U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Fiscal Year Ended: December 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Transition Period From To
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COMMISSION FILE NUMBER: 0 - 22083
GLOBAL MED TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)
Colorado 84-1116894
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12600 West Colfax Suite C-420 Lakewood, Colorado 80215
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 238-2000
Securities to be registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
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Class A Common Stock Purchase Warrants
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for at least the past 90
days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $4,787,000
Aggregate market value of voting stock held by non-affiliates as of March 15,
1999: $11,583,816
Shares of Common Stock, $.01 par value, outstanding as of March 15, 1999:
8,881,879
Documents incorporated by reference:
Exhibits to Issuer's Registration Statement on Form SB-2, No. 333-52761.
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TABLE OF CONTENTS
PART I
Item Page
1. Description of Business 3
2. Description of Property 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Common Equity and Related Stockholder Matters 10
6. Management's Discussion and Analysis 11
7. Financial Statements 16
8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure 18
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act 19
10. Executive Compensation 23
11. Security Ownership of Certain Beneficial Owners and Management 31
12. Certain Relationships and Related Transactions 36
PART IV
13. Exhibits and Reports on Form 8-K 37
14. Signatures 38
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Global Med Technologies, Inc. (the Company or Global) was organized under the
laws of the State of Colorado in December 1989. The Company completed its
initial public offering of securities in the first quarter of 1997, from which
it received net proceeds of approximately $8,200,000 from the sale of 1,456,988
Units, each of which consisted of two shares of Common Stock and one Class A
Common Stock Purchase Warrant (the Class A Warrants).
Formerly known as National MRO, Inc., which was founded in 1989, the Company
changed its name to Global Data Technologies, Inc. in 1995, in connection with
the merger of National MRO, Inc. and The Wyndgate Group, Ltd. (Wyndgate) in May
1995. The Company changed its name again in May 1996 to Global Med Technologies,
Inc.
Wyndgate operates as a division of Global, and designs, develops, markets and
supports information management software products for blood banks, hospitals,
centralized transfusion centers and other healthcare related facilities.
The National MRO, Inc. business operated as the DataMed International (DataMed)
division of the Company, and managed and marketed a variety of services that are
designed to assist companies with administering substance abuse testing
programs. Effective December 15, 1997, the Company sold DataMed for gross
proceeds of $1,200,000 and the assumption of certain liabilities and capital
leases (the DataMed Sale).
FINANCING AGREEMENTS - 1999
In March 1999, the Company entered into agreements for a comprehensive financing
package that includes: (1) an $8,000,000 preferred stock private placement
through American Fronteer Financial Corporation (AFFC), a wholly owned
subsidiary of Fronteer Financial Holdings Ltd. (Fronteer Financial); (2)
exercise of 2,000,000 warrants at $0.25 per warrant; (3) extending the balance
on the line of credit with eBanker USA.Com, Inc. (eBanker), formerly Fronteer
Development Finance, Inc., a majority owned subsidiary of Fronteer Financial,
until April 15, 2000, with a change in the default conversion rate from $0.05
per share contained in the original loan agreement to $0.25 per share; and (4) a
$750,000 bridge loan, which bears interest at 12% per annum (March 1999
Financing Agreements).
The Company executed a letter agreement with AFFC for an $8,000,000 convertible
preferred stock private placement. The convertible preferred stock will be
convertible into common stock at $2.50 per share any time after twelve months of
the closing date of the sale of the stock. There will be a forced conversion of
the convertible preferred stock into common stock if the closing bid market
price of the common stock is at $4.00 or more for at least 15 business days. The
convertible preferred stock will carry a 15% coupon paid semi-annually in the
Company's common stock.
Heng Fung Finance Company, Ltd. (Heng Fung Finance) is in the process of
surrendering the promissory note in the amount of $500,000 in exercise of the
warrants to acquire 2,000,000 shares of common stock of the Company. This
transaction is expected to be completed in April 1999.
The remaining $2,650,000 loan from eBanker will be extended until April 15,
2000, with the previous conversion price of $0.05 per share increased to $0.25
per share. In consideration for the extension, the Company paid a 2% fee to AFFC
of $53,000, payable in shares of the Company's common stock.
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The $750,000 bridge loan bears interest at 12% and is convertible 6 months after
the loan is drawn into shares of common stock of the Company at the 15-day
average closing bid price prior to the date of closing. The loan has not yet
been drawn.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000 (April 1999 Financing Agreement). The
agreement provides a line of credit, with interest at 12% per annum payable
monthly, due April 12, 2000. As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in shares of
common stock of the Company. The line of credit will be convertible, at Heng
Fung's option, into shares of the Company's common stock at a price based on the
average closing bid price of the Company's common stock for a period of 15
business days prior to April 13, 1999.
With the above financing packages, the Company and AFFC have mutually agreed to
withdraw the $20,000,000 bond offering, which was previously announced.
FINANCING AGREEMENTS - 1998
On April 14, 1998, Fronteer Capital, Inc. (Fronteer Capital), a wholly owned
subsidiary of Fronteer Financial, and Heng Fung Finance committed to provide to
the Company lines of credit for up to $1,650,000 and $1,500,000, respectively,
for a total combined loan commitment of $3,150,000 over the following twelve
months (April 1998 Financing Agreements). The loans bear interest calculated at
a rate of 12% per annum, and were originally due on April 15, 1999 but have been
extended to April 15, 2000.
Pursuant to the loan commitment provided by Heng Fung Finance, the Company had
agreed that the Company's board of directors would not exceed nine and Heng Fung
Finance had the option to cancel all the Company's then existing management and
employee contracts. Heng Fung Finance has appointed five members to the board of
directors of the Company. Since completion of the April 1998 Financing
Agreements and the appointment of the additional directors by Heng Fung Finance,
new employment contracts, approved by the Board, have been entered into with Dr.
Michael I. Ruxin, Chairman and Chief Executive Officer, and Messrs. Thomas F.
Marcinek, President and Chief Operating Officer, and Alan K. Geddes, Vice
President and Chief Financial Officer.
For issuing the commitment, Heng Fung Finance received warrants to purchase
6,000,000 shares of the Company's common stock. The warrants are exercisable at
$0.25 per share for up to 10 years and the Company registered the Warrants and
the underlying shares for resale under the Securities Act of 1933, as amended
(1933 Act). Using the Black-Scholes model for estimating the fair value of the
warrants to purchase 6,000,000 shares of the Company's common stock, the Company
recorded $5,340,000 as deferred financing costs as of April 14, 1998, to be
amortized straight-line over the term of the loan. For issuing its commitment,
Fronteer Capital received warrants to purchase 1,000,000 shares of the Company's
common stock. When the line of credit was drawn upon in October 1998, Fronteer
Capital received additional warrants to purchase 5,000,000 shares of the
Company's common stock. The warrants are exercisable at $0.25 per share for up
to 10 years and the Company registered the warrants and the underlying shares
for resale under the 1933 Act. Using the Black-Scholes model for estimating the
fair value of the warrants to purchase 1,000,000 shares of the Company's common
stock, the Company recorded $890,000 as deferred financing costs as of April 14,
1998, to be amortized straight-line over the term of the loan. Using the
Black-Scholes model for estimating the fair value of the warrants to purchase
5,000,000 shares of the Company's common stock, the Company recorded an
additional $4,450,000 as deferred financing costs as of October 30, 1998, to be
amortized straight-line over the remaining term of the loan. The Company's
Registration Statement which included the 12,000,000 warrants and the underlying
shares became effective February 16, 1999.
The loan commitment provided by Fronteer Capital has substantially the same
terms and conditions as the loan commitment provided by Heng Fung Finance except
that, if Heng Fung Finance had not appointed directors to the Company's board of
directors, Fronteer Capital had the right to appoint a maximum of three members
to the board of directors of the Company. Dr. Michael I. Ruxin, the Chief
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Executive Officer of the Company, has agreed to personally guarantee the
repayment of $1,650,000 of the Fronteer Capital line of credit. The guarantee is
limited to certain of Dr. Ruxin's assets.
If the Company defaults on the repayment of any amount borrowed by the Company
pursuant to the Heng Fung Finance commitment, all original existing members of
the board of directors of the Company will have to resign and Heng Fung Finance
will have the right to appoint all new members to the board of directors; and
all employment contracts of the management and officers of the Company entered
into prior to the financing agreements will be invalid immediately, and their
employment will be subject to reconfirmation by Heng Fung Finance. Prior to the
Financing Agreements executed in March 1999, Heng Fung Finance had the right to
convert the outstanding amount of the loan into shares of the Company's common
stock at a conversion price of $0.05 per share. The March 1999 Financing
Agreements increased the conversion price to $0.25 per share. If there is no
default on the repayment to Heng Fung Finance, or if there is a default and Heng
Fung Finance does not exercise its rights on default, Fronteer Capital will have
the same rights on default on the repayment of any amounts borrowed pursuant to
the Fronteer Capital commitment as Heng Fung Finance as are specified above.
On September 11, 1998, Fronteer Capital entered into an agreement with eBanker,
whereby Fronteer Capital agreed to assign to eBanker its rights to and
obligations in the loan commitment to the Company. On September 28, 1998, the
Company approved the Assignment, Assumption and Consent Agreement by and between
the Company, Dr. Ruxin, Fronteer Capital and eBanker whereby the Company
consented to the assignment by Fronteer Capital to eBanker of all of the rights,
duties and obligations under the Fronteer Capital line of credit agreement
described above.
In October 1998, the Company, Heng Fung Finance and eBanker entered into a Loan
and Warrant Purchase and Sale Agreement whereby Heng Fung Finance sold, and
eBanker purchased, $1,000,000 of the Heng Fung Finance loan and warrants to
purchase 4,000,000 shares of the Company's common stock. Heng Fung agreed to
return the original notes and its warrant to purchase 6,000,000 shares of the
Company's common stock to the Company, and the Company has issued a $500,000
promissory note and a warrant to purchase 2,000,000 shares of the Company's
common stock to Heng Fung Finance and a $1,000,000 promissory note and a warrant
to purchase 4,000,000 shares of the Company's common stock to eBanker.
As of December 31, 1998, the Company owed $500,000 to Heng Fung Finance and
$2,200,000 to eBanker. On March 19, 1999, the Company drew the remaining
$450,000 available on the line of credit with eBanker thereby owing eBanker a
total of $2,650,000.
The Company agreed to pay a cash finder's fee of 9% of the Fronteer Line of
Credit to AFFC, payable as the eBanker line of credit is drawn. As of December
31, 1998, the Company had paid AFFC $108,000 under the agreement. In March 1999,
in consideration for the extension of the eBanker line of credit for one year,
the Company paid AFFC a fee of 2% or $53,000, payable in share of the Company's
common stock.
Business of Registrant
Principal Products and Their Markets
The Company designs, develops, markets and supports information management
software products for blood banks, hospitals, centralized transfusion centers
and other health care related facilities. Revenues are derived from the
licensing of software, the provision of consulting and other value added support
services and the resale of hardware and software obtained from vendors. On
December 15, 1997, the Company sold its DataMed International division (DataMed)
which was in the business of substance abuse testing management services.
Founded in 1984, Wyndgate initially developed a Student Information System
(SIS), an integrated software package for colleges and universities to track
student information. Pursuant to an agreement with eight California blood
centers (the Royalty Group), Wyndgate began development of a blood tracking
system called SAFETRACE(R) to assist community blood centers, hospitals, plasma
centers and outpatient clinics in the U.S. in complying with the quality and
safety standards of the FDA for the collection and management of blood and blood
products.
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The Company continues to concentrate its development efforts on enhancements to
its existing SAFETRACE(R) blood bank product and on development of SAFETRACE
TX(TM), Wyndgate's transfusion management information system software product
completed in 1998. Both products are approved by the Food and Drug
Administration (FDA) for sale in the United States. Wyndgate's development of
SAFETRACE TX(TM) began in 1996.
Status of SAFETRACE TX
Wyndgate has completed the development of SAFETRACE TX(TM), a transfusion
management information system that is designed to be used by hospitals and
centralized transfusion centers to help insure the quality of blood transfused
into patient-recipients. SAFETRACE TX(TM) provides electronic cross-matching
capabilities to help insure blood compatibility with patient-recipients and will
track, inventory, bill and document all activities with blood products from the
time blood products are received in inventory to the time the blood products are
used or returned to blood centers. Management expects SAFETRACE TX(TM) will
complement SAFETRACE(R) as the combined SAFETRACE TX(TM) and SAFETRACE(R)
software system will be able to integrate hospitals with blood centers and
provide a "vein-to-vein"(TM) tracking of the blood supply. SAFETRACE TX(TM)
entered beta testing on April 6, 1998. Upon completion of beta testing, a 510(k)
submission of SAFETRACE TX(TM) was made to the FDA. SAFETRACE TX(TM) could only
be marketed by the Company outside the United States until FDA 510(k) clearance
was received. FDA clearance was received January 29, 1999.
Competition
Currently, Wyndgate is aware of four primary competitors to its SAFETRACE(R)
software product, including MAK-SYSTEM Corp. from France, Information Data
Management, Inc., Blood Bank Computer Systems, Inc., and Systec Computer
Associates from the United States. There are two primary competitors in the
United States to its SAFETRACE TX(TM) product, MEDIWARE Information Systems,
Inc. and Cerner Corp. Some of these competitors are larger and have greater
resources than the Company. The Company believes it is able to compete on the
basis of the capabilities of the technology currently available in SAFETRACE(R)
and SAFETRACE TX(TM).
Dependence on Major Customers
The Company, through its Wyndgate division, currently has 26 customers
(including the Royalty Group) and intends to continue to target domestic and
international blood centers, plasma centers and hospital donor centers.
During the year ended December 31, 1998, three customers, The Institute for
Transfusion Medicine, Pittsburgh, Pennsylvania, Gulf Coast Regional Blood
Center, Houston, Texas, and Haemonetics Corporation, Braintree, Massachusetts,
each accounted for 19%, 12%, and 12%, respectively, of the Company's total
revenues from continuing operations. Accounts receivable from the above
customers as of December 31, 1998 was approximately $198,000. There were no
accrued revenues from the above customers as of December 31, 1998.
During the year ended December 31, 1997, two customers, Belle Bonfils Memorial
Blood Center, Denver, Colorado and Haemonetics Corporation, Braintree,
Massachusetts, each accounted for approximately 10% and 33% of the Company's
total revenues from continuing operations. Accounts receivable from the above
customers as of December 31, 1998 and 1997 was approximately $150,000 and
$60,000, respectively. Accrued revenues from the above customers were
approximately $160,000 as of December 31, 1997. In order to reduce its credit
risks, the Company generally requires substantial down payments and progress
payments during SAFETRACE(R) implementations.
