees of the
Business as of June 30, 1997, which paid time off is reflected on the June
30, 1997, Financial Statements delivered to Buyer pursuant to Section
4.1(g), and which represent payment obligations actually incurred in the
ordinary course of Seller's Business.
(y) SALES COMMISSIONS. SCHEDULE 2.4(d) is a complete and
accurate list of all sales commissions of the Business as of June 30, 1997,
which sales commissions are reflected on the June 30, 1997, Financial
Statements delivered to Buyer pursuant to Section 4.1(g), and which
represent payment obligations actually incurred in the ordinary course of
Seller's Business;
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(z) ACCRUED INTEREST. SCHEDULE 2.4(d) is a complete and
accurate list of all accrued interest obligations of the Business as of
June 30, 1997, which obligations are reflected on the June 30, 1997,
Financial Statements delivered to Buyer pursuant to Section 4.1(g), and
which represent payment obligations actually incurred in the ordinary
course of Seller's Business;
(aa) DEPOSIT ACCOUNTS. Attached hereto as SCHEDULE 4.1(aa) (the
"DEPOSIT ACCOUNTS") is a complete and accurate list of each bank, trust
company, savings institution, brokerage firm, mutual fund or other
financial institution with which Seller has an account or safe deposit box
for the Business, and the account numbers and the June 30, 1997, account
balances, the names and identification of all Persons authorized to draw
thereon or to have access thereto, and the names of each Person holding
powers of attorney or agency authority from Seller and a summary of the
terms thereof.
(bb) LEASES. Seller has good and marketable title to all of the
rights and interests in, to, and under the Leases free and clear of all
encumbrances, but subject to the terms of such Leases. Each Lease held by
Seller is a legal, valid and binding agreement of Seller and all other
parties thereto in force and effect on the date hereof in accordance with
its terms. Seller has fulfilled all material obligations required pursuant
to each Lease to have been performed prior to the date hereof. Seller
warrants and guarantees that there has not occurred any default under any
such Lease on the part of Seller or any other party thereto, nor has any
event occurred which with the giving of notice or the lapse of time (or
both) would constitute a default thereunder or would cause the acceleration
of any obligation of Seller thereunder, or the creation of any encumbrance
upon any of the Assets transferred hereunder.
(cc) EMPLOYEES. Attached hereto as SCHEDULE 4.1(ac) is a
complete and accurate list of names, positions, including whether full-time
or part-time, and current annual salary or wage rates and bonus and other
compensation or severance arrangements of all full-time and part-time
Employees. To the best of Seller's knowledge there is no pending or
threatened Employee strike, work stoppage or labor dispute, and no union
representation question exists or is being negotiated, no union organizing
activities by or with respect to any Employees are taking place, and none
of the Employees is represented by any labor union or organization. Seller
is in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, and the payment of wages and working hours. Except as set
forth in Schedule 4.1(ac), there are no pending, and to the best of
Seller's knowledge, threatened wage and hour claims, EEOC claims,
unemployment compensation claims, workers compensation claims or any
similar claim against Seller by Employees.
(dd) EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 4.1(ad)
is a complete and accurate list of all employee benefit policies and plans
that are or have been sponsored, maintained for the benefit of or
contributed to by Employees at any time within the past two (2) years prior
to the Closing Date ("Employee Benefit Plans"), including,
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without limitation, (i) each employee benefit plan as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (ii) each policy, plan or arrangement relating to stock
options, profit sharing, bonus or incentive awards or compensation,
vacation, sick time or disability leave, deferred or supplemental
compensation, and (iii) each other plan, agreement, arrangement, program,
practice or policy providing for the recognition or payment by Seller of
any employee benefits. Seller has made available to Buyer complete and
accurate copies of all such Employee Benefit Plans. Seller has
established, maintained, and administered all Employee Benefit Plans in
compliance with applicable laws and Employee Benefit Plan terms and
conditions, and all obligations, whether arising by operation of law or by
contract, required to be performed in connection with the Employee Benefit
Plans have been performed in all material respects, nor has any event
occurred which, with notice or the passage of time, or both, would
constitute a breach of fiduciary duty or a default by Seller under any
Employee Benefit Plan.
(ee) NO AGENT OR BROKERS. No agent, broker, or other firm or
person is or will be entitled to any broker or finder's fee, or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement made by or on behalf of Seller.
(ff) INTERCOMPANY OBLIGATIONS. Attached hereto as SCHEDULE
4.1(af) is a complete and accurate list of all intercompany obligations or
outstanding liabilities of the Business to Seller, and the consummation of
the transactions contemplated by this Agreement will not (either alone, or
upon the occurrence of any act or event, or with the lapse of time, or
both) result in any payment arising or becoming due from the Business to
Seller, or any successor or assign of Seller.
(gg) FOREIGN PERSON. Seller is not a "foreign person" as that
term is defined in Paragraph 6038A(c)(3) of the Code.
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to Seller as follows:
(a) ORGANIZATION AND STANDING. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Michigan.
(b) CORPORATE AUTHORITY. Buyer has corporate power and
corporate authority to own and lease the Assets and its other properties as
the Assets and such properties are now owned and leased by Buyer, to
conduct its businesses as and where such businesses have been and are now
being conducted, and to enter into and deliver this Agreement and perform
the transactions contemplated herein.
(c) BINDING EFFECT. This Agreement when executed and delivered
will constitute Buyer's legal, valid and binding obligation enforceable in
accordance with its terms, except to the extent that the enforceability
against Buyer of this Agreement in
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accordance with its terms may be limited in accordance with principles of
equity or applicable insolvency, bankruptcy or other similar laws affecting
creditors' rights generally.