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In April 1999, the Company entered into a termination agreement with a former
customer who had previously licensed SAFETRACE(R). The agreement resolves all
outstanding contractual issues and will result in payments to the Company during
1999 of approximately $1,019,000.
Royalty Agreements
The Royalty Group. Pursuant to a development agreement between Wyndgate and the
Royalty Group, Wyndgate developed SAFETRACE(R) and must make royalty payments to
the Royalty Group based on a percentage of Wyndgate's SAFETRACE(R) license fees
collected, measured by cash received from SAFETRACE(R) licensees, net of certain
fees and charges. The time period under the royalty schedule is based upon the
first date of SAFETRACE(R) license invoicing, which was September 14, 1995. The
royalty amounts are computed as a percentage of software license fees collected.
Institute For Transfusion Medicine. Pursuant to a Development Agreement
(Development Agreement) dated July 1996, between the Company and The Institute
for Transfusion Medicine (ITxM), the Company agreed to develop and has completed
the development of Commercial Centralized Transfusion System Software
(Commercial CTS Software), which is Wyndgate's SAFETRACE TX(TM) software
product. The Development Agreement provided for a royalty payment to ITxM for
revenues received from the sale of the Commercial CTS Software, net of certain
fees and charges. The royalty period starts with the first commercial transfer
for value of the Commercial CTS Software, which was on March 31, 1999.
The Development Agreement further granted ITxM a non-exclusive, perpetual and
fully-paid license to operate SAFETRACE TX (TM) for internal use, which includes
companies which ITxM controls as defined in the Development Agreement and
companies which ITxM has the ability to cause the direction of management,
whether through ownership of voting securities, by contract or otherwise.
In January 1998, the Company and ITxM agreed (the January 1998 Agreement) that
the Company would not be required to pay monetary penalties, accrued in 1997, in
the approximate amount of $485,000, to ITxM, which were incurred as a result of
delays in development of SAFETRACE TX(TM), in consideration of the Company
providing to ITxM additional maintenance services and product upgrades and
substitute liquidated damage provisions for delays.
With receipt of FDA clearance, the Development Agreement with ITxM expired and
is survived by certain provisions regarding royalty payments, operating license,
indemnification and confidentiality.
Ortho-Clinical Diagnostics, Inc. In 1996, the Company entered into an
Exclusivity and Software Development agreement (the Exclusivity Agreement) with
Ortho-Clinical Diagnostics, Inc. (OCD), successor to Ortho Diagnostic Systems
Inc., a wholly-owned subsidiary of Johnson & Johnson. The Exclusivity Agreement
provided OCD the exclusive right to negotiate with the Company with respect to
the Company's activities and developments in information technology and
intellectual property relating to donor and transfusion medicine. In connection
with this agreement, the Company received $500,000 in 1996.
In May 1997, the Company received a request from OCD to continue its evaluation
of the Company's technology, on a non-exclusive basis, with the intent of
responding to the Company by July 14, 1997 regarding whether or not OCD would
propose some form of transaction with the Company. The Company received an
additional $500,000 from OCD during 1997. The Company and OCD agreed to further
extensions of this non-exclusive agreement through December 31, 1998 to enable
OCD to complete its strategic evaluation. The Company also agreed to perform
certain software development services. In connection with the extension to
December 31, 1998, the parties agreed that OCD has until June 30, 1999, to elect
to require the Company to provide the software development services as defined
in the Exclusivity Agreement. The Company anticipates finalizing a Sales,
Distribution and Development Agreement during the second quarter of 1999. The
total of $1,000,000 is included in deferred revenue as of December 31, 1998.
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Government Approval and Regulation
With the spread of AIDS and Hepatitis-B, stringent FDA guidelines have been
imposed on domestic blood centers in order to improve the quality of the U.S.
blood supply. Several domestic blood centers have been cited by the FDA for
noncompliance and certain blood centers have been closed as a result of
non-compliance with FDA requirements. Management believes numerous blood centers
throughout the worldwide blood bank industry have internally developed their own
software applications and systems to track blood collection, testing,
processing, distribution and transfusion activities. These internally developed
systems which have been developed for domestic blood center use are also
designed to comply with FDA requirements. The Company believes that most blood
center developed systems are not fully integrated and do not offer the
capabilities required by the FDA in view of the fact that many of the Company's
current SAFETRACE(R) customers have or intend to replace their internally
developed blood tracking systems with SAFETRACE(R). While laboratory information
system providers have developed automated testing and reporting procedures
designed for a portion of the blood tracking process, these systems address only
the laboratory management function and are not fully integrated with other blood
tracking functions required for effective FDA compliant blood tracking systems.
The Company believes that blood centers and laboratory information system
providers are looking for a way to meet the FDA guidelines while minimizing
their risks and costs.
The FDA requires all blood tracking application software vendors to submit a
510(k) application for review. The application process for FDA review and
compliance with FDA guidelines relates to computer software products regulated
as medical devices. The FDA considers software products intended for the
following to be medical devices: (i) use in the manufacture of blood and blood
components; or (ii) maintenance of data used to evaluate the suitability of
donors and the release of blood or blood components for transfusion or further
manufacturing. As medical device manufacturers, the Company and its competitors
are required to register with the Center for Biologics Evaluation and Research
("CBER"), list their medical devices, and submit a pre-market notification or
application for pre-market review. In April 1997, the Company's Wyndgate
division received notification from the FDA of its finding of "substantial
equivalence" of SAFETRACE(R). This determination provides a 510(k) clearance and
permits the Company to continue to market SAFETRACE(R). On January 29, 1999, the
510(k) clearance was received for SAFETRACE TX(TM).
The Company's products and services are subject to regulations adopted by
governmental authorities, including the FDA, which governs blood center computer
software products regulated as medical devices. The Company will also be
required to follow applicable Good Manufacturing Practices (GMP) regulations of
the FDA, which include testing, control and documentation requirements, as well
as similar requirements in other countries, including International Standards
Organization (ISO) 9001 standards.
Research and Development
During the years ended December 31, 1998 and 1997, the Company incurred
approximately $1.97 million and $3.76 million, respectively, for research and
development expenses associated with the Company's software products. Research
and development expenses are anticipated to continue to be a substantial portion
of the Company's operating expenses. The Company's SAFETRACE TX(TM) product
achieved technological feasibility in April 1998, and accordingly, the Company
capitalized $1.104 million associated with this product in 1998.
Employees
As of December 31, 1998, the Company had 49 full-time employees, consisting of 2
employees in the corporate offices in Denver, Colorado and 47 at Wyndgate's
offices near Sacramento, California. The Company has employment agreements with
certain personnel. The Company's employees are not represented by a labor union
or subject to collective bargaining agreements. In March 1998, management
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implemented a cost reduction program which initially resulted in a substantial
decrease to its previous employee base. The Company has never experienced a work
stoppage and believes that its employee relations are satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
During 1998, the Company occupied two primary locations. The Company occupied
approximately 3,439 square feet of office space in Lakewood, Colorado pursuant
to a lease that expires on December 31, 2000. The Company also leased
approximately 22,000 square feet of office space in Rancho Cordova, California
for its Wyndgate division pursuant to a lease that would have expired on
September 7, 2002. Effective November 1, 1998, the Company had subleased
approximately 11,000 square feet of its facility in Rancho Cordova, California.
In January 1999, the Company re-negotiated its lease in Lakewood, Colorado. The
new lease is for approximately 1,252 square feet of office space and the lease
expires on February 14, 2002. The former office space has been subleased. In
February 1999, the Company terminated its lease of office space in Rancho
Cordova, California. The Company leased approximately 15,000 square feet of
office space in El Dorado Hills, California, at a lower rate for a term of 86
months, ending May 31, 2006. Neither of these transactions resulted in
significant lease termination penalties or costs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which management believes to
be material, and there are no such proceedings which are known to be
contemplated.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Units sold by the Company in its initial public offering, each of which
consisted of two shares of common stock and one warrant, commenced trading on
the Nasdaq Small-Cap Market on February 12, 1997. On March 13, 1997, the common
stock and warrants included in the Units began to trade separately and the Units
ceased to trade. On February 9, 1998, the Company's common stock and warrants
were delisted from the Nasdaq Small-Cap Market, and commenced trading on the
Bulletin Board.
The following table sets forth the high and low bid prices for the Company's
common stock since the common stock commenced trading on March 13, 1997. The
quotations reflect inter-dealer prices, with retail markup, markdown or
commissions, and may not represent actual transactions. The information
presented has been derived from the National Quotation Bureau, Inc. Library.
COMMON STOCK
Fiscal Quarter Ended: High Low
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December 31, 1998 $ 1.063 0.531
September 30, 1998 1.313 0.656
June 30, 1998 1.781 1.000
March 31, 1998 2.000 0.781
December 31, 1997 3.063 2.125
September 30, 1997 2.938 1.813
June 30, 1997 3.000 2.750
March 31, 1997 3.875 3.000
Holders
As of December 31, 1998, the Company had approximately 116 holders of record of
the Company's common stock.
Dividends
The payment of dividends by the Company is within the discretion of its Board of
Directors and depends in part upon the Company's earnings, capital requirements
and financial condition. Since its inception, the Company has not paid any
dividends on its common stock and does not anticipate paying such dividends in
the foreseeable future. The Company intends to retain earnings, if any, to
finance its operations.
There have been no recent sales of unregistered securities.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Global Med Technologies, Inc. (the Company), through its one operating division
Wyndgate Technologies (Wyndgate), designs, develops, markets and supports
information management software products for blood banks, hospitals, centralized
transfusion centers and other healthcare related facilities. Revenues for
Wyndgate are derived from the licensing of software, the provision of consulting
and other value-added support services and the re-sale of hardware and software
obtained from vendors. On December 15, 1997, the Company sold its DataMed
International division (DataMed) which is in the business of substance abuse
testing management services. The audited financial statements and related
footnotes herein reflect DataMed as discontinued operations.
On April 14, 1998, the Company entered into two debt financing agreements which
provided the Company up to $3,150,000 in gross proceeds in exchange for up to
12,000,000 warrants convertible into common stock at $0.25 per share. Should the
Company not repay the financing proceeds and accrued interest thereon on or
before April 15, 1999, the convertible financing proceeds, including interest
thereon, would have been convertible into approximately 70,000,000 shares of
common stock at $0.05 per share.
In March 1999, the Company entered into agreements for a comprehensive financing
package that includes: (1) an $8,000,000 preferred stock private placement
through American Fronteer Financial Corporation (AFFC), a wholly owned
subsidiary of Fronteer Financial Holdings Ltd. (Fronteer Financial); (2)
exercise of 2,000,000 warrants at $0.25 per warrant; (3) extending the balance
on the line of credit with eBanker USA.Com, Inc. (eBanker), formerly Fronteer
Development Finance, Inc., a majority owned subsidiary of Fronteer Financial
until April 15, 2000, with a change in the default conversion rate from $0.05
per share contained in the original loan agreement to $0.25 per share; and (4) a
$750,000 bridge loan which bears interest at 12% per annum.
Heng Fung Finance is in the process of surrendering the promissory note in the
amount of $500,000 in exercise of the warrants to acquire 2,000,000 shares of
common stock of the Company. This transaction is expected to be completed in
April 1999.
The remaining $2,650,000 loan from eBanker will be extended until April 15,
2000, with the previous conversion price of $0.05 per share increased to $0.25
per share. In consideration for the extension, the Company paid a 2% fee to AFFC
of $53,000, payable in shares of the Company's common stock.
The $750,000 bridge loan bears interest at 12% and is convertible 6 months after
the loan is drawn, into shares of common stock of the Company at the 15-day
average closing bid price prior to the date of closing. The loan has not yet
been drawn.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000 (April 1999 Financing Agreement). The
agreement provides a line of credit, with interest at 12% per annum payable
monthly, due April 12, 2000. As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in shares of
common stock of the Company. The line of credit will be convertible, at Heng
Fung's option, into shares of the Company's common stock at a price based on the
average closing bid price of the Company's common stock for a period of 15
business days prior to April 13, 1999.
The Company completed its initial public offering of securities in the first
quarter of 1997, from which it received net proceeds of approximately $8,200,000
from the sale of 1,456,988 Units, each of which consisted of two shares of
Common Stock and one Class A Common Stock Purchase Warrant (the February 1997
Public Offering). The uses of proceeds were principally expended to repay
short-term debt, notes payable, accounts payable and other accrued expenses; to
fund Wyndgate's research and development of the transfusion management's
information software product (SAFETRACE TX(TM)); to fund Wyndgate's sales and
marketing efforts, as well as for general working capital purposes.
11
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
RESULTS OF OPERATIONS
Revenues. Revenues are comprised of software sales and consulting revenues, and
the re-sale of hardware and software obtained from vendors.
Revenues from software sales and consulting increased by $2.230 million, or
101%, to $4.439 million for the year ended December 31, 1998 compared to $2.209
million for the year ended December 31, 1997. This increase in software sales
and consulting revenue is primarily the result of substantially increased sales
and related deliveries of Wyndgate's SAFETRACE(R) software product.
Revenues from the re-sale of hardware and software obtained from vendors
increased by $51,000, or 17%, to $348,000 for the year ended December 31, 1998
compared to $297,000 for the year ended December 31, 1997. This increase was
primarily due to increases in the average price per order and in the number of
Wyndgate customers which ordered third party hardware and software through
Wyndgate.
Cost Of Revenues. Cost of revenues as a percentage of total revenues was 47% and
64% for the year ended December 31, 1998 and 1997, respectively.
Cost of software sales and consulting, as a percentage of the related revenue
was 44% and 62% for the years ended December 31, 1998 and 1997, respectively.
This decrease was primarily a result of increased sales of Wyndgate's
SAFETRACE(R) software product licenses, which typically have higher profit
margins than revenues from consulting, and implementation related services.
Additionally, relative decreases in personnel and related benefit and travel
expenses incurred during 1998 for the number of SAFETRACE(R) implementations,
customer training and customer support services also contributed to the decrease
in the cost of software sales and consulting.
Cost of hardware and software, obtained from vendors, as a percentage of the
related revenue was 86% and 75% for 1998 and 1997, respectively. Typically,
revenues from the re-sale of hardware and software, obtained from vendors are
priced at lower profit margins than revenues from software sales and consulting.
Gross Profit. Gross profit as a percentage of total revenue was 53% and 36% for
1998 and 1997, respectively. This increase in gross profit was primarily a
result of the increased sales of the higher margin SAFETRACE(R) software
products discussed above. Additionally, relative increases in revenues derived
from higher margin software license fees also contributed to the increase in
gross profit experienced by the Company during 1998.