(d) APPROVALS; CONSENTS. All approvals, resolutions,
authorizations, consents, actions or orders required of Buyer for the
authorization, execution and delivery of, and for the consummation of the
transactions contemplated by, this Agreement, have been obtained or will be
obtained prior to the Closing.
(e) NO AGENT OR BROKERS. No agent, broker, or other firm or
person is or will be entitled to any broker or finder's fee, or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement made by or on behalf of Buyer.
4.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of each Party contained in this Article IV shall be true,
accurate and complete as of the date of the execution of this Agreement,
and shall continue to be true, accurate and complete as of the Closing.
The respective obligations of the Parties for the truth, accuracy and
completeness of the representations and warranties made by each Party
pursuant to this Article IV, shall survive the Closing.
ARTICLE V
COVENANTS OF THE PARTIES
------------------------
5.1 COVENANTS OF SELLER. Seller agrees that from the date of
execution of this Agreement until the Closing:
(a) OPERATION OF THE BUSINESS. Seller shall operate the
Business subject to and in accordance with the Management Agreement, and
shall preserve intact the present business organization and relationships
(except as otherwise contemplated herein and in the Management Agreement),
and avoid any action which could have a material adverse effect on the
present goodwill, intangible assets and advantageous relationships of the
Business.
(b) MAINTENANCE OF CONTRACTS, COPYRIGHTS, PERMITS, ETC. Seller
shall preserve and maintain in force in the ordinary course of business
without change (except as otherwise contemplated herein and in the
Management Agreement) all Contracts, Copyrights and Tradenames, licenses,
registrations, franchises and other similar rights which it owns or of
which it is the beneficiary.
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(c) PROSCRIBED ACTIVITIES. Except with Buyer's express prior
written approval which Buyer may withhold in the exercise of its sole and
absolute discretion, Seller shall not, directly or indirectly, whether
through the act itself or through any agreement entered into or to be
entered into to perform an act, do any of the following:
(i) solicit or enter into any discussions or negotiations
with any Person regarding the sale or other disposition of all or any of
the Assets, or furnish any information to any prospective buyer or
acquiring party of all or any material part of the Assets;
(ii) subject any of the Assets to any Lien other than those
listed in SCHEDULE 4.1(h);
(iii) incur any obligation (contingent or fixed) to
transfer or convey, including by means of an option to purchase or acquire,
or transfer or convey, any material Asset of the Business, or enter into
any other transaction or make or enter into any other contract or
commitment affecting the Business, except with the prior written consent of
Buyer in accordance with the Management Agreement;
(iv) grant any general or uniform increase in the rates of
pay or benefits to officers, directors or Employees (or a class thereof) or
pay any special bonus to any person (with the sole exception of bonuses in
the form of stock, or stock options, of Seller), or enter into any new
employment, collective bargaining or severance agreement;
(v) make, guarantee, assume or otherwise cause the Business
to become liable for any borrowing or increase any existing indebtedness
except with the prior written consent of Buyer;
(vi) discharge or satisfy any Lien or pay any debt,
obligation or liability of the Business, except with the prior written
consent of Buyer; or
(vii) engage in or enter into any material transaction
of any nature relating to the Business and not expressly provided for
herein, except with the prior written consent of Buyer.
(d) INSURANCE. Subject to Seller's reimbursement rights under
the Management Agreement, Seller shall maintain in force all property,
casualty, liability, directors and officers and other forms of insurance
which it is presently carrying with respect to the Business, and no
cancellation or reduction of such insurance coverage shall be effected by
Seller.
(e) BOOKS AND RECORDS; COMPLIANCE WITH LAWS. Seller shall
maintain its books of account and records relating to the Business in the
usual, regular and ordinary manner, and on a basis consistent with prior
years, and shall comply in all material respects with all laws applicable
to it or to the conduct of its Business.
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(f) NO ORGANIC CHANGE. Subject to Seller's obligations under
the Management Agreement, and except as contemplated by this Agreement or
disclosed in SCHEDULE 5.1(f), Seller shall not change the character of the
Business or take any other action if any such action would or could
reasonably be expected to have a material, adverse impact on the
properties, financial status or condition, operations, or prospects of the
Business.
(g) CONSENT AND APPROVALS. Seller shall use reasonable efforts
to obtain all necessary consents and approvals of other Persons to the
transactions contemplated by this Agreement.
(h) CORPORATE NAME. On or prior to the Closing Date, Seller
shall take all action necessary and file all documents or instruments
necessary with any governmental entity or other Person to abandon its use
of the names "National MRO," "DataMed," "DataMed International," and all
other names used by Seller to identify the Business (except as provided in
Section 2.2(c)). Seller agrees not to adopt any new name that conflicts
with or otherwise interferes with Buyer's ability to use the current names
of the Business after the Closing.
(i) DEPRECIATION OF CAPITAL ASSETS. Prior to the Closing Date,
Seller shall fully depreciate all purchased capital assets of the Business
on its books of account and records for purposes of federal income tax,
unless Seller receives a written position prepared in good faith in the
ordinary course of business by Ernst & Young as its auditor, that Seller is
not lawfully permitted to take such depreciation.
(j) COOPERATION. During the period prior to Closing, and for a
reasonable period of time after Closing, Seller will cooperate with Buyer
in every reasonable way in carrying out the transition of the ownership of
the Business and the other transactions contemplated herein, in obtaining
any and all required approvals and authorizations, any and all required
consents of third parties, and in preparation of the various schedules
required to be produced on the Closing Date pursuant to Article VII hereof,
and in executing and delivering all documents, instruments or copies
thereof deemed necessary or useful by Buyer.
5.2 SELLER'S EMPLOYEES, EMPLOYEE BENEFITS. Buyer and Seller agree
that Buyer has not assumed and shall not assume any obligation to employ
any particular person or persons previously or currently employed by
Seller. On or before the Closing Date and effective as of the Effective
Time, Seller shall terminate the employment of any and all Employees.
Except as otherwise provided by the Management Agreement, Seller shall be
fully responsible for all claims of such Employees including, but not
limited to, claims related to salary or compensation, severance pay, sick
or vacation leave, disability benefits, pension benefits, retirement
benefits, or benefits in connection with any other pension or other
profit-sharing plan. Buyer shall not assume or be obligated for any such
claims owed by Seller to such Employees, notwithstanding any employment of
Seller's Employees by Buyer following Closing. Except as otherwise
provided by the Management Agreement, Seller shall indemnify, defend and
hold Buyer harmless against and in respect of any and all Damages that
Buyer may incur or suffer, arising or resulting from Seller's employment of
its Employees, pursuant to the terms and conditions set
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forth in Article X, below, and in particular Section 10.1 thereof. Seller
shall not make any representation to any of Seller's Employees concerning
any future employment with Buyer, except with the prior written
authorization of Buyer.
5.3 ACCESS AND INFORMATION. Buyer may, prior to the Closing and
through its Agents, make, or cause to be made, at Buyer's own expense, such
investigation of the business, properties and personnel of the Business as
Buyer may deem necessary or advisable, and such investigation shall not
affect the representations and warranties to be made by the Seller under
this Agreement. Buyer and its Agents shall have full access to the
Business's books of account and records, and Seller's books of account and
records relating to the operations of the Business and maintained by Seller
during the period from and including June 20, 1997 through and including
the Closing, and Seller will furnish to Buyer and its Agents, at Buyer's
expense, such financial and operating data and other information (or copies
thereof) with respect to the properties, and personnel of the Business as
Buyer shall from time to time reasonably request. Furthermore, Seller will
use reasonable efforts to ensure that the auditors and accountants of
Seller will cooperate with Buyer and its Agents in making available to them
all financial and Tax information requested, including the right to examine
working papers pertaining to audits made and to make copies and extracts
thereof.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the transactions contemplated hereby are subject to the
satisfaction of all of the conditions set out in the remainder of this
Section 6.1. Buyer may waive any or all of these conditions in whole or in
part in writing on or before the Closing; provided, however, that no such
waiver of a condition shall constitute a waiver by Buyer of any of its
other rights or remedies, at law or in equity, if Seller shall be in
default of any of its representations, warranties, or covenants under this
Agreement.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller herein contained shall be true and
correct in all material respects on and as of the Closing, except as
affected by transactions contemplated hereby.
(b) PERFORMANCE OF AGREEMENTS. Seller shall have in all
material respects performed all obligations and complied with all covenants
and conditions contained in this Agreement, in the Escrow Agreement, and in
the Management Agreement, to be performed and complied with by Seller on or
prior to the Closing.
(c) CORPORATE ACTION AND APPROVALS. All necessary corporate
action and approvals on the part of Seller in adopting and approving this
Agreement, and approving the transactions contemplated hereby, shall have
been taken. Without limiting the generality of the foregoing, Seller's
Shareholders shall have met, voted and duly approved in accordance with
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Seller's Articles of Incorporation, Bylaws, and other organizational
instruments, this Agreement and all of the transactions contemplated
hereby.
(d) CONSENTS OF OTHER PERSONS. Except as described in SCHEDULE
6.1(d), to the extent that Seller's assignment of any Contract requires the
consent of a party to such agreement, such consent shall have been obtained
by the Closing, provided, however, that (i) Seller shall not make, as a
condition for the obtaining of any such consent, any agreements or
undertakings not approved by Buyer, and (ii) if such consent cannot be
obtained Buyer shall have the option, exercisable in Buyer's sole and
complete discretion, to require Seller to terminate the applicable
Contract. Without limiting the generality of the foregoing, Seller and
Buyer each shall have obtained the unconditional consent of the Landlord to
an Office Lease for a portion of the Premises, without as a result thereof,
Landlord having a right to demand of Buyer, accelerated payment of rent or
other expenses due under the existing lease for the Premises, any transfer
or other fee, premium or penalty, any increase in the rent, or any other
material change in the terms of the existing lease for the Premises.
(e) OFFICE LEASE. Landlord shall have executed and delivered to
Buyer, an Office Lease, in form and content reasonably acceptable to Buyer
and to the Landlord and substantially in the form attached hereto as
EXHIBIT E and incorporated herein by this reference, pursuant to which
Buyer will lease approximately 9069 square feet of Suite A501, and
approximately 1478 square feet of Suite A130 of the Premises.
(f) COLLATERAL AGREEMENT. Michael I. Ruxin shall have executed
and delivered the Noncompetition Agreement in the form set forth in EXHIBIT
F.
(g) NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the Business, the Assets or other properties or financial
condition of the Business between the date of this Agreement and the
Closing, except to the extent that such material adverse change was caused
by Buyer, or caused by Buyer's assignee under the Management Agreement.
(h) ORGANIZATION OF BUYER. Buyer shall have received a
Certificate of Authority to Transact Business from the Secretary of State
of Colorado, and any other jurisdiction in which Seller maintains
qualification in order to conduct the Business within such jurisdiction.