General and Administrative. General and administrative expenses decreased
$933,000, or 35%, to $1.769 million for 1998 compared to $2.702 million for
1997. The decrease in general and administrative expenses was attributable
primarily to the restructuring and reorganization in March 1998 which
significantly reduced payroll, outside contract services, various insurance
related items, leased office space and other general and administrative
activities. The decrease was partially offset by general and administrative
expenses associated with the grants of certain options and warrants to purchase
shares of the Company's common stock.
Sales and Marketing. Sales and marketing expenses were $975,000 and $1.458
million for 1998 and 1997, respectively, a decrease of $483,000, or 33% compared
1997. The decrease in sales and marketing expenses was primarily due to the
restructuring and cost reduction activities undertaken in March 1998.
Research and Development. Research and development expenses decreased $1.784
million, or 47%, from 1998 to 1997. The decrease in research and development
expenses was primarily due to SAFETRACE TX(TM) achieving technological
feasibility during 1998 and the resulting ability to capitalize software
development costs until such time as the product is released to the general
public. Capitalized software costs increased to $920,000 net, from $136,000 net,
as of December 31, 1998 and 1997, respectively. Management anticipates research
and development costs will continue to be substantial. Management's plans for
12
<PAGE>
Wyndgate's future software products and services require continual research and
development expenditures in order to continue to capitalize on Wyndgate's
existing technological base and its existing software development talent.
Depreciation and Amortization. Depreciation and amortization increased to
$567,000 from $409,000 during 1998. The increase of $158,000, or 39%, from 1998
to 1997 is primarily due to the increase in fixed assets.
Restructuring Charges. In March 1998, the Company underwent a restructuring and
reorganization which was implemented to reduce general and administrative
expenses in such areas as payroll, outside contract services, various health
related items, leased office space and others as well. Restructuring expenses
were incurred in the amount of $132,000 for the year ended December 31, 1998.
All of these expenses had been paid as of December 31, 1998.
Interest Income. Interest income decreased $150,000 from 1997 to 1998. This
decrease was primarily due to interest income earned on the net proceeds of the
February 1997 Public Offering.
Interest Expense. Interest expense increased $14,000 from 1997 to 1998. This
increase was primarily due to the 1998 Financing Agreements.
Other. Other income (expense) increased to $355,000 income from $81,000 expense
or a total change of $436,000 from 1997 to 1998. This increase was primarily due
to an adjustment in 1998 for potential estimated losses accrued in prior years
in connection with the discontinued operations of DataMed. During 1998, the
provision for estimated losses of $421,000 was reversed.
Financing Costs. On April 14, 1998, the Company entered into two financing
agreements that provided for the issuance of warrants to purchase a total of
12,000,000 shares of the Company's common stock at $0.25 per share, for a period
of ten years. The issuance of the warrants resulted in deferred costs related to
the financing of $10.680 million being amortized to financing costs over the
term of the agreements that both expire on April 15, 1999. For the year ended
December 31, 1998, the company recognized $6.031 million in financing costs
expense.
Loss from Continuing Operations. The Company's loss from continuing operations
during 1998 as compared to 1997 increased $1.221 million. However, the loss from
continuing operations includes the recognition of $6.031 million of financing
costs. Loss from continuing operations before other income (expense) decreased
$4.538 million to $2.879 million from the $7.417 million loss for 1997 due to
increased sales and significantly reduced expenses. During the first quarter of
1998, management began the implementation of a cost reduction program which, as
it was anticipated, assisted in management's efforts to reduce the Company's
operating expenses and operating losses.
Loss from Discontinued Operations and Gain on Sale of Discontinued Operations.
The Company's loss from discontinued operations and gain on sale of discontinued
operations during 1997 were attributable to the sale of DataMed to NMRO that was
effective on December 15, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $821,000 as of December 31, 1998
compared to $2.370 million at December 31, 1997, none of which was restricted.
In light of the Company's current cash position, financing activities, and
projected cash flow, management believes the Company has the financial
resources, or can obtain the financial resources, to maintain its planned level
of operations for the next twelve months, although the Company anticipates that
it will continue to incur operating losses, negative cash flows and capital
expenditures during that period.
13
<PAGE>
It is expected that the net proceeds generated by the March 1999, April 1999 and
April 1998 Financing Agreements and the customer contract settlement for
$1,019,000 are sufficient to fund the Company's liquidity and capital
requirements in the short and long term excluding acquisitions or major new
product development initiatives. Management anticipates that the net proceeds
from the 1999 and April 1998 financing agreements, proceeds from the exercise of
warrants, and any future financing activities will be used to fund the Company's
anticipated research and development costs, sales and marketing efforts, and
negative cash flows during the remainder of 1999 and for general working capital
purposes.
The Company had a net working capital deficit of $2.528 million as of December
31, 1998 and $2.582 million at December 31, 1997.
The Company used $3.228 million in net cash for operating activities during
1998, compared to $5.300 million of net cash used during 1997. These amounts
include $631,000 and $1.255 million of net cash used by discontinued operations
during 1998 and 1997, respectively. The cash used in continuing operations of
$2.597 million during 1998 consisted primarily of the net loss from continuing
operations of $8.637 million, net of the amortization of non-cash deferred
financing costs of $6.031 million.
Net cash used by investing activities was $1.101 million during 1998 compared to
net cash provided by investing activities during 1997 of $161,000. The Company
invested $1.104 million in software development during 1998.
Net cash provided by financing activities was $2.780 million and $7.020 million
during 1998 and 1997, respectively. These amounts primarily include proceeds
from the April 1998 Financing Agreements in 1998 of $2.7 million and proceeds
from the February 1997 Public Offering in 1997 of $8.200 million.
EFFECT OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS
The Company has not experienced material unfavorable effects on its results of
operations, cash flows or financial position due to foreign currency exchange
fluctuations or due to domestic inflation. It is not anticipated to have any
material effect in the near future.
USE OF PROCEEDS
In February 1997, the Company completed an initial public offering of
securities, from which it received net proceeds of approximately $8,200,000 from
the sale of 1,456,988 Units (the February 1997 Public Offering). Each Unit
consisted of two shares of Common Stock and one Class A Common Stock Purchase
Warrant. On March 13, 1997, the common stock and the warrants began trading
separately.
The net proceeds to the Company from the February 1997 Public Offering of
approximately $8,200,000 have been applied as follows: approximately $2,700,000
for research and development costs, including approximately $481,000 in capital
expenditures, incurred primarily for the development of Wyndgate's SAFETRACE
TX(TM) software; $860,000 for sales and marketing expenses incurred for sales
and marketing for Wyndgate's software products and services; approximately
$300,000 of other capital expenditures for general operating purposes related to
the increased number of employees assigned to customer support, customer
implementations, customer training and general operating purposes for Wyndgate;
approximately $1,874,000 for the principal repayment of certain short-term debt,
approximately $181,000 of which was paid, under the same terms and conditions as
nonaffilates, to certain significant owners, directors, officers and other
related parties of the Company, who held 10% notes; approximately $1,046,000 for
general working capital requirements for the Company's continuing operations;
and approximately $1,420,000 for the Company's DataMed International division.
14
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RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued which is effective for all fiscal years beginning after
June 15, 1999. The Company currently does not participate in these activities
and consequently does not believe adoption of the statement will have an effect
on the financial statements.
On December 22, 1998, the Accounting Standards Executive Committee (AcSec)
issued Statement of Position 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions, (SOP 98- 9), which is
effective for transactions entered into in fiscal years beginning after December
15, 1998. The Company does not believe that the adoption of the statement will
have a significant effect on the disclosures in its financial statements and
will adopt it when required.
YEAR 2000 COMPLIANCE
The Year 2000 issue refers to the fact that many computer systems were
originally programmed using two digits rather than four digits to identify the
applicable year. When the year 2000 occurs, these systems could interpret the
year as 1900 rather than 2000. Unless hardware, system software and applications
are corrected to be Year 2000 compliant, computers and the devices they control
could generate miscalculations and create operational problems. Various systems
could be affected ranging from complex information technology (IT) computer
systems to non-IT devices such as an individual machine's programmable logic
controller.
To address this issue, the Company developed a corporate plan including the
formation of a team consisting of internal resources and, as deemed necessary,
third-party experts. The phases of the plan include: conducting inventory of the
affected technology and assessing the impact of the Year 2000 issue; developing
solution plans; modification or replacement; testing and certification; and
developing contingency plans. All components of software and hardware of the
Company are presently in various phases. The Company expects to have critical IT
systems tested and installed, and expects to be Year 2000 compliant by the end
of the third quarter of 1999.
The Company relies on third-party suppliers for many services and the Company
will be adversely impacted if these suppliers do not make the necessary changes
to their own systems and products successfully and in a timely manner. The
Company has implemented a plan to communicate with its customers and suppliers
on this issue in an effort to minimize any potential Year 2000 compliance
impact; however, it is not possible to guarantee their compliance.
The total cost of the program is estimated to be approximately $250,000, of
which approximately $50,000 has been spent through December 31, 1998.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issues. Nevertheless, since it is not possible to
anticipate all possible future outcomes, especially when third parties are
involved, there could be circumstances in which the Company would be unable to
take customer orders, or collect payments. In addition, disruptions in the
economy generally resulting from Year 2000 issues could materially adversely
affect the Company. The Company could be subject to litigation for computer
systems product failure, for example, equipment shutdown or failure to properly
date transaction records. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
The Company is in the process of establishing a formal contingency plan for its
applications. The Company is working continually with the third party suppliers
of software and related services in resolving Year 2000 issues. The Company's
formal contingency plans are currently being developed in conjunction with these
suppliers. The Company will continue to monitor the progress of the suppliers in
the resolution of Year 2000 issues and continue to evaluate the necessity of an
independent contingency plan.
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<PAGE>
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and the Company
intends that such forward-looking statements be subject to the safe harbors for
such statements under such sections. The Company's forward-looking statements
include the plans and objectives of management for future operations, including
plans and objectives relating to the Company's planned marketing efforts and
future economic performance of the Company. The forward-looking statements and
associated risks set forth in this Annual Report on Form 10-KSB include or
relate to: (i) the ability of the Company to obtain a meaningful degree of
consumer acceptance for its software products and proposed software products,
(ii) the ability of the Company to market its software products and proposed
software products on a national and international basis at competitive prices,
(iii) the ability of the Company's software products and proposed software
products to meet government regulations and standards, (iv) the ability of the
Company to develop and maintain an effective national and international sales
network, (v) success of the Company in forecasting demand for its software
products and proposed software products, (vi) the ability of the Company to
maintain pricing and thereby maintain adequate profit margins, (vii) the ability
of the Company to achieve adequate intellectual property protection for the
Company's software products and proposed software products, (viii) the ability
of the Company and its customers to successfully and timely implement the
Company's software products, and (ix) possible changes in customer software
buying patterns due to Year 2000 issues.
The forward-looking statements herein are based on current expectations that
involve a number of risk and uncertainties. Such forward-looking statements are
based on assumptions that the Company will market and provide software products
on a timely basis, that there will be no material adverse competitive or
technological change in condition of the Company's business, that demand for the
Company's software products will significantly increase, that the Company's
Chief Executive Officer will remain employed as such by the Company, that the
Company's forecasts accurately anticipate market demand and that there will be
no material adverse change in the Company's operations, business or governmental
regulation affecting the Company or its suppliers. The foregoing assumptions are
based on judgments with respect to, among other things, future economic,
competitive and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the Company's control. Accordingly, although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any such
assumption could prove to be inaccurate and therefore there can be no assurance
that the results contemplated in forward-looking statements will be realized. In
addition, as disclosed elsewhere in the "Risk Factors" section of this Annual
Report on Form 10-KSB, there are a number of other risks inherent in the
Company's business and operations which could cause the Company's operating
results to vary markedly and adversely from prior results or the results
contemplated by the forward-looking statements. Growth in absolute and relative
amounts of cost of sales, research and development, sales and marketing and
other operating expenses or the occurrence of other events could cause actual
results to vary materially from the results contemplated by the forward- looking
statements. Management decisions, including budgeting, are subjective in many
respects and periodic revisions must be made to reflect actual conditions and
business developments, the impact of which may cause the Company to alter its
marketing, capital investment and other expenditures, may also materially and
adversely affect the Company's liquidity, financial position and results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this Annual Report on Form 10-KSB, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the Company's objectives or plans will be
achieved.
ITEM 7. FINANCIAL STATEMENTS.
The Financial Statements that constitute Item 7 are attached at the end of this
Annual Report on Form 10-KSB.
16
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INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report - KPMG LLP F-1
Independent Auditor's Report - Ernst & Young LLP F-2
Balance Sheets as of December 31, 1998 and 1997 F-3
Statements of Operations for the years ended December 31, 1998 and 1997 F-5
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1998 and 1997 F-6
Statements of Cash Flows for the years ended December 31, 1998 and 1997 F-7
Notes to Financial Statements F-9
17
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) (i) On June 19, 1998, in response to a request for proposal by Global Med
Technologies, Inc. (the Company) for auditing services, the accounting firm of
Ernst & Young LLP notified the Company that Ernst & Young LLP had declined to
stand for re-election to perform the Company's 1998 audit and had resigned as
the Company's auditor. Ernst & Young LLP acted as the independent accountants
for the Company for the years ended December 31, 1994, 1995, 1996 and 1997.
(ii) Ernst & Young LLP's reports on the Company's financial statements for
either of the two most recent fiscal years did not contain an adverse opinion or
disclaimer of opinion, or was modified as to uncertainty, audit scope or
accounting principles.
(iii) Not applicable.
(iv) In connection with the audits of the Company's financial statements for the
fiscal years ended December 31, 1997 and 1996, and any subsequent interim period
through June 19, 1998, there were no disagreements with Ernst & Young LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the
matter in their report. There were no "reportable events" as that term is
described in Item 304(a)(1)(iv) of Regulation S-B. The Company received a letter
from Ernst &Young LLP addressed to the Commission stating that it agreed with
the above statements. A copy of that letter, dated June 30, 1998, was filed as
Exhibit 16 to the Current Report on Form 8-K.
(b) On October 2, 1998, the Company engaged KPMG LLP certifying accountants for
the year ended December 31, 1998.
18
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification Of Directors and Executive Officers
The following sets forth certain information with respect to the officers and
directors of the Company.