(i) LITIGATION. No action or proceeding shall have been
instituted or threatened which would enjoin, restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
(j) CHANGES IN LAW. No law or order shall have been enacted,
entered, issued, promulgated or enforced by any governmental entity, at
what otherwise would be the Closing Date, which would not permit the
Business as presently conducted to be continued by Buyer unimpaired
following the Closing Date.
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(k) OPINION OF COUNSEL. Buyer shall receive at the Closing from
Brenman Bromberg & Tenenbaum, P.C., counsel to Seller, an opinion dated as
of the Closing Date, in form and substance reasonably satisfactory to
Buyer, that:
(i) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Colorado;
(ii) Seller has corporate power and corporate authority to
own and lease the Assets as the Assets are now owned and leased by Seller,
to conduct the Business as and where such Business has been and is now
being conducted, and to enter into and deliver this Agreement and perform
the transactions contemplated herein;
(iii) This Agreement when executed and delivered will
constitute Seller's legal, valid and binding obligation enforceable in
accordance with its terms, except to the extent that the enforceability
against Seller of this Agreement in accordance with its terms may be
limited in accordance with principles of equity or applicable insolvency,
bankruptcy or other similar laws affecting creditors' rights generally; and
(iv) All approvals, resolutions, authorizations, consents,
actions or orders required of Seller for the authorization, execution and
delivery of, and for the consummation of the transactions contemplated by,
this Agreement, including, without limitation, the approval of Seller's
Shareholders, have been obtained.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations
of Seller to consummate the transaction contemplated hereby are subject to
the satisfaction of all of the conditions set out in the remainder of this
Section 6.2. Seller may waive any or all of these conditions in whole or
in part in writing on or before the Closing; provided, however, that no
such waiver of a condition shall constitute a waiver by Seller of any of
its other rights or remedies, at law or in equity, if Buyer shall be in
default of any of its representations, warranties, or covenants under this
Agreement.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer herein contained shall be true and
correct in all material respects on and as of the Closing, except as
affected by transactions contemplated hereby.
(b) PERFORMANCE OF AGREEMENTS. Buyer shall have in all material
respects performed all obligations and complied with all covenants and
conditions contained in this Agreement, in the Escrow Agreement, and in the
Management Agreement, to be performed and complied with by Buyer on or
prior to the Closing.
(c) SHAREHOLDER APPROVAL. Seller's Shareholders shall have met,
voted and duly approved in accordance with Seller's Articles of
Incorporation, Bylaws, and other organizational instruments, this Agreement
and all of the transactions contemplated hereby.
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(d) OFFICE LEASE. Landlord shall have executed and delivered to
Seller, an Office Lease, in form and content reasonably acceptable to
Seller and to the Landlord and substantially in the form attached hereto as
EXHIBIT G and incorporated herein by this reference, pursuant to which
Seller will lease approximately 3439 square feet of Suite A500 of the
Premises.
(e) LITIGATION. No action or proceeding shall have been
instituted or threatened which would enjoin, restrain or prohibit the
consummation of the transactions contemplated by this Agreement.
(f) OPINION OF COUNSEL. Seller shall receive at the Closing
from Buyer's counsel, an opinion dated as of the Closing Date, in form and
substance reasonably satisfactory to Seller, that:
(i) Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
incorporation;
(ii) Buyer has corporate power and corporate authority to
purchase the Assets and to enter into and deliver this Agreement and
perform the transactions contemplated herein; and
(iii) This Agreement has been duly authorized by all
necessary corporate action on the part of Buyer, and when executed and
delivered will constitute Buyer's legal, valid and binding obligation
enforceable in accordance with its terms, except to the extent that the
enforceability against Buyer of this Agreement in accordance with its terms
may be limited in accordance with principles of equity or applicable
insolvency, bankruptcy or other similar laws affecting creditors' rights
generally.
ARTICLE VII
CLOSING
-------
7.1 TIME AND PLACE; DELIVERIES. The Closing shall be held on or
before November 17, 1997, or such later date which the Parties may
establish by amendment of this Agreement ("CLOSING DATE"), at a place to be
agreed upon and designated by the Parties. All proceedings to take place
at the Closing shall take place simultaneously, and no delivery shall be
considered to have been made until all such proceedings have been
completed.
7.2 DELIVERIES BY SELLER UPON CLOSING. At the Closing on the Closing
Date, Seller shall deliver to Buyer the following (duly executed where
appropriate):
(a) Possession of the Assets, including, without limitation, all
the items listed in Section 2.1;
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(b) Updated Schedules to be attached hereto, reflecting any
changes as necessary to render the information contained therein true and
accurate and not misleading, as required pursuant to Paragraph 4.1(n),
above;
(c) All consents required for assignment and transfer by Seller
to Buyer of the Contracts;
(d) The documents or instruments necessary to assign Seller's
current Copyrights and Tradenames;
(e) The documents and other instruments referenced in Section
6.1 which Seller is required to execute or obtain and deliver to Buyer;
(f) The opinion of Seller's counsel referenced in Section
6.1(i); and
(g) Such other documents as (A) may be reasonably requested by
Buyer at least three (3) business days prior to the Closing Date to effect
the Closing as herein contemplated or (B) required to effect the Closing as
herein contemplated whether or not requested by Buyer.
7.3 DELIVERIES BY BUYER UPON CLOSING. At the Closing on the Closing
Date, Buyer shall deliver to Seller the following (duly executed where
appropriate):
(a) Immediately available funds in the amount set forth in
Paragraph 3.3;
(b) The opinion of Buyer's counsel referenced in Section 6.2(e);
and
(c) Such other documents as (A) may be reasonably necessary
requested by Seller at least three (3) business days prior to the Closing
Date to effect the Closing as herein contemplated or (B) required to effect
the Closing of as herein contemplated whether or not requested by Seller.
7.4 DELIVERIES BY BOTH BUYER AND SELLER. At the Closing on the
Closing Date, Buyer and Seller each shall execute and deliver an Office
Lease for a portion of the Premises, a Bill of Sale substantially in the
form of agreement attached hereto as EXHIBIT H and incorporated herein by
this reference, and an Assignment and Assumption Agreement substantially in
the form of agreement attached hereto as EXHIBIT I and incorporated herein
by this reference.
ARTICLE VIII
TERMINATION
-----------
8.1 TERMINATION BY THE PARTIES. This Agreement may be terminated at
any time prior to the Closing by mutual written consent of the Parties.
This Agreement also may be terminated by either of the Parties on the
Closing Date upon written notice to the other Party (in accordance
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with Section 11.2 hereof) in the event that all of the conditions precedent
to a Party's obligation to consummate the Closing shall not have been
satisfied on or prior to the Closing Date, in which case Section 8.4 shall
apply.
8.2 TERMINATION BY SELLER. Seller may terminate this Agreement under
the following circumstances:
(a) The commencement of any voluntary proceeding by Buyer under
any reorganization arrangement, readjustment, moratorium law or statute,
including without limitation, the United States Bankruptcy Code or any
successor federal statute, or if any involuntary proceeding under any
reorganization arrangement, readjustment, moratorium law or statute,
including without limitation the United States Bankruptcy Code or any
successor federal statute, is commenced against Buyer, or if Buyer makes,
negotiates or commences negotiations for partial or complete assignment of
its assets for the benefit of creditors, pursuant to statutory or common
law;
(b) Buyer suffers an appointment of a receiver, custodian,
examiner or a trustee for any of its property or assets;
(c) The termination, liquidation or dissolution of Buyer;
(d) In the event that Buyer shall default in the performance of
any material duty or obligation imposed upon it by this Agreement and such
default shall continue for a period of ten (10) days after written notice
thereof has been given to Buyer by Seller; or
(e) In the event that Seller's Shareholders do not approve this
Agreement and the transactions contemplated hereby within the time required
herein, but only if Seller is not then in breach of any material duty or
obligation imposed upon Seller hereunder, and no event has occurred which
with the giving of notice or the passage of time would constitute a breach
by Seller of any material duty or obligation imposed upon Seller hereunder.
8.3 TERMINATION BY BUYER. Buyer may terminate this Agreement under
the following circumstances:
(a) the commencement of any voluntary proceeding by Seller under
any reorganization arrangement, readjustment, moratorium law or statute,
including without limitation, the United States Bankruptcy Code or any
successor federal statute, or if any involuntary proceeding under any
reorganization arrangement, readjustment, moratorium law or statute,
including without limitation the United States Bankruptcy Code or any
successor federal statute, is commenced against Seller; or if Seller makes,
negotiates or commences negotiations for partial or complete assignment of
its assets for the benefit of creditors, pursuant to statutory or common
law;
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(b) Seller suffers an appointment of a receiver, custodian,
examiner or a trustee for any of its property or assets;
(c) the termination, liquidation or dissolution of Seller,
except any such action that causes a third party to expressly assume the
obligations and succeed to the interests of Seller hereunder;
(d) in the event that Seller's Shareholders do not approve this
Agreement and the transactions contemplated hereby within the time required
herein, but only if Buyer is not then in breach of any material duty or
obligation imposed upon Buyer hereunder, and no event has occurred which
with the giving of notice or the passage of time would constitute a breach
by Buyer of any material duty or obligation imposed upon Buyer hereunder;
or
(e) in the event Seller shall default in the performance of any
material duty or obligation imposed upon it by this Agreement and such
default shall continue for a period of ten (10) days after written notice
thereof has been given to Seller.
8.4 EFFECT OF TERMINATION. Except as otherwise provided in Section
3.2 with regard to the Deposit, upon termination of this Agreement, the
following shall apply:
(a) If Buyer terminates this Agreement pursuant to Section 8.3,
or if Seller terminates this Agreement pursuant to Section 8.2(e), then in
addition to any other right or remedies to which Buyer may be entitled
hereunder, or by law, Seller will retain all rights (including rights to
accounts receivable of the Business), and all obligations and liabilities
(including accounts payable) relating to the operation of the Business
prior to the Closing, and Seller will reimburse Buyer for its Expenses, as
defined in Section 6.2 of the Management Agreement;
(b) If Seller terminates this Agreement pursuant to Section 8.2
(except for Section 8.2(e)), then (i) this Agreement and the Management
Agreement will terminate; (ii) Seller will not be obligated to reimburse
Buyer for its Expenses, as defined in Section 6.2 of the Management
Agreement; and (iii) Seller will assume all rights (including rights to
accounts receivable of the Business), and all obligations and liabilities
(including accounts payable) relating to the operation of the Business
after the effective date of the termination;
(c) if Buyer terminates this Agreement following any failure to
satisfy the conditions precedent set forth in Section 6.1 (except for
Section 6.1(d)), then the effect shall be governed by Section 8.4(a) above;
and
(d) if Seller terminates this Agreement following any failure to
satisfy the conditions precedent set forth in Section 6.2, then the effect
also shall be governed by Section 8.4(a) above.