<TABLE>
<CAPTION>
Officer or
Name Age Position Director Since
- ------------------------ --- --------------------------- --------------
<S> <C> <C> <C>
Michael I. Ruxin, M.D. 53 Chairman of the Board and 1989
Chief Executive Officer
Fai H. Chan 54 Director 1998
Robert H. Trapp 43 Director 1998
Kwok Jen Fong 49 Director 1998
Jeffrey M. Busch 41 Director 1998
Gary L. Cook 41 Director 1998
Gordon E. Segal, M.D. 47 Director 1997
Gerald F. Willman, Jr. 41 Director and Wyndgate Vice 1995
President-Product Management
Thomas F. Marcinek 45 President and Chief Operating 1998
Officer
Alan K. Geddes 49 Vice President Finance, Chief 1998
Financial Officer and Treasurer
William J. Collard (1) 57 Wyndgate President 1995
Bruce Daniels 53 Wyndgate Vice President - 1998
Sales and Marketing
James R. Flynt 43 Wyndgate Vice President - 1998
Operations
</TABLE>
- --------------
(1) Mr. Collard retired as an officer of the Company effective February 4,
1999. He had been on leave since November 20, 1998 and the Company's
president and other employees are performing his duties.
The directors of the Company are elected to hold office until the next annual
meeting of shareholders and until their respective successors have been elected
and qualified. Officers of the Company are elected by the Board of Directors and
hold office until their successors are elected and qualified.
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The following sets forth biographical information concerning the Company's
directors and executive officers for at least the past five years. All of the
following persons who are executive officers of the Company are full time
employees of the Company.
Michael I. Ruxin, M.D., the founder of the Company, has been an officer and
director of the Company since its incorporation in 1989 and is currently the
Chairman and Chief Executive Officer of the Company. From 1982 to 1994, Dr.
Ruxin was a director of GeriMed of America, Inc., a private company
administering senior health care centers. From 1985 to 1993, Dr. Ruxin was an
officer and director of CBL Medical, Inc. (CBL), a public company, which managed
multiple medical groups, including Medcomp Medical Group, which was a group of
small clinics owned by Dr. Ruxin. CBL focused on providing second opinions on
workers compensation claims. Dr. Ruxin left CBL management in 1988 to found the
Company although he remained on the board of CBL due to his continued ownership
of clinics until 1993. Dr. Ruxin received a B.A. degree from the University of
Pittsburgh and a 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.
Fai H. Chan, has been a Director of the Company since May 1998. He has been a
Director of Fronteer Financial Holdings, Inc. ("Fronteer") since December 26,
1997, and Chairman of the Board of Directors and President since February 1998.
Mr. Chan is the Chairman and Managing Director of Heng Fung Holdings Company
Limited and has been a Director of Heng Fung Holdings Company Limited since
September 2, 1992. Mr. Chan was elected Managing Director of Heng Fung Holdings
Company Limited on May 1, 1995 and Chairman on June 3, 1995. Heng Fung Holdings
Company Limited's primary business activities include real estate investment and
development, merchant banking, the manufacturing of building material machinery,
pharmaceutical products and retail fashion. Mr. Chan has been the President and
a Director of Powersoft Technologies, Inc. (formerly, Heng Fai China Industries,
Inc.), which owns various industrial companies, since June 1994 and Chief
Executive Officer thereof since June 1995; a Director of Intra-Asia Equities,
Inc., a merchant banking company, since June 1993; Executive Director of Hua
Jian International Finance Co., Ltd. from December 1994 until December 1996; and
Chairman of the Board of Directors of American Pacific Bank since March 1988 and
Chief Executive Officer thereof between April 1991 and April 1993.
Robert H. Trapp has been a Director of the Company since May 1998. He has been a
Director of Fronteer Financial since December 1997 and the Managing Director
since February 1998. Mr. Trapp has been a director of Heng Fung Holdings Company
Limited since May 1995; a Director of Inter-Asia Equities, Inc., a merchant
banking company, since February 1995 and the Secretary thereof since April 1994;
Director, Secretary and Treasurer of Powersoft Technologies, Inc., which owns
various industrial companies; and the Canadian operational manager of Pacific
Concord Holding (Canada) Ltd. of Hong Kong, which operates in the consumer
products industry, from July 1991 until November 1997.
Kwok Jen Fong has been a Director of the Company since May 1998. Mr. Fong has
been a Director of Fronteer Financial since February 1998 and a Director of Heng
Fung Holdings Company Limited since May 1995. Mr. Fong has been a practicing
solicitor in Singapore for at least the last five years.
Jeffrey M. Busch has been a Director of the Company since May 1998. Mr. Busch
has been a practicing attorney for over five years. Mr. Busch has also been a
Director of Fronteer Financial since February 1998.
Gary L. Cook has been a Director of the Company since November 19, 1998. Since
1996, he has been Secretary, Treasurer and Chief Financial Officer of Fronteer
Financial Holdings, Ltd. and oversees all accounting, internal and external
reporting, treasury and cash management functions. Mr. Cook also is Treasurer of
eBanker USA.Com, Inc., formerly Fronteer Development Finance, Inc.,
Vice-President and Chief Financial Officer of American Fronteer Financial
Corporation and a Director of Secutron Corporation. From 1994 to 1996, Mr. Cook
was self-employed as the principal of All Tune and Lube, LLC where he
20
<PAGE>
researched, directed and managed the successful start up and development of a
small business. From 1982 to 1994, he was a Senior Manager at KPMG Peat Marwick
and was responsible for all auditing services for several clients in various
financial and other industries. Mr. Cook also directed the training, management
and evaluation of staff developed and implemented accounting, financial
reporting and SEC reporting systems for major growth companies. Mr. Cook
received a B.A. in Accounting from Bringham Young University in 1982 and is a
member of the Colorado Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.
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 a 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.
Gerald F. Willman, Jr. has been a director of the Company and the Vice President
of the Wyndgate division since May 1995 and Chief Financial Officer from April
through August 1998. 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.
Thomas F. Marcinek was elected as President and Chief Operating Officer in March
1998. From 1994 until joining the Company, he was the President and owner of
Prax Information Systems, Wantagh, New York, a practice management software
consulting company. From 1990-1994, he was the President of the Data
Technologies Group, a division of Henry Schein, Inc., Melville, New York. From
1985-1990, he was the Vice President of MIS for that same company.
Alan K. Geddes was elected as Vice President - Finance, Chief Financial Officer
and Treasurer of the Company in August 1998. He was also a financial consultant
to the Company. Mr. Geddes was Vice President and Chief Financial Officer of
EDnet, Inc., a publicly held company based in San Francisco, California, from
1996 to 1997. From 1986 to 1996, Mr. Geddes was the Chief Financial Officer of
Oncogenetics, Inc., Phoenix, Arizona and IMAR Corporation, San Rafael,
California, both emerging companies in medical technology, in addition to
founding his own company, California Pacific Leasing, Inc., San Rafael,
California. Previously, he served as Corporate Controller at Fiberplastics,
Inc., Corte Madera, California, in corporate management at Bio-Rad Laboratories,
Richmond, California, as Plant Controller with Abbott Laboratories, Pasadena,
California and as Financial Analyst with Litton Industries, Woodland Hills,
California. Mr. Geddes received a B.A. degree from the University of California
and a M.B.A. degree in finance from Utah State University.
William J. Collard, who retired February 4, 1999, was a director and the
Secretary/Treasurer of the Company from May 1995 to May 1998 and was the
President of the Wyndgate division since May 1995. From 1984 to May 1995 he was
president and a director of The Wyndgate Group, Ltd., and responsible for
directing the sales, operations and research and development efforts of The
Wyndgate Group, Ltd. From 1976 to 1984, Mr. Collard was the executive director
of Sigma Systems, Inc., a company that provides colleges and other institutions
with administrative computer applications. Mr. Collard received a B.S. degree in
Business Administration (Finance) and a M.S. degree in Business Administration
(Quantitative Methods) from California State University.
Bruce Daniels has been Vice President, Sales and Marketing of the Company since
August 1998. Mr. Daniels has extensive knowledge in both hospital and blood
center transfusion practices. From 1994 to 1998, Mr. Daniels was President -
Pall Biomedical Products Company division, Pall Corporation, East Hills, New
21
<PAGE>
York (NYSE: PLL). In this capacity he directed the sales and marketing for
Pall's hospital products in North America. These products included blood
processing and transfusion sets for general use and leukocyte removal. From 1975
to 1994, Mr. Daniels was Vice President Sales and Marketing at Kentec Medical,
Inc., Irvine, California, a regional specialty distributor, for medical devices,
equipment and services. Mr. Daniels has a B.A. degree in economics, with a
chemistry minor, from Marietta College, Marietta, Ohio, and has completed a
Medical Marketing Program at the University of California, Los Angeles.
James R. Flynt has been Vice President, Operations of the Company since August
1998. Mr. Flynt has held significant domestic and international positions for
companies in both Healthcare and Information Systems. From August 1997 to March
1998, Mr. Flynt was Director of Laboratory Implementation at ADAC Healthcare
Information Systems, Houston, Texas. From May 1996 to August 1997, he was
Director of Client Service for Soft Computer Consultants, Palm Harbor Florida.
From October 1995 to May 1996, Mr. Flynt was Channels Solutions Manager for IBM
Healthcare Solutions, IBM Asia Pacific, Brisbane, Australia, where he performed
market feasibility analysis and business development in the Pacific Rim. Between
1984 and 1994, Mr. Flynt worked at Sunquest Information Systems, Inc., Tucson,
Arizona, where he held position of increasing responsibility including LIS
Marketing Consultant, Assistant VP - Client Support and Senior Product Director.
Mr. Flynt has a B.S. degree in microbiology, with emphasis in organic and
biochemistry, from the University of Arizona and is a registered Microbiologist
with the American Society of Clinical Pathologists (ASCP).
Family Relationships
There are no family relationships among any of the Company's officers and
directors.
Involvement In Certain Legal Proceedings
No officer, director, significant employee, promoter or control person of the
Company has been involved in any event of the type described in Item 401(d) of
Regulation S-B during the past five years.
Compliance With Section 16(A) Of The Exchange Act
To the Company's knowledge, during the Company's year ended December 31, 1998,
there were no directors or officers or more than 10% shareholder of the Company
that failed to timely file a Form 3, Form 4 or Form 5, other than Fai H. Chan
who failed to timely file a Form 3 and Form 4, and Jeffrey Busch who failed to
timely file a Form 3, and Robert H. Trapp who timely failed to file a Form 3,
and Heng Fung Holdings Company Limited, Heng Fung Finance Company Limited, and
Heng Fung Capital Private Limited who failed to timely file a Form 4.
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<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding compensation paid to the
Company's CEO and the other executive officers of the Company who received in
excess of $100,000 of salary and bonus from the Company during the year ended
December 31, 1998:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------ -------------------------------------------------
Restricted
Name and Principal Stock Options All Other
Position Year Salary Bonuses ($) Awards & SARs Compensation
- ----------------------- ---------- ------------ ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael I. Ruxin, 1998 $190,000 --- --- 1,250,000 $131,736 (1)
Chairman and CEO 1997 190,000 --- --- --- 17,936 (2)
1996 195,000 --- --- --- 16,520 (3)
Thomas F. Marcinek, 1998 125,000 --- --- 500,000 5,400 (4)
President and COO 1997 22,000 --- --- --- ---
1996 --- --- --- --- ---
Gerald F. Willman, Jr. 1998 95,000 --- --- 150,000 --- (5)
Director and 1997 95,000 --- --- --- 25,000 (5)
Vice President, 1996 95,000 --- --- --- 8,000 (5)
Product Management
William J. Collard, 1998 100,000 --- --- --- 5,400 (6)
Wyndgate President 1997 100,000 --- --- --- 16,400 (6)
and Director (through 1996 100,000 --- --- --- 188,400 (6)
February 4, 1999)
</TABLE>
(1) Dr. Ruxin received $3,800 per annum in life insurance premiums, $1,078 per
month car allowance and $115,000 under his non-compete agreement.
(2) Dr. Ruxin received $5,000 per annum in life insurance premiums and a $1,078
per month car allowance.
(3) Dr. Ruxin received $5,000 per annum in life insurance premiums and a $960
per month car allowance.
(4) Mr. Marcinek received a $450 per month car allowance.
(5) In 1997, Mr. Willman received $25,000 for tax expenses related to the 1995
Wyndgate merger. In 1996, Mr. Willman received $8,000 for reimbursement for
a vacation.
(6) Mr. Collard received a $450 per month car allowance in 1996, 1997 and 1998.
In 1996, Mr. Collard received $175,000 under his non-compete agreement and
reimbursement for a vacation in the approximate amount of $8,000. In 1997,
Mr. Collard received approximately $11,000 for tax expenses related to the
May 1995 Wyndgate merger.
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<PAGE>
Stock Option Plans
The Second Amended and Restated Stock Option Plan provides for the issuance of
options to purchase up to 2,200,000 shares of common stock to employees,
officers, directors and consultants of the Company. Options may be granted as
incentive stock or as non-qualified stock options. Only employees of the Company
are eligible to receive Incentive Options. Unless sooner terminated, the Plan
will expire on May 31, 2000. As of December 31, 1998, options to purchase
1,821,216 shares of the Company's common stock at exercise prices ranging from
$0.75 to $3.75 per share through 2008 were outstanding, of which options to
purchase 393,900 shares were exercisable.
The Employee Stock Compensation Plan of 1997, as amended during 1998, includes a
maximum of 200,000 shares of the Company's common stock as authorized for
issuance. As of December 31, 1998, options to purchase 100,000 shares of the
Company's common stock were outstanding. Effective August 27, 1998, the Company
issued 50,000 shares of its common stock to a director in exchange for services.
The fair value of the stock on August 27, 1998 was $33,000 and is recorded as
general and administrative expense.
1998 and 1997 Activity
On May 27, 1998, incentive options to purchase 350,000 shares of the Company's
common stock and non-qualified options to purchase 5,000 shares were issued to
certain officers at an exercise price of $0.75 per share, and are exercisable
for ten years. The options vest at the rate of 20% per year.
On May 27, 1998, the board of directors granted a non-qualified option to
purchase 55,248 shares of the Company's common stock to a former officer of the
Company. The exercise price is $0.92 per share, the option was vested
immediately and is exercisable for ten years. In accordance with the provisions
of Statement of Financial Accounting Standard No. 123, Accounting for
Stock-Based Compensation, the fair value of the option was recorded as general
and administrative expense in the amount of $41,000.
On June 3, 1998, the Company authorized the issuance of incentive stock options
to purchase 340,000 shares of the Company's common stock at $1.0625 per share,
exercisable for ten years, to certain employees. The options become fully vested
on March 3, 1999.
On August 27, 1998, the Company authorized the issuance of non-qualified stock
options to purchase an aggregate of 900,000 shares of the Company's common stock
at $0.75 per shares, exercisable for ten years, to members of the Board of
Directors in consideration for serving on the Board and on the Executive
Committee of the Board. The Company also authorized the issuance of incentive
options to certain officers of the Company to purchase 600,000 shares of the
Company's common stock and non-qualified stock options to purchase an aggregate
of 32,000 shares of the Company's common stock to certain employees. All of
these grants are at $0.75 per share and exercisable for ten years. The options
vest at the rate of 20% per year.