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8.5 EXTENSION; WAIVER. At any time prior to the Closing Date, either
Party may (a) extend the time for the performance of any of the obligations
or other acts of the other Party, (b) waive any inaccuracy in or breach of
the representations and warranties of the other Party contained herein or
in any schedule hereto or in any document delivered pursuant hereto, or (c)
waive the other Party's compliance with any of the covenants, conditions,
or agreements contained herein. Any Agreement on the part of any Party to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed and delivered on behalf of such Party to the
other Party in accordance with Section 11.3 hereof.
ARTICLE IX
POST CLOSING COMMITMENTS AND COVENANTS
--------------------------------------
9.1 NONCOMPETITION. Seller and Buyer acknowledge and agree that (i)
Buyer's entering into this Agreement is induced primarily because of the
covenants and assurances made by Seller hereunder; (ii) the covenant not to
compete and the other restrictive covenants of Seller are necessary to
insure the continuation of the Business as operated nationwide by Buyer
subsequent to the Closing; and (iii) irreparable harm and damage to Buyer
will result if Seller violates the covenant not to compete or any other
restrictive covenant set forth in this Article IX. Therefore, in
consideration of these premises and in order to induce Buyer to consummate
the purchase contemplated by this Agreement, Seller agrees that for a
period of three (3) years following the Closing Date (the "NONCOMPETITION
PERIOD"), Seller will not directly or indirectly, whether as a principal,
on his or its own account, or solely or jointly with others as an agent,
contractor, general partner, limited partner, manager or member of any
corporation, partnership, limited liability company or other entity: (i)
own, manage, operate, control, or participate in the management or control
of, directly or indirectly, any enterprise located within the territorial
United States (the "RESTRICTED TERRITORY"), which is, or as of Seller's
engagement or participation would become, engaged in any business that is
competitive with any aspect of the Business as operated by Buyer; or (ii)
be employed by, provide, or contract to provide, management, consulting, or
administrative services to any enterprise located within the Restricted
Territory which is, or as of Seller's engagement or participation would
become, engaged in any activity or business that is competitive with any
substance abuse testing or third party administration services of the
Business.
9.2 NON-DISCLOSURE OF TRADE SECRETS. During the Noncompetition
Period, Seller will not, without the prior written consent of Buyer, which
consent Buyer may give or withhold in its sole and absolute discretion:
(i) disclose Trade Secrets to any Person not a party to this Agreement;
(ii) permit the use or appropriation of Trade Secrets by any Person not a
party to this Agreement; (c) use or appropriate Trade Secrets for any
purpose other than the performance of its obligations under this Agreement;
or (d) otherwise misuse or misappropriate Trade Secrets.
9.3 COVENANT NOT TO SOLICIT. During the Noncompetition Period,
Seller will not, without the prior written consent of Buyer, which consent
Buyer may give or withhold in its sole and absolute discretion, either
directly or indirectly, either for itself or for any other Person, call
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upon, solicit, invite, entice, divert or take away, or attempt to solicit,
invite, entice, divert or take away, or in any way interfere with, the
relationships existing between Buyer and any of Buyer's employees or
contractors, or any other Person with whom or with which Buyer has a then
existing business relationship.
9.4 MODIFICATION. Although Seller and Buyer consider the
restrictions contained in this Article IX to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that
the time or geographical territory or any other restriction contained in
this Section is an unreasonable or otherwise unenforceable restriction, the
above provisions shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such other extent as
such court may determine or indicate to be reasonable.
9.5 REMEDIES. The parties to this Agreement further acknowledge and
agree that Buyer's remedy at law for a breach or threatened breach of any
of the provisions of this Article IX would be inadequate and, in
recognition of that fact, in the event of a breach or threatened breach by
Seller of the provisions of this Section, Buyer shall be entitled to,
without posting any bond, and Seller agree not to oppose any request for,
equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other
equitable remedy which may be available. Nothing contained herein shall be
construed as prohibiting Buyer from pursuing any other remedies available
to Buyer.
ARTICLE X
INDEMNIFICATION
---------------
10.1 SELLER'S INDEMNIFICATION. Buyer and its Agents shall neither
assume nor be responsible for, and Seller shall indemnify and defend Buyer
and its Agents against and hold Buyer and its Agents harmless from, any
claims of whatsoever kind and nature and any obligations, liabilities,
actions, suits, claims, demands, losses, damages or expenses of whatsoever
kind and nature, including attorneys' fees, which occur at any time in
consequence of or arising out of or in connection with: (i) any conduct by
Seller or its Agents relating to the operation of the Business, or other
action by Seller or its Agents concerning the Assets, prior to and
including the Closing Date; (ii) any unassumed or excluded contracts or
liabilities; (iii) any breach by Seller or its Agents of any representation
or warranty of Seller contained in this Agreement or any of the documents
related hereto; (iv) any misrepresentation or concealment or omission of a
material fact in any other document furnished or required to be furnished
by Seller in connection with this Agreement; and (v) any other material
breach by Seller or its Agents of this Agreement, or of any other document
furnished or required to be furnished by Seller in connection with this
Agreement, including the Management Agreement. Upon request, Seller shall
provide Buyer with written assurances that Seller will defend the same at
its own expense and with counsel of its own selection. If Seller shall
fail to provide such written assurances, or otherwise fails to defend,
Buyer, upon written notice to Seller, shall have the right, but not the
obligation, to undertake the defense of, and to compromise or settle
(exercising reasonable business judgment) the claim or other matter on
behalf, for the account and at the risk of Seller.