Pursuant to Dr. Ruxin's Employment Agreement, the Company authorized the
issuance to Dr. Ruxin of a non-qualified stock option to purchase 1,000,000
shares of the Company's common stock at $0.75 per share, exercisable for ten
years. The Company is in the process of amending the grant so the option may be
exercisable only when the Corporation's annual audited financial statements
reflect earnings of $0.01 per share, or after a vesting period of sixty months,
whichever occurs first.
Also on August 27, 1998, non-qualified options to purchase 250,000 shares of the
Company's common stock at $0.75 per share, for a period of ten years, were
issued to certain officers for the year ended December 31, 1998. The options
vest at the rate of 33-1/3% per year.
On October 14, 1998, the Company authorized the issuance of non-qualified stock
options to purchase an aggregate of 130,000 shares of the Company's Common Stock
at $0.75 per share, exercisable for ten years, to two officers of the Company.
On November 19, 1998, non-qualified options to purchase 25,000 shares of the
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<PAGE>
Company's Common Stock at $0.85 per share, exercisable for ten years were
granted to an employee. On December 17, 1998, options to purchase 40,000 shares
of the Company's Common Stock at $0.76 per share were granted to an employee.
The options vest at the rate of 20% per year.
On January 4, 1999, the board of directors authorized incentive stock option
grants to purchase a total of 45,000 shares of the Company's common stock to
three employees at $0.78 per share. The market price of the common stock on
January 4, 1999, the date of the grant was $0.84375, resulting in compensation
expense of $2,900. The options are for ten years and 25,000 vest at 20% per year
beginning in September 1999 and the remaining options for 20,000 shares vest at
the rate of 50% immediately and 50% on March 28, 1999.
Also on January 4, 1999, non-qualified options to purchase 60,000 shares of the
Company's common stock at $.78 per share were granted to two employees, one of
which is an officer, and non-qualified options to purchase 500 shares of the
Company's common stock at $.78 per share were granted to a consultant. The
employee grants vest at the rate of 20% per year beginning in 1999, and the
consultant options were 100% vested on the grant date. All of the options are
for a term of ten years. Compensation expense associated with the consultant
options of $500 was recorded as of January 4, 1999.
On February 16, 1999, the board of directors approved a resolution to register
1,829,788 shares of the Company's common stock underlying the outstanding Class
A Warrants (1,456,988 shares at $4.55), 10% Note Warrants (187,800 shares at
$3.75), and specified non-qualified stock options (185,000 shares at $2.50 and
$1.81). As an incentive to exercise of the aforementioned warrants and options,
the board of directors agreed to discount the exercise price per share by an
amount up to 33-1/3% of the bid price on the common stock on the effective date
of the registration statement. Under current accounting guidance, this
transaction will result in a significant non-cash charge to the statement of
operations on the effective date of the registration statement. However, if
exercised it would result in a significant infusion of cash to the Company for
its operations.
Unless otherwise stated, options to purchase shares of the Company's common
stock are granted at the fair market value of the common stock on the effective
date of the grant.
During 1997, the Company recognized expense of $314,000 related to certain
grants of stock options within the Company's Stock Option Plan. This amount
consists of approximately $146,000 included in sales and marketing expense,
$136,000 included in general and administrative expense, $22,000 included in
research and development expense and $10,000 included in costs of revenue in the
accompanying 1997 statement of operations.
Warrants
On August 27, 1998, pursuant to the provisions of an agreement for consulting
services with a Director of the Company, the Company authorized the issuance of
warrants to purchase 600,000 shares of the Company's common stock, at $0.75 per
share, exercisable for ten years. Using the Black-Scholes model for estimating
the fair value of the warrants to purchase 600,000 shares of the Company's
common stock, the Company recorded $247,000 as consulting expense as of August
25, 1998.
On December 17, 1998, the warrants issued as of January 23, 1997 relating to 12%
notes were amended. The board of directors agreed to issue warrants to two
individuals to purchase 563,624 shares of the Company's common stock at a
discount of 25% of the market price per share, or $0.55 per share. The Company
received cash proceeds of approximately $311,000 on December 17, 1998, and
recorded a noncash charge to general and administrative expense of $104,000.
25
<PAGE>
Other Option Activity
In addition to the options granted pursuant to the Second Amended and Restated
Stock Option Plan, the Company has issued non-qualified options to purchase
2,542,000 shares of the Company's common stock, exercisable for ten years from
the date of grant, pursuant to the terms of the stock option agreements. The
information regarding the specific grants is included in the 1998 and 1997
Activity above. The common stock underlying the options is not included in the
Company's effective registration statement on Form S-8 registering shares
authorized pursuant to the Second Amended and Restated Stock Option Plan.
Option Grants Table
The following table sets forth certain information regarding options to purchase
shares of the Company's common stock issued to Executive Officers of the Company
during the year ended December 31, 1998:
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted in 1998 Price Date
- -------------------------- -------------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael I. Ruxin 1,000,000(1)(3)(4) 33% $ 0.75 08/27/08
250,000(1) 8% 0.75 08/27/08
Thomas F. Marcinek 350,000(1) 11% 0.75 08/27/08
150,000(1)(4) 5% 0.75 08/27/08
Alan K. Geddes 250,000(1) 8% 0.75 08/27/08
100,000(1)(4) 3% 0.75 08/27/08
Bruce Daniels 250,000(1) 8% 0.75 08/27/08
James R. Flynt 100,000(1) 3% 0.75 08/27/08
Gerald F. Willman 60,000(1)(4) 2% 0.75 08/27/08
90,000(2) 3% 0.75 12/17/08
</TABLE>
(1) On August 27, 1998, the above named individuals received options to
purchase the stated number of shares of common stock of the Company; such
options have vesting periods ranging from three to five years, exercisable
for ten years. The exercise price of the options is $0.75 per share, which
was equal to the market value of the share on the date of the grant.
(2) On December 17, 1998, Mr. Willman, received options to purchase 90,000
shares of common stock; such options vest over three years and the exercise
price of the options is $0.75 per share, which was equal to the market
value of the shares on the date of the grant.
(3) On August 27, 1998, Dr. Ruxin was issued an option to purchase 1,000,000
shares of the common stock of the Company at $0.75 per share, exercisable
ten years from the date of the grant. The Company is in the process of
amending the grant to include exercisability only when the Company's annual
audited financial statements reflect earnings of $0.01 per share, or 60
months, whichever occurs first.
(4) These options to purchase shares of the Company's common stock are not
registered in the Company's effective Form S-8 registering authorized
shares under the Second Amended and Restated Stock Option Plan.
26
<PAGE>
Aggregated Option Exercises In 1998 And Year-End Option Values/Table
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Options at year-end
Shares Year-end ($)
Acquired Value Exercisable/ exercisable/
Name on Exercise Realized Unexercisable unexercisable
- ------------------------- --------------- ------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Michael I. Ruxin --- --- 0 / 1,250,000 $ 0 / 937,500
Thomas F. Marcinek --- --- 120,000 / 380,000 90,000 / 285,000
Alan K. Geddes --- --- 83,333 / 266,667 62,500 / 150,000
Bruce Daniels --- --- 50,000 / 200,000 37,500 / 150,000
James R. Flynt --- --- 20,000 / 80,000 15,000 / 60,000
Gerald F. Willman --- --- 2,000 / 148,000 1,500 / 111,000
</TABLE>
No options were exercised during 1998 by the Company's executive officers.
Long-Term Incentive Plan ("LTIP") Awards Table
No long term incentive plan awards were granted by the Company to any of the
executive officers or directors of the Company during the year ended December
31, 1998.
Compensation Of Directors
Standard Arrangements. Members of the Company's board of directors are not
compensated in their capacities as board members. However, the Company
reimburses all of its officers, directors and employees for accountable expenses
incurred on behalf of the Company. Currently, the Company does not pay any
directors fees for attendance at board meetings.
Other Arrangements. The Company has no other arrangements pursuant to which any
director of the Company was compensated during the year ended December 31, 1998,
for services as a director.
On August 1, 1998, the Company entered into an employment agreement with Dr.
Ruxin for a period of three years commencing August 1, 1998. 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 five years from August 1,
1998). 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, plus any other increase which may be determined from
time to time at the discretion of the Company's 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, a decision by the
Company to terminate its business and liquidate its assets, the merger or
consolidation of the Company with another entity or an agreement to such a
merger or consolidation or any other type of reorganization, or if the Company
makes a general assignment for the benefit of creditors, files for voluntary
bankruptcy or if a petition for the involuntary bankruptcy of the Company is
filed in which an order for relief is entered and remains in effect for a period
of thirty days or more, or if the Company seeks, consents to, or acquiesces in
the appointment of a trustee, receiver or liquidator of the Company or any
material part of its assets. Dr. Ruxin's employment under the employment
agreement also may be terminated by reason of Dr. Ruxin's death or disability or
for cause as set forth in the employment agreement. If the Company for any
reason other than cause or permanent disability terminates the agreement, the
Company must pay Dr. Ruxin compensation, benefits and incentives at the rate in
27
<PAGE>
effect at termination for twenty-four months following the date of termination.
Pursuant to Dr. Ruxin's Employment Agreement, the Company authorized the
issuance to Dr. Ruxin of a non-qualified stock option to purchase 1,000,000
shares of the Company's common stock at $0.75 per share, exercisable for ten
years. The Company is in the process of amending the grant so the option may be
exercisable only when the Corporation's annual audited financial statements
reflect earnings of $0.01 per share, or after a vesting period of sixty months,
whichever occurs first.
On August 1, 1998, the Company also entered into an employment agreement with
Alan K. Geddes for a period of three years commencing August 1, 1998. 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 five
years from August 1, 1998). Under the agreement, Mr. Geddes receives a salary of
$125,000 per year and certain other fringe benefits. Mr. Geddes employment
agreement includes an annual cost-of-living increase, plus any other increase
which may be determined from time to time at the discretion of the Company's
Board of Directors. The agreement also contains a non-solicitation provision
which prohibits Mr. Geddes from soliciting employees and/or customers of the
Company to enter the employ or to do business with any business entity in
competition with the Company during Mr. Geddes' employment and for a period of
twelve months after the cessation thereof. The agreement also provides that
annually, while the employment agreement is in effect, solely at the sole option
of the Company, Mr. Geddes may receive incentive compensation of up to 50% of
his then current annual base salary. The incentive compensation will be based on
objectives established by the Company and Mr. Geddes on December 31 of each
year.
Pursuant to the agreement, Mr. Geddes received incentive stock options under the
Company's Stock Option Plan, as amended, to purchase an aggregate of 250,000
shares of the Company's common stock. The options vest at the rate of 20% per
year over a period of five years. If the Company (i) sells substantially all its
assets, or (ii) mergers or consolidates with another entity or otherwise
reorganizes whereby the total value of the Company's Common Stock exceeds
$100,000,000 as a result of such transaction or (iii) terminates Mr. Geddes for
any reason other than for cause prior to the expiration of the agreement, then
the entire 250,000 in options shall become 100% vested and immediately
exercisable.
Mr. Geddes' employment under the employment agreement may be terminated by Mr.
Geddes under the same circumstance as set forth in Dr. Ruxin's employment
agreement. If Mr. Geddes' employment agreement is terminated by the Company for
any reason other than cause or permanent disability, the Company must pay Mr.
Geddes compensation, benefits and incentives at the rate in effect at
termination for twelve months following the date of termination. The Company
also paid Mr. Geddes' temporary living expenses associated with his relocation
to Sacramento, California.
On August 1, 1998, the Company also entered into an employment agreement with
Thomas F. Marcinek for a period of three years commencing August 1, 1998. 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 five
years from August 1, 1998). Under the agreement, Mr. Marcinek receives a salary
of $125,000 per year and certain other fringe benefits. Mr. Marcinek employment
agreement includes an annual cost-of-living increase, plus any other increase
which may be determined from time to time at the discretion of the Company's
Board of Directors. The agreement also contains non-solicitation and annual
incentive compensation provisions which are similar to those set forth in Mr.
Geddes' employment agreement.
Pursuant to the agreement, Mr. Marcinek received incentive stock options under
the Company's Stock Option Plan, as amended, to purchase an aggregate of 350,000
shares of the Company's Common Stock. The options vest at the rate of 20% per
year over a period of five years. If the Company (i) sells substantially all its
assets, or (ii) mergers or consolidates with another entity or otherwise
reorganizes whereby the total value of the Company's Common Stock exceeds
$100,000,000 as a result of such transaction or (iii) terminates Mr. Marcinek
for any reason other than for cause prior to the expiration of the agreement,
then the entire 350,000 in options shall become 100% vested and immediately
exercisable.
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<PAGE>
Mr. Marcinek's employment under the employment agreement may be terminated by
Mr. Marcinek under the same circumstance as set forth in Dr. Ruxin and Mr.
Geddes' employment agreements. If Mr. Marcinek's employment agreement is
terminated by the Company for any reason other than cause or permanent
disability, the Company must pay Mr. Marcinek compensation, benefits and
incentives at the rate in effect at termination for twelve months following the
date of termination.
On February 1, 1999, the Company entered into an employment agreement with James
R. Flynt. The agreement commenced February 1, 1999 and ends January 31, 2002,
unless at the close of the second year of the initial term, the agreement shall
be automatically extended for an additional two years.
As compensation for services rendered under the agreement, Mr. Flynt receives a
salary at the rate of $100,000 per annum. Mr. Flynt's salary shall be reviewed
on an annual basis (from July 6, 1998) and if his performance is deemed
satisfactory, his salary shall be increased at least in an amount equal to the
cost of living increase for the prior year, providing that at least one other
senior management's salary (CEO or CFO) is increased by a similar cost of living
raise. In addition, Mr. Flynt shall be eligible for performance increases.
Annually, on July 6 of each year, solely at the option of the Company, Mr. Flynt
may be entitled to receive incentive compensation of up to 50% of his base
salary of $100,000 per year. This incentive compensation shall be based on
objectives that shall be established by the senior officers and/or the board of
directors.
When the agreement was executed, Mr. Flynt received nonqualified stock options
to purchase an aggregate of 50,000 shares of the Company's common stock, in
addition to the nonqualified stock options granted to purchase 100,000 shares of
the Company's common stock previously granted. Twenty percent (20%) of the total
options granted shall vest and become exercisable upon the anniversary date of
the initial stock option grant.
If the Company (i) sells substantially all of its assets, or (ii) merges or
consolidates with another entity or otherwise reorganizes whereby the total
market value of the Company's common stock exceeds $100,000,000 as a result of
such transaction or (iii) terminates Mr. Flynt for any reason other than
malfeasance prior to Mr. Flynt's contract expiration; then the total options
granted to Mr. Flynt shall become immediately 100% vested and immediately
exercisable on the date preceding the effective date of such sale, merger,
consolidation or other reorganization.
Upon the occurrence of any of the following events the employment agreement may
be terminated by Mr. Flynt: (i) the sale by the Company of substantially all of
its assets; (ii) a decision by the Company to terminate its business and
liquidate its assets; (iii) 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; (iv) the Company makes a general assignment for the
benefit of creditors, files a voluntary bankruptcy petition, files a petition or
answer seeking a reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any law, there shall have been
filed any petition or application for the involuntary bankruptcy of the Company,
or other similar proceeding, in which an order for relief is entered or which
remains undismissed for a period of thirty days or more, or the Company seeks,
consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the Company or any material party of its assets; (v) there are
material reductions in Mr. Flynt's duties and responsibilities without his
written consent or a demotion from his current position; (vi) termination by the
Company of Mr. Flynt's employment with the Company for any reason other than
cause; (vii) a five percent reduction in Mr. Flynt's base compensation (not
including bonus), other than any such reduction which is part of, and generally
consistent with, a general reduction of salaries; (viii) a material reduction by
the Company in the kind or level of employee benefits (other than salary and
bonus) to which Mr. Flynt is entitled immediately prior to such reduction with
the result that Mr. Flynt's overall benefits package (other than salary and
bonus) is substantially reduced (other than any such reduction applicable to
29
<PAGE>
others in the Company generally); (viv) the Company does not provide Mr. Flynt
with commercially reasonable staffing, tools, or other necessary support
resources to implement and support the Company developed products in manner
consistent with industry standards resulting in a mutually defined level of
customer satisfaction.
Mr. Flynt's employment under the employment agreement also may be terminated by
reason of Mr. Flynt's death or disability or for cause as set forth in the
employment agreement. Following the termination of the employment agreement by
the Company for any reason other than cause, death, or the temporary or
permanent disability of Mr. Flynt, Mr. Flynt shall be entitled to compensation
and benefits for eight months following the date of termination.
As a condition to the April 1998 Financing Agreements each of the Company's
Officers and certain employees provided the lenders with undated releases of
their respective employment agreements and tendered resignations, which are
being held in escrow. Until the releases are accepted or rescinded by the
lenders, the following employment agreements between the Company and its
Officers are still in effect.
On May 24, 1995, the Company had entered into a five year employment agreement
with William J. Collard. The agreement provided for an annual salary of
$100,000. Mr. Collard's employment agreement included a cost-of-living increase
at the rate of 2 1/2% per annum, plus any other increase which had been
determined from time to time at the discretion of the Company's board of
directors. Mr. Collard's agreement also contained a covenant not to compete. The
covenant not to compete would terminate the later of five years from the date of
the agreement or the term of the agreement; hence, the Company would not receive
any benefit from the covenant not to compete unless the agreement was terminated
prior to May 24, 2000. If Mr. Collard's agreement was terminated by the Company
for any reason other than cause or permanent disability, the Company would be
required to pay him a lump sum severance payment of $2.5 million.
Mr. Collard and the Company reached an agreement whereby Mr. Collard's
employment agreement would be terminated and Mr. Collard would retire effective
February 4, 1999. The Company agreed to pay Mr. Collard $64,000, in monthly
installments of $3,000 per month for approximately 22 months commencing December
30, 1998. In addition, the Company agreed to pay Mr. Collard approximately
$237,500, in 42 monthly installments, also commencing December 30, 1998.
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 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. Mr. Willman received approximately $8,000 for vacation related
expenses in 1996. During 1997, Mr. Willman received approximately $25,000 for
tax expenses related to the May 1995 Wyndgate merger.
Reporting On Repricing Of Options
Effective February 20, 1998, the board of directors granted an incentive option
to purchase 350,000 shares of the Company's common stock to Mr. Thomas F.
Marcinek at $0.92 per share. On August 27, 1998, the board of directors amended
the price of the incentive option to $0.75 per share, the market price of the
Company's common stock on that date. During the period from the original grant
to the amendment, the Company experienced the Changes in Control, as described
below. The new board of directors believe it was in the best interest of the
Company to reprice the option as a further incentive to Mr. Marcinek.
30
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is currently controlled by Heng Fung Holdings Company Limited (Heng
Fung Holdings) and its principals, Fai H. Chan, Kwok Jen Fong, Robert H. Trapp
and Jeffrey M. Busch. Heng Fung Holdings and its principals have appointed five
of eight members of the Board of Directors of the Company, i.e., Messrs. Chan,
Fong, Trapp, Busch, and Gary L. Cook. In addition, Heng Fung Holdings owns 98.6%
of Heng Fung Capital (S) Limited, which, in turn, owns 100% of Heng Fung Finance
Company Limited (Heng Fung Finance). In connection with an April 14, 1998,
$1,500,000 million loan to the Company, Heng Fung Finance was issued a warrant
to purchase 6,000,000 shares of the Company's Common Stock, exercisable at $0.25
per share until April 14, 2008. Heng Fung Holdings also owns approximately 31%
(beneficially approximately 76%) of the outstanding common stock of Fronteer
Financial. Fronteer Financial owns 100% of the outstanding common stock of
American Fronteer Financial Corporation (AFFC), formerly named RAF Financial
Corporation, the underwriter of the Company's initial public offering. AFFC owns
warrants to purchase 46,100 units at $11.55 per unit, exercisable until January
14, 2002, each unit consisting of two shares of Common Stock and a warrant to
purchase one share of Common Stock at $7.51, exercisable until February 11,
2000. Fronteer Financial also owns 100% of the outstanding common stock of
Fronteer Capital and the majority of the outstanding common stock of eBanker. In
connection with an April 14, 1998, $1,650,000 line of credit extended to the
Company, Fronteer Capital was issued a warrant to purchase 1,000,000 shares of
the Company's Common Stock, exercisable at $0.25 per share until April 14, 2008,
and the right to receive a warrant to purchase an additional 5,000,000 shares of
the Company's Common Stock, exercisable at $0.25 per share until April 14, 2008,
if the line of credit was drawn upon by the Company. In September 1998, pursuant
to an Assignment, Assumption, Assumption and Consent Agreement, Fronteer Capital
assigned all its rights duties and obligations under the $1,650,000 line of
credit to eBanker. In October 1998, the Company borrowed $400,000 on the
$1,650,000 line of credit and issued eBanker a warrant to purchase 5,000,000
shares of the Company's Common Stock, exercisable at $0.25 per share until April
14, 2008.
Also, in October 1998, pursuant to a Loan and Warrant Purchase and Sale
Agreement, Heng Fung Finance sold eBanker $1,000,000 of the April 14, 1998 loan
and warrants to purchase 4,000,000 shares of the Company's common stock,
exercisable at $0.25 per share until April 14, 2008. Therefore, through its
subsidiaries, Heng Fung Holdings and its principals beneficially own warrants to
purchase 12,000,000 shares of the Company's common stock, exercisable at $0.25
per share until April 14, 2008, and warrants to purchase 46,100 units at $11.55
per unit, exercisable until January 14, 2002, each unit consisting of two shares
of common stock and a warrant to purchase one share of common stock at $7.51,
exercisable until February 11, 2000.
Security Ownership of Beneficial Owners
The following table sets forth, as of the date hereof, the ownership of the
Company's Common Stock, based upon 8,881,879 common shares outstanding as of
March 15, 1999, by (i) each director and executive officer of the Company, (ii)
all executive officers and directors of the Company as a group, and (iii) all
persons known by the Company to beneficially own more than 5% of the Company's
Common Stock.
31
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Position With Company Beneficial Ownership(1) Class
- ----------------------------- --------------------- ----------------------- -----------
<S> <C> <C> <C>
Fai H. Chan Director 12,388,300(8)(9)(10)(11) 58.2%
30 Wall Street, 11th Floor
New York, NY 10005
Kwok Jen Fong Director 12,288,300(8)(13) 58.0%
7 Tamasek Boulevard
#43-03 Suntec Tower One
Singapore 038987
Robert H. Trapp Director 12,138,300(8)(10)(11) 57.7%
1700 Lincoln Street
32nd Floor
Denver, Colorado 80202
Michael I. Ruxin, M.D. Chairman of the Board and 934,050(2) 10.5%
12600 W. Colfax, Suite C-420 Chief Executive Officer
Lakewood, CO 80215
Jeffrey M. Busch Director 1,938,300(12) 18.0%
Suite 204 B, Oxford Plaza
University Plaza
Newark, DE 19702
Gerald F. Willman, Jr. Director and Vice President - 952,514(5) 10.6%
11463 Forty-Niner Circle Product Management
Gold River, CA (Wyndgate Technologies, Inc.)
Lori J. Willman None 952,514(6) 10.6%
11463 Forty-Niner Circle
Gold River, CA
William J. Collard (1) President through February 4, 1999
4925 Robert J. Matthew's Pkwy. (Wyndgate Technologies, Inc.) 613,006(4) 6.9%
Suite 100
El Dorado Hills, CA 95762
Gordon E. Segal, M.D. Director 312,250(7) 3.5%
3850 Kim Lane
Encino, CA 91436
Thomas F. Marcinek President and Chief Operating 140,500(3) 1.6%
1026 Folsom Ranch, Apt. #303 Officer
Folsom, CA 95630
Alan K. Geddes Vice President Finance, Chief 103,833(14) 1.2%
6 Barrie Way Financial Officer and Treasurer
Mill Valley, CA 94941
Bruce Daniels Vice President Sales 10,000(15) 0.1%
4925 Robert J. Matthew's Pkwy. and Marketing
Suite 100 (Wyndgate Technologies)
El Dorado Hills, CA 95762
Kim Geist Secretary of Global Med 2,000(17) 0.02%
13400 Clayton Street Technologies, Inc.
Thornton, CO 80241
Gary L. Cook Director --- 0.0%
1700 Lincoln Street
32nd Floor
Denver, Colorado 80203
James R. Flynt Vice President Operations 1,488(18) 0.0%
4925 Robert J. Mathews Pkwy. (Wyndgate Technologies)
Suite 100
El Dorado Hills, CA 95762
All Directors and Executive 16,407,941 72.0%
Officers as a group (14 persons)
</TABLE>
- -----------------
32
<PAGE>
(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 10% Notes and 250,000 shares underlying currently exercisable
options. Does not include 1,000,000 options which will not become
exercisable for more than 60 days of the date hereof.
(3) Includes 120,000 shares underlying currently exercisable options. Does not
include 380,000 options which will not become exercisable for more than
sixty days of the date hereof.
(4) Includes 15,000 shares underlying warrants issued in connection with the
purchase of 10% Notes. Mr. Collard has granted individual options to an
employee of Wyndgate Technologies, Inc. to purchase all or any part of
1,633 of his shares of the Company, exercisable until September 21, 2005.
(5) Includes 346,481 shares owned by Lori J. Willman, the spouse of Gerald F.
Willman, Jr., and 70,000 shares underlying currently exercisable options.
Does not include 26,000 shares underlying options which will not become
exercisable for more than sixty days of the date hereof. Gerald F. Willman,
Jr. has granted individual options to certain employees of Wyndgate
Technologies, Inc. to purchase all or any part of 109,434 of his shares of
the Company, exercisable until September 21, 2005.
(6) Includes 536,033 shares and 70,000 shares underlying currently exercisable
options owned by Gerald F. Willman, Jr., the spouse of Lori J. Willman.
Does not include 26,000 shares underlying options owned by Gerald F.
Willman, Jr. which will not become exercisable for more than sixty days of
the date hereof.
(7) Includes 6,250 shares underlying warrants issued in connection with 10%
Notes and 56,000 shares underlying currently exercisable options. Does not
include 24,000 shares underlying options which will not become exercisable
for more than sixty days of the date hereof.
(8) Includes 2,000,000 shares which may be acquired upon exercise of warrants
to purchase Common Stock, which are currently exercisable, owned by Heng
Fung Finance Company Limited, as to which he is a director and 9,000,000
shares which may be acquire upon exercise of warrants to purchase Common
Stock, which are currently owned by Fronteer Development Finance, Inc., a
majority-owned subsidiary of Heng Fung Finance Company Limited.
(9) Includes 250,000 shares underlying currently exercisable options.
(10) Includes 1,000,000 shares which may be acquired upon exercise of warrants
to purchase Common Stock, which are currently exercisable, owned by
Fronteer Capital, Inc., as to which he is a director.
(11) Includes 138,300 shares underlying currently exercisable warrants to
purchase 46,100 units, each unit consisting of two shares of common stock
and one currently exercisable warrant, owned by American Fronteer Financial
Corporation, of which he is a director.
(12) Includes: (i) 50,000 shares, 150,000 shares underlying currently
exercisable options and 600,000 shares underlying currently exercisable
warrants; (ii) 1,000,000 shares which may be acquired upon exercise of
warrants to purchase Common Stock, which are currently exercisable, owned
by Fronteer Capital, Inc., which is a wholly-owned subsidiary of Fronteer
Financial Holdings, Ltd., of which he is a director; and, (iii) 138,300
shares underlying currently exercisable warrants to purchase 46,100 units,
each unit consisting of two shares of common stock and one currently
exercisable warrant, owned by American Fronteer Financial Corporation,
f.k.a. RAF Financial Corporation, which is a wholly-owned subsidiary of
Fronteer Financial Holding, Ltd., of which he is a director.
33
<PAGE>
(13) Includes: (i) 150,000 shares underlying currently exercisable options; (ii)
1,000,000 shares which may be acquired upon exercise of warrants to
purchase Common Stock, which are currently exercisable, owned by Fronteer
Capital, Inc., which is a wholly-owned subsidiary of Fronteer Financial
Holdings, Ltd., which is a partially-owned subsidiary of Heng Fung Finance
Company Limited, of which he is a director; and, (iii) 138,300 shares
underlying currently exercisable warrants to purchase 46,100 units, each
unit consisting of two shares of common stock and one currently exercisable
warrant, owned by American Fronteer Financial Corporation, which is a
wholly-owned subsidiary of Fronteer Financial Holding, Ltd., which is a
partially-owned subsidiary of Heng Fung Finance Company Limited, of which
he is a director.
(14) Includes 83,333 shares underlying currently exercisable options. Does not
include 266,667 shares underlying options which will not become exercisable
for more than 60 days from the date hereof.
(15) Does not include 250,000 shares underlying options which will not become
exercisable for more than 60 days from the date hereof.