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10.2 BUYER'S INDEMNIFICATION. Seller and its Agents shall neither
assume nor be responsible for, and Buyer shall indemnify and defend against
and hold Seller and its Agents harmless from, any claims of whatsoever kind
and nature and any obligations, liabilities, actions, suits, claims,
demands, losses, damages or expenses of whatsoever kind and nature,
including attorneys' fees, in consequence of or arising out of or in
connection with: (i) the conduct of the Business after the Closing Date;
(ii) any Business Contracts or Assumed Obligations after the Closing Date;
(iii) any breach by Buyer or its Agents of any representation or warranty
of Buyer contained in this Agreement; (iv) any misrepresentation or
concealment or omission of a material fact in any other document furnished
or required to be furnished by Buyer in connection with this Agreement, and
(v) any other material breach by Buyer or its Agents of this Agreement, or
of any other document furnished or required to be furnished by Buyer in
connection with this Agreement, including the Management Agreement. Upon
request, Buyer shall provide Seller with written assurances that Buyer will
defend the same at its own expense and with counsel of its own selection.
If Buyer fails to provide such written assurances, or otherwise fails to
defend, Seller shall have the right, but not the obligation, to undertake
the defense of, and to compromise or settle (exercising reasonable business
judgment) the claim or other matter on behalf, for the account and at the
risk of Buyer.
10.3 INDEMNIFICATION FOR TAXES.
(a) From and after the Closing, Seller shall indemnify and save
the Buyer harmless from any and all liabilities for Taxes imposed upon
Seller for any taxable year prior to and including the taxable year in
which the Closing occurs, and for any other Taxes in respect of which
Seller is obligated to prepare returns, provided, however, that Buyer shall
be responsible for payment of all Taxes imposed upon Buyer and relating to
the period of Buyer's ownership and operation of the Business after the
Closing Date.
(b) If any claim for Taxes is asserted by any taxing authority
against Buyer that, if successful, would result in an indemnification
payment pursuant to this Section 10.3, Buyer shall promptly notify Seller
in writing of such claim (a "TAX CLAIM"), and such notice shall include in
reasonable detail the circumstances surrounding such claim. Upon the
posting of a surety bond as described below, Seller shall have the right to
control the handling and disposition of all Tax Claims including, without
limitation, (i) whether or not to contest or settle such Tax Claim at the
outset or at any stage, (ii) whether to pursue or forego any administrative
appeals and proceedings, (iii) if Seller chooses to undertake judicial
action with respect to a Tax Claim, the court or other judicial body before
which the action shall be commenced and (iv) the manner in which any such
contest is to be conducted. The rights of Seller pursuant to the preceding
sentence shall be contingent upon the posting of a surety bond issued by a
company reasonably acceptable to Buyer in an amount equal to the amount of
the Tax Claim, which bond may be exonerated at the request of Buyer in
order to satisfy the Tax Claim. If Seller fails to post the surety bond
described in the preceding sentence within ten (10) days following notice
to Buyer of the Tax Claim, Buyer shall have the right to handle and dispose
of the Tax Claim in such manner as it sees fit.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1 EXPENSES AND TAXES.
(a) Except as otherwise provided in Section 8.4(a), the Parties
hereto shall each bear their own costs and expenses incurred in connection
with the transactions described herein, including, without limitation, the
fees and expenses of their counsel and accountants, and travel, meals and
lodging.
(b) Seller shall be liable and responsible for, and will duly
and timely pay, any transfer tax liability which may arise out of or result
from the transactions contemplated herein (including, without limitation
any tax imposed on the sale of the Assets pursuant to this Agreement).
(c) NOTICE. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have
been given when delivered personally, by nationally recognized overnight
courier, or when deposited in the United States mail, certified, and with
proper postage prepaid, addressed as follows:
SELLER: Global Med Technologies, Inc.
12600 West Colfax, Suite A-500
Lakewood, Colorado 80215
Attention: Michael I. Ruxin, Chief Executive Officer
BUYER: National Medical Review Offices, Inc.
5750 Wilshire Boulevard, Suite 275
Los Angeles, California 90036
Attention: President
If such notice, demand or other communication is served personally, service
shall be conclusively deemed made at the time of such personal service. If
such notice, demand, or other communication is given by mail, service shall
be conclusively deemed given five (5) business days after the deposit
thereof in the United States Mail addressed to the Party to whom such
notice, demand, or other communication is to be given, as hereinabove set
forth. Either Party may change its address for the purpose of receiving
notices, demands, or other communications provided herein by giving a
written notice in the manner stated above to the other Party stating such
change of address.
11.3 TIME. Time is of the essence of this Agreement.
11.4 FURTHER ASSURANCES. Each Party agrees to execute and deliver
such documents and instruments and take any actions desirable or necessary
to otherwise carry out the full intent and purpose of this Agreement.
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11.5 BINDING EFFECT. All the terms, provisions and conditions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the Parties hereto, and their successors and assigns.
11.6 SEVERABILITY OF PROVISIONS. If any provision of this Agreement
or the application thereof to any person or circumstance shall to any
extent be held in any judicial proceeding with appropriate jurisdiction to
be invalid or unenforceable, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those
to which it was held to be invalid or unenforceable, shall not be affected
thereby, and shall be valid and be enforceable to the fullest extent
permitted by law, but only if and to the extent such enforcement would not
materially and adversely frustrate any Party's essential objectives as
reflected in this Agreement.
11.7 CAPTIONS. The captions in this Agreement are included for
purposes of convenience only and shall not be considered a part of the
Agreement in construing or interpreting any provision hereof.