(16) Does not include 100,000 shares underlying options which will not become
vested for more than 60 days from the date hereof.
(17) Includes 2,000 shares underlying currently exercisable options. Does not
include 13,000 shares underlying options which will not become vested for
more than 60 days of the date hereof.
(18) Does not include 50,000 shares underlying options which will not become
vested for more than 60 days from the date hereof.
Changes In Control
On April 14, 1998, Fronteer Capital, Inc. (Fronteer Capital), a wholly owned
subsidiary of Fronteer Financial Holdings, Ltd. (Fronteer Financial), and Heng
Fung Finance Company Limited (Heng Fung Finance) committed to provide to the
Company lines of credit for up to $1,650,000 and $1,500,000, respectively, for a
total combined loan commitment of $3,150,000 over the following twelve months.
Pursuant to the loan commitment provided by Heng Fung Finance, the Company
agreed that the Company's board of directors would not exceed nine and Heng Fung
Finance had the option to cancel all the Company's then existing management and
employee contracts. Heng Fung Finance appointed five members to the board of
directors of the Company. Since completion of the April 1998 Financing
Agreements and the appointment of the additional directors by Heng Fung Finance,
new employment contracts, approved by the Board, have been entered into with Dr.
Michael I. Ruxin, Chairman and Chief Executive Officer, and Messrs. Thomas F.
Marcinek, President and Chief Operating Officer, and Alan K. Geddes, Vice
President and Chief Financial Officer.
For issuing the commitment, Heng Fung Finance received warrants to purchase
6,000,000 shares of the Company's common stock. The warrants are exercisable at
$0.25 per share for up to 10 years and the Company registered the warrants and
the underlying shares for resale under the 1933 Act. Using the Black-Scholes
model for estimating the fair value of the warrants to purchase 6,000,000 shares
of the Company's common stock, the Company recorded $5,340,000 as deferred
financing costs as of April 14, 1998, to be amortized straight-line over the
term of the loan.
For issuing the commitment, Fronteer Capital received warrants to purchase
1,000,000 shares of the Company's common stock. When the line of credit was
drawn upon, Fronteer Capital received additional warrants to purchase 5,000,000
shares of the Company's common stock. The warrants are exercisable at $0.25 per
share for up to 10 years and the Company registered the warrants and the
underlying shares for resale under the 1933 Act. Using the Black-Scholes model
for estimating the fair value of the warrants to purchase 1,000,000 shares of
the Company's common stock, the Company recorded $890,000 as deferred financing
34
<PAGE>
costs as of April 14, 1998, to be amortized straight-line over the term of the
loan. Using the Black-Scholes model for estimating the fair value of the
warrants to purchase 5,000,000 shares of the Company's common stock, the Company
recorded an additional $4,450,000 as deferred financing costs as of October 30,
1998, to be amortized straight-line over the remaining term of the loan.
The Company's Registration Statement which included the 12,000,000 warrants and
the underlying shares became effective February 16, 1999.
The loan commitment provided by Fronteer Capital has substantially the same
terms and conditions as the loan commitment provided by Heng Fung Finance except
that, if Heng Fung Finance had not appointed directors to the Company's board of
directors, Fronteer Capital had the right to appoint a maximum of three members
to the board of directors of the Company. Dr. Michael I. Ruxin, the Chief
Executive Officer of the Company, has agreed to personally guarantee the
repayment of $1,650,000 of the Fronteer Capital line of credit. The guarantee is
limited to certain of Dr. Ruxin's assets.
If the Company defaults on the repayment of any amount borrowed by the Company
pursuant to the Heng Fung Finance commitment, all original existing members of
the board of directors of the Company will have to resign, Heng Fung Finance
will have the right to appoint all new members to the board of directors, all
employment contracts of the management and officers of the Company existing at
the time of the financing will be invalid immediately, and their employment will
be subject to reconfirmation by Heng Fung Finance. If there is no default on the
repayment to Heng Fung Finance, or if there is a default and Heng Fung Finance
does not exercise its rights on default, Fronteer Capital will have the same
rights on default on the repayment of any amounts borrowed pursuant to the
Fronteer Capital commitment as Heng Fung Finance as are specified above.
On September 11, 1998, Fronteer Capital entered into an agreement with eBanker
USA.com, Inc. (eBanker), formerly known as Fronteer Development Finance, Inc., a
majority owned subsidiary of Fronteer Financial, whereby Fronteer Capital agreed
to assign to eBanker its rights to and obligations in the loan commitment to the
Company. On September 28, 1998, the Company approved the Assignment, Assumption
and Consent Agreement by and between the Company, Dr. Ruxin, Fronteer Capital
and eBanker whereby the Company consented to the assignment by Fronteer Capital
to eBanker of all of the rights, duties and obligations under the Fronteer
Capital line of credit agreement described above.
In October 1998, the Company, Heng Fung Finance and eBanker entered into a Loan
and Warrant Purchase and Sale Agreement whereby Heng Fung Finance sold, and
eBanker purchased, $1,000,000 of the Heng Fung Finance loan and warrants to
purchase 4,000,000 shares of the Company's Common Stock. Heng Fung has agreed to
return the original notes and its warrant to purchase 6,000,000 shares of the
Company's Common Stock to the Company, and the Company has issued a $500,000
promissory note and a warrant to purchase 2,000,000 shares of the Company's
Common Stock to Heng Fung Finance and a $1,000,000 promissory note and a warrant
to purchase 4,000,000 shares of the Company's Common Stock to eBanker.
In March 1999, the Company entered into agreements for a comprehensive financing
package that includes: (1) an $8,000,000 preferred stock private placement
through American Fronteer Financial Corporation (AFFC), a wholly owned
subsidiary of Fronteer Financial Holdings Ltd. (Fronteer Financial); (2)
exercise of 2,000,000 warrants at $0.25 per warrant; (3) extending the balance
on the line of credit with eBanker USA.Com, Inc. (eBanker), formerly Fronteer
Development Finance, Inc., a majority owned subsidiary of Fronteer Financial
until April 15, 2000, with a change in the default conversion rate from $0.05
per share contained in the original loan agreement to $0.25 per share; and (4) a
$750,000 bridge loan which bears interest at 12% per annum.
35
<PAGE>
Heng Fung Finance is in the process of surrendering the promissory note in the
amount of $500,000 in exercise of the warrants to acquire 2,000,000 shares of
common stock of the Company. This transaction is expected to be completed in
April 1999.
The remaining $2,650,000 loan from eBanker has been extended until April 15,
2000, with the previous conversion price of $0.05 per share increased to $0.25
per share. In consideration for the extension, the Company paid a 2% fee to AFFC
of $53,000, payable in shares of the Company's common stock.
The $750,000 bridge loan bears interest at 12% and is convertible 6 months after
the loan is drawn into shares of common stock of the Company at the 15-day
average closing bid price prior to the date of closing. The loan has not yet
been drawn.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000 (April 1999 Financing Agreement). The
agreement provides a line of credit, with interest at 12% per annum payable
monthly, due April 12, 2000. As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in shares of
common stock of the Company. The line of credit will be convertible, at Heng
Fung's option, into shares of the Company's common stock at a price based on the
average closing bid price of the Company's common stock for a period of 15
business days prior to April 13, 1999.
The Company agreed to pay a cash finder's fee of 9% of the Fronteer Line of
Credit to American Fronteer Financial Corporation (AFFC), formerly named RAF
Financial Corporation, payable as the eBanker line of credit is drawn. As of
December 31, 1998, the Company had paid AFFC $108,000 under the agreement. AFFC
is a majority-wholly owned subsidiary of Fronteer Financial.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Ruxin has personally guaranteed the Company's $1,650,000 Fronteer Line of
Credit.
In August 1997, the Company entered into a four year employment agreement with
Hollis Gailey, the spouse of William J. Collard, a former officer and director
of the Company. Ms. Gailey provided international business services for
Wyndgate. During 1997, the Company also paid Ms. Gailey $30,000 in consideration
of her entering into the employment agreement with the Company, and agreed to
pay $60,000 in deferred compensation, payable in three equal annual installments
in 1998, 1999, and 2000. In January 1998, the Company paid Ms. Gailey $20,000 in
connection with the deferred compensation amount. In September 1998, Ms. Gailey
resigned from the Company pursuant to terms contained in the employment
agreement.
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, 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 adopted a resolution in July 1996 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.
36
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See "EXHIBIT INDEX" on page 40
(b) Current Reports on Form 8-K:
A Current Report on Form 8-K dated October 2, 1998 was filed on October 7, 1998.
The Current Report contained information pursuant to Regulation S-K Item 30. The
Company made the following representations: Effective October 2, 1998, the
Company engaged KPMG Peat Marwick LLP as certifying accountant for the year
ended December 31, 1998. The Company did not consult with KPMG Peat Marwick LLP
with regard to any matter concerning the application of accounting principles to
any specific transactions, either completed or proposed, or the type of audit
opinion that might be rendered with respect to the Company's financial
statements prior to engaging the firm.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GLOBAL MED TECHNOLOGIES, INC.
A Colorado Corporation
Date: April 14, 1999 By /s/ Michael I. Ruxin
----------------------------------------
Michael I. Ruxin, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Dated: April 14, 1999 /s/ Michael I. Ruxin
----------------------------------------
Michael I. Ruxin, Chairman of the Board
and Chief Executive Officer and Director
Dated: April 14, 1999 /s/ Thomas F. Marcinek
----------------------------------------
Thomas F. Marcinek, President and Chief
Operating Officer
Dated: April 14, 1999 /s/ Gerald F. Willman, Jr.
----------------------------------------
Gerald F. Willman, Jr., Director
and Wyndgate Vice President -
Product Management
Dated: April 14, 1999 /s/ Alan K. Geddes
----------------------------------------
Alan K. Geddes, Chief Financial Officer,
Vice President, Finance and Treasurer
Dated: April 15, 1999 /s/ Fai H. Chan
----------------------------------------
Fai H. Chan, Director
Dated: April 15, 1999 /s/ Robert H. Trapp
----------------------------------------
Robert H. Trapp, Director
Dated: April 15, 1999 /s/ Kwok Jen Fong
----------------------------------------
Kwok Jen Fong, Director
Dated: April 14, 1999 /s/ Jeffrey M. Busch
----------------------------------------
Jeffrey M. Busch, Director
Dated: April 15, 1999 /s/ Gary L. Cook
----------------------------------------
Gary L. Cook, Director
Dated: April 15, 1999 /s/ Gordon E. Segal
----------------------------------------
Gordon E. Segal, Director
38
<PAGE>
Independent Auditors' Report
Board of Directors
Global Med Technologies, Inc.
We have audited the accompanying balance sheet of Global Med Technologies, Inc.
as of December 31, 1998, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Med Technologies, Inc.
as of December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
KPMG LLP
Denver, Colorado
April 9, 1999
F-1
<PAGE>
Report of Independent Auditors
Board of Directors
Global Med Technologies, Inc.
We have audited the accompanying balance sheet of Global Med Technologies, Inc.
as of December 31, 1997, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Med Technologies, Inc.
at December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Denver, Colorado
April 10, 1998
F-2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
BALANCE SHEETS
(In thousands, except per share information)
December 31,
-----------------
1998 1997
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ............................................ $ 821 2,370
Accounts receivable-trade, net of allowance for uncollectible accounts
of $50 and $175 at December 31, 1998 and 1997, respectively ...... 413 175
Accrued revenues, net of allowance for uncollectible accounts of
$15 and $125 at December 31, 1998 and 1997 ....................... 43 158
Prepaid expenses and other assets .................................... 118 256
------- -------
Total current assets .................................................... 1,395 2,959
EQUIPMENT, FURNITURE AND FIXTURES, AT COST:
Furniture and fixtures ............................................... 229 367
Machinery and equipment .............................................. 308 303
Computer hardware and software ....................................... 1,145 1,166
------- -------
1,682 1,836
Less accumulated depreciation and amortization ....................... (1,117) (665)
------- -------
Net equipment, furniture and fixtures ................................... 565 1,171
DEFERRED FINANCING COSTS,
net of accumulated amortization of $6,031 at
December 31,1998 .................................................... 4,649 --
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of accumulated amortization of $653 and $403 at
December 31, 1998 and 1997, respectively ............................. 920 136
OTHER ASSETS ............................................................ 60 --
------- -------
Total assets ............................................................ $ 7,589 4,266
======= =======
See accompanying notes to the financial statements.