11.8 EXHIBITS AND SCHEDULES. All Exhibits, Schedules and Appendices
to this Agreement shall be deemed to be incorporated herein by reference
and made a part hereof as if set out in full herein.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts by the Parties. All counterparts shall be construed together
and shall constitute one agreement. Each counterpart shall be deemed an
original hereof notwithstanding that less than all of the Parties may have
executed it.
11.10 GOVERNING LAW. This Agreement shall be governed by, and shall
be construed and enforced in accordance with, the internal laws of the
State of Colorado without reference to principles of conflicts of laws.
11.11 AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded, or cancelled only by a written instrument signed by each of the
Parties, and any of the terms, provisions, and conditions hereof may be
waived, only by a written instrument signed by the waiving Party. Failure
of a Party at any time or times to require performance of any provision
hereof shall not be considered to be a waiver of any succeeding breach of
such provision by the other Party.
11.12 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto regarding its subject matter and
supersedes all prior agreements, correspondence, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any Party
which has not been embodied in this Agreement or the documents expressly
referred to herein.
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11.13 DISPUTE RESOLUTION. In the event of any controversy, claim or
dispute between any Parties arising out of or relating to this Agreement,
or the making, performance or interpretation of it (the "Dispute"), the
Parties agree to comply diligently and in good faith with the following
procedure in order to resolve the Dispute:
(a) A meeting (the "Initial Meeting") shall promptly be held at
which all Parties are present or represented by individuals with full
decision making authority regarding the Dispute. If within thirty (30)
days following the Initial Meeting the Parties have not succeeded in
negotiating a resolution of the Dispute, the Dispute shall be submitted to
mediation facilitated by a mediator ("Mediator"). Such Mediator shall be
a retired judge or mature practicing attorney. Each Party shall bear its
proportionate share of the costs of the mediation, including the Mediator's
fee. The Parties agree to participate in good faith in the mediation and
negotiations related thereto and in all mediation conferences.
(b) If within a period of thirty (30) days following the final
adjournment of the mediation conference(s), the Parties are unable to
resolve the Dispute, the Dispute shall be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then existing, including, but not limited to, the
Commercial Arbitration Rules relating to selection of arbitrators and the
place of arbitration. Arbitrators will be persons experienced in
negotiating, making, and consummating acquisition agreements. Judgment
upon the arbitration award may be entered in any court having jurisdiction
over the subject matter of the controversy.
11.14 ATTORNEYS' FEES AND COSTS. In the event either party commences
legal action or arbitration to interpret or enforce this Agreement, or for
damages for any alleged breach hereof, the prevailing party in such action
shall be entitled to recover from the nonprevailing party reasonable
attorney's fees and costs as awarded by the court.
11.15 REPRESENTATION BY COUNSEL; INTERPRETATION. Each party to
this Agreement acknowledges that it has been represented by counsel in
connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of law, or any legal decision that would
require interpretation of this Agreement against the party that drafted it
has no application and is expressly waived.
11.16 ASSIGNMENT PROHIBITED. This Agreement may not be assigned,
delegated, or transferred by either Party, by operation of law or
otherwise, except with the prior written consent of the other Party, which
consent shall not be unreasonably withheld, delayed or conditioned.
[signatures continued on next page]
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IN WITNESS WHEREOF, the Parties have caused the execution and
delivery of this Agreement as of the date first above written.
"Buyer" "Seller"
NATIONAL MEDICAL GLOBAL MED TECHNOLOGIES, INC.
REVIEW OFFICES, INC. a Colorado corporation
a Michigan corporation
/s/ MURRAY I. LAPPE /s/ MICHAEL I. RUXIN
- ------------------------------- -----------------------------------
Murray I. Lappe Michael I. Ruxin
President President and Chief Executive Officer
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LIST OF EXHIBITS
EXHIBITS
- --------
EXHIBIT A Letter of Intent
EXHIBIT B Escrow Agreement
EXHIBIT C Management Agreement
EXHIBIT D Floor Plan
EXHIBIT E Office Lease (Buyer)
EXHIBIT F Noncompetition Agreement
EXHIBIT G Office Lease (Seller)
EXHIBIT H Bill of Sale
EXHIBIT I Assignment and Assumption Agreement
<PAGE>
LIST OF SCHEDULES
SCHEDULES
- ---------
2.1(a) Fixtures, Furniture and Equipment
2.1(b) Supplies and Consumables
2.1(c) Prepaid Expenses
2.1(d) Accounts Receivable
2.1(e) Accrued Accounts Receivable (Un-billed Revenue)
2.1(f) Copyrights and Tradenames
2.1(g) Business Contracts
2.1(i) Customer List
2.1(k) Included Telephone Numbers and Internet Addresses
2.2(b) Excluded Telephone Numbers and Internet Addresses
2.3(c) Buyer's Tenant Improvements
2.4(b) Accounts Payable
2.4(c) Accrued Accounts Payable
2.4(d) Accrued Expenses
2.4(e) Leases
2.5 Specific Excluded Liabilities
3.3 Working Capital Reconciliation
3.4 Purchase Price Allocation
4.1(a) Exceptions to Seller's Representations Re: Affiliates
4.1(e) Exceptions to Seller's Representations Re: No Violation
4.1(f) Exceptions to Seller's Representations Re: Compliance with
Laws
4.1(g) Financial Statements
4.1(h) Exceptions to Title
4.1(aa) Deposit Accounts
4.1(ac) Employees
4.1(ad) Employee Benefit Plans
4.1(af) Intercompany Obligations
5.1(f) Organic Changes Re: Seller
6.1(d) Consents Not Obtained