F-3
<PAGE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
BALANCE SHEETS (CONTINUED)
(In thousands, except per share information)
December 31,
-----------------
1998 1997
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable ...................................................... $ 234 324
Accrued expenses ...................................................... 637 599
Accrued payroll ....................................................... 53 398
Accrued compensated absences .......................................... 438 449
Noncompete accrual .................................................... 35 150
Deferred revenue ...................................................... 1,935 2,761
Financing agreement ................................................... 500 --
Current portion of capital lease obligations .......................... 91 229
Net liabilities of discontinued operations ............................ -- 631
-------- --------
Total current liabilities ................................................ 3,923 5,541
CAPITAL LEASE OBLIGATIONS, less current portion .......................... 105 198
FINANCING AGREEMENT ...................................................... 2,200 --
-------- --------
Total liabilities ........................................................ 6,228 5,739
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value: Authorized shares - 10,000;
None issued or outstanding ......................................... -- --
Common stock, $.01 par value: Authorized shares - 40,000;
Issued and outstanding shares - 8,882 and 8,148 at December 31, 1998
and 1997, respectively ............................................. 89 82
Additional paid-in capital ............................................ 24,884 13,420
Accumulated deficit ................................................... (23,612) (14,975)
-------- --------
Total stockholders' equity (deficit) ..................................... 1,361 (1,473)
-------- --------
Total liabilities and stockholders' equity (deficit) ..................... $ 7,589 4,266
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Year Ended December 31,
----------------------
1998 1997
---- ----
REVENUES:
<S> <C> <C>
Software sales and consulting ...................................... $ 4,439 2,209
Hardware and software sales, obtained from vendors ................. 348 297
------- -------
4,787 2,506
------- -------
COST OF REVENUES:
Software sales and consulting ...................................... 1,950 1,373
Hardware and software sales, obtained from vendors ................. 300 224
------- -------
2,250 1,597
------- -------
Gross profit .......................................................... 2,537 909
OPERATING EXPENSES:
General and administrative ......................................... 1,769 2,702
Sales and marketing ................................................ 975 1,458
Research and development ........................................... 1,973 3,757
Depreciation and amortization ...................................... 567 409
Restructuring charges .............................................. 132 --
------- -------
Loss from continuing operations before other income (expense).......... (2,879) (7,417)
OTHER INCOME (EXPENSE):
Interest income .................................................... 18 168
Interest expense ................................................... (100) (86)
Financing costs .................................................... (6,031) --
Other .............................................................. 355 (81)
------- -------
Loss from continuing operations ....................................... (8,637) (7,416)
Loss from discontinued operations ..................................... -- (880)
Gain on sale of discontinued operations ............................... -- 1,013
------- -------
Net loss .............................................................. $(8,637) (7,283)
======= =======
Basic and diluted loss per common share:
Loss from continuing operations .................................... $ (1.05) (0.96)
Gain from discontinued operations .................................. -- 0.02
------- -------
Loss per share ................................................ $ (1.05) (0.94)
======= =======
Weighted average number of common shares outstanding .................. 8,228 7,728
======= =======
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
Common Stock Additional
------------------- paid-in Accumulated
Shares Amount capital Deficit Total
------ ------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 ......................................... 4,994 $ 50 4,282 (7,692) (3,360)
Issuance of warrants related to
January 1997 12% notes ......................................... -- -- 79 -- 79
Issuance of common stock related to
conversion of certain 10% notes ................................. 93 1 348 -- 349
Initial public offering including
underwriter's over allotment option-
net of offering expenses ........................................ 2,914 29 8,197 -- 8,226
Share adjustments related to May
1995 private placement of common stock .......................... 120 1 (1) -- --
Issuance of common stock from exercise of
stock options under Company's stock
option plan ..................................................... 15 -- 21 -- 21
Issuance of common stock to a corporate
marketing enterprise ............................................ 12 1 25 -- 26
Option grants under the Company's
stock option plan ............................................... -- -- 314 -- 314
Option grants to a business advisory enterprise ..................... -- -- 155 -- 155
Net loss ............................................................ -- -- -- (7,283) (7,283)
------- ------- ------- ------- -------
Balances, December 31, 1997 ......................................... 8,148 82 13,420 (14,975) (1,473)
Issuance of common stock from exercise of warrants .................. 564 5 410 -- 415
related to January 1997 12% notes
Issuance of common stock for services ............................... 170 2 123 -- 125
Fair value of warrants associated with financing agreements ......... -- -- 10,680 -- 10,680
Warrants issued for consulting services ............................. -- -- 210 -- 210
Fair value of options issued to former officer ...................... -- -- 41 -- 41
Net loss ............................................................ -- -- -- (8,637) (8,637)
------- ------- ------- ------- -------
Balances, December 31, 1998 ......................................... 8,882 $ 89 24,884 (23,612) 1,361
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
---------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................. $(8,637) (7,283)
Adjustments to reconcile net loss to net cash used
in operating activities:
Loss from discontinued operations ............................................... -- 880
Gain on sale of discontinued operations ......................................... -- (1,013)
Depreciation and amortization ................................................... 567 409
Amortization of software development costs ...................................... 320 240
Amortization of financing costs ................................................. 6,031 --
Changes in allowances for uncollectible amounts ................................. (235) --
Loss on disposal of assets ...................................................... 35 2
Issuance of common stock, options and warrants
for services and other ........................................................ 419 549
Other ........................................................................... (61) --
Changes in operating assets and liabilities:
Accounts receivable-trade .................................................... (113) 700
Accrued revenues, net ........................................................ 225 168
Prepaid expenses and other assets ............................................ 201 (60)
Accounts payable ............................................................. (90) (159)
Accrued expenses ............................................................. 38 (132)
Accrued payroll .............................................................. (345) 155
Accrued compensated absences ................................................. (11) 97
Noncompete accrual ........................................................... (115) --
Deferred revenue ............................................................. (826) 1,402
------- -------
Net cash used in continuing operations ............................................... (2,597) (4,045)
Net cash used in discontinued operations ............................................. (631) (1,255)
------- -------
Net cash used in operating activities ................................................ (3,228) (5,300)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and fixtures .................................................. (77) (781)
Proceeds from sales of property and equipment ........................................ 80 --
Capital expenditures of discontinued operations ..................................... -- (58)
Net proceeds from sale of discontinued operations .................................... -- 1,000
Increase in software development costs ............................................... (1,104) --
------- -------
Net cash provided by (used in) investing activities .................................. (1,101) 161
------- -------
See accompanying notes to the financial statements.
F-7
<PAGE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Year Ended December 31,
---------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on financing agreements ................................................... $ 2,700 450
Principal payments on short-term debt ................................................ -- (1,547)
Principal payments under capital lease obligations ................................... (231) (207)
Principal payments under capital lease obligations
of discontinued operations ......................................................... -- (107)
Principal payments on notes payable .................................................. -- (327)
Issuance of common stock, net offering costs ......................................... 311 8,272
Deferred offering costs .............................................................. -- 486
------- -------
Net cash provided by financing activities ............................................ 2,780 7,020
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................. (1,549) 1,881
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....................................... 2,370 489
------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............................................. $ 821 2,370
======= =======
</TABLE>
SUPPLEMENTAL DISCLOSURES:
The Company entered into capital lease obligations of approximately $130,000 in
1997.
During 1997, convertible 10% notes payable of approximately $324,000 and related
accrued interest of approximately $25,000 were converted into 93,003 shares of
common stock at $3.75 per share.
Cash paid for interest in 1998 and 1997 was $100,00 and $86,000, respectively.
See accompanying notes to the financials statements.
F-8
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND LIQUIDITY
On May 23, 1995, The Wyndgate Group, Limited (Wyndgate) merged with National
MRO, Inc. (National MRO) in accordance with the terms and provisions of an
Agreement of Merger and National MRO changed its name to Global Data
Technologies, Inc., which subsequently changed its name to Global Med
Technologies, Inc. (the Company). Subsequent to the merger, the businesses of
both Wyndgate and National MRO were operated as divisions of the Company.
The Company, through Wyndgate, provides information management software products
and services to the health care industry and operates in one business segment.
The Company, through its DataMed division, which was discontinued in 1997, (see
Note 2), was in the business of providing substance abuse testing management
services.
During 1998 and 1997, the Company incurred losses and used significant amounts
of cash in operations. Heng Fung Finance Company Limited, a significant
shareholder, has committed, in writing, to provide the Company with financial
support which, with the proceeds from the financing agreements discussed in Note
6, will be sufficient to fund the Company's operations through December 31,
1999.
CASH AND CASH EQUIVALENTS
For purposes of the accompanying statements of cash flows, the Company considers
all highly liquid investments with original maturities of three months or less
when purchased to be cash equivalents.
CREDIT RISK AND MARKET RISK
Accounts receivable at December 31, 1998 and 1997 are derived from SAFETRACE(R)
sales and related services and re-sales of hardware and software to blood
centers and blood center service providers located in the United States.
Historically, the Company does not require collateral or other security to
support customer receivables. In order to reduce credit risk, the Company
requires substantial down payments and progress payments during the course of an
installation of its software products. The Company establishes allowances for
doubtful accounts based upon factors surrounding the credit risk specific to
customers.
The Company has customers located in numerous locations across the United States
and sales are not concentrated in any geographic or economic region.
ACCRUED REVENUES
Accrued revenues at December 31, 1998 and 1997 are generally billable and
collectible within one year.
F-9
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
EQUIPMENT, FURNITURE AND FIXTURES
Equipment, furniture and fixtures are stated at cost. Depreciation and
amortization, which includes amortization of assets under capital leases, is
based on the straight-line method over estimated useful lives ranging from three
to five years.
LONG-LIVED ASSETS
The Company accounts for long lived assets under the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121)
which requires that long-lived assets and certain identifiable intangibles,
including goodwill, held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable. An impairment loss is recognized when estimated
undiscounted future cash flows expected to be generated by the asset is less
than its carrying value. Measurement of the impairment loss is based on the fair
value of the asset, which are generally determined using valuation techniques
such as discounted present value of expected future cash flows.
SOFTWARE DEVELOPMENT COSTS
The Company capitalized certain software development and production costs once
technological feasibility had been achieved through release to the general
public. Software development costs incurred prior to achieving technological
feasibility are included in research and development expense in the accompanying
statement of operations.
Capitalized software development costs are reported at the lower of unamortized
cost or net realizable value. Commencing upon the initial product release or
when software development revenue has begun to be recognized, these costs are
amortized based on the straight-line method over the estimated life of the
product, generally two to five years. For the years ended December 31, 1998 and
1997, the Company recorded approximately $320,000 and $240,000 of amortization,
respectively. Amortization of capitalized software costs is included in cost of
revenues in the accompanying statements of operations.
DEFERRED REVENUE
At December 31, 1998 and 1997, $1,000,000 of the deferred revenue balance is
related to an agreement between the Company and Ortho-Clinical Diagnostics,
Inc., successor to Ortho Diagnostic Systems, Inc., a wholly owned subsidiary of
Johnson & Johnson. At December 31, 1998 and 1997, approximately $485,000 and
$885,000, respectively, of the deferred revenue balance is related to agreements
between The Institute for Transfusion Medicine and the Company for a transfusion
services software product to be known as SAFETRACE TX(TM) development agreement.
The remaining deferred revenue balances at December 31, 1998 and 1997 of
$450,000 and $876,000, respectively, primarily consist of unearned SAFETRACE(R)
maintenance revenue, sales of SAFETRACE(R) licenses and related postcontract
customer support, and re-sales of hardware and software which were not yet
recognizable as revenue pursuant to the Company's revenue recognition accounting
policies discussed below.
F-10
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income
Taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. A valuation allowance is required to the extent any
deferred tax assets may not be realizable.
FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments approximate fair
value due to the short-term maturities of these items.
REVENUE RECOGNITION
Effective January 1, 1998, the Company adopted the provisions of Statement of
Position 97-2, Software Revenue Recognition (SOP 97-2), which requires that
revenue for licensing, selling, leasing, or otherwise marketing computer
software be recognized when evidence of an arrangement exists, delivery of the
product has occurred, collectibility of the related receivable is assured and
the vendor's fee is fixed or determinable. In addition, revenue is recognized
for the multiple elements of software arrangements based upon the fair value of
each element. Accordingly, revenue from products or services is recognized based
upon shipment of products or performance of services. License fee revenue is
recognized upon completion of signed contract and shipment of the software.
Revenue from royalties is recognized upon receipt of payment or according to the
payment terms specified in the contract. Revenue from maintenance contracts is
deferred and recognized ratably over the period of the agreement.
Implementation, training and consulting revenue is recognized upon completion of
the training and course or performance of services, respectively.
Prior to 1998, revenue from sales of software licenses, included in software
sales and consulting revenue, was recognized upon delivery of the software
product to the customer, unless the Company had significant related vendor
obligations remaining. When significant obligations remained after the software
product had been delivered, revenue was not recognized until such obligations
had been completed or were no longer significant. The costs of any insignificant
obligations were accrued when the related revenue was recognized. Under SOP
97-2, revenue from software licenses is recognized upon delivery, when all
elements of a software arrangement, as described above, have been established.
Revenue from software development contracts, included in software sales and
consulting revenue, is recognized on a percentage-of-completion method with
progress to completion measured based upon labor costs incurred or achievement
of contract milestones.
Revenue from the re-sale of hardware and software, obtained from vendors, is
recognized at the time the hardware and software are delivered to customers.
F-11
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIGNIFICANT CUSTOMERS
During 1998, three customers, The Institute for Transfusion Medicine, Gulf Coast
Regional Blood Center and Haemonetics Corporation, accounted for approximately
19%, 12%, and 12%, respectively, of the Company's total revenue from continuing
operations.
During 1997, two customers, Haemonetics Corporation and Belle Bonfils Memorial
Blood Center, each accounted for approximately 33% and 10% of the Company's
total revenues from continuing operations.
LOSS PER COMMON SHARE
Loss per share is computed under the provisions of Statement of Financial
Accounting Standard No. 128 (SFAS No. 128), Earnings Per Share. SFAS No. 128
requires the presentation of basic and diluted earnings per share. Basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities, or other potential common stock instruments. Diluted
earnings per share includes the dilutive effect of these instruments. In 1998
and 1997, the effect of all potential common stock instruments was antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
STOCK BASED COMPENSATION
The Company has adopted the "disclosure method" provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123). As permitted under SFAS No. 123, the Company continues to
account for stock-based compensation costs under the intrinsic value based
method of accounting as prescribed by Accounting Principles Board Opinion No. 25
(APB No. 25), Accounting for Stock Issued to Employees.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued which is effective for all fiscal years beginning after
June 15, 1999. The Company currently does not participate in these activities
and consequently does not believe adoption of the statement will have an effect
on the financial statements.
On December 22, 1998, the Accounting Standards Executive Committee (AcSec)
issued Statement of Position 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions, (SOP 98-9), which is
effective for transactions entered into in fiscal years beginning after December
15, 1998. The Company does not believe that the adoption of the statement will
have a significant effect on the disclosures in its financial statements and
will adopt it when required.
F-12
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 131, Disclosures about Segments of an Enterprise
and Related Information, which was required to be implemented during the year
ended December 31, 1998. The adoption of this statement had no significant
effect on the disclosures in the financial statements.
The Company was also required to implement SFAS No. 130, Reporting Comprehensive
Income, during the year ended December 31, 1998. The adoption of this statement
had no significant effect on the financial statements.
RESTRUCTURING CHARGES
In March 1998, the Company underwent a restructuring and reorganization which
was implemented to reduce general and administrative expenses in such areas as
payroll, outside contract services, various health related items, leased office
space and others as well. Restructuring expenses were incurred in the amount of
$132,000 for the year ended December 31, 1998. All of these expenses had been
paid as of December 31, 1998.
2. DISCONTINUED OPERATIONS
On August 18, 1997, the Company entered into an asset purchase agreement with
National Medical Review Offices, Inc. (NMRO) to sell its DataMed division to
NMRO. In conjunction with the sale, the Company and NMRO also entered into a
management agreement where NMRO agreed effective July 1, 1997 to assume the
direction and control of the business and operations of DataMed. Accordingly,
NMRO managed the business and assumed ownership responsibilities for the
operational results from July 1, 1997 through the date of final close. On
December 15, 1997, upon stockholders' approval, the Company finalized the sale
of the assets and operations of DataMed to NMRO for approximately $1 million in
proceeds net of various closing costs and the assumption of certain liabilities.
The accompanying financial statements and related footnotes reflect DataMed as
discontinued operations.
The operating results of the discontinued operations reflected in the Company's
Statement of Operations as of June 30, 1997 are summarized as follows (in
thousands):
Substance abuse testing and other revenue $ 2,953
Cost of revenue (2,151)
-------
Gross profit $ 802
=======
Net loss $ (880)
=======
The net liabilities of the discontinued operations as of December 31, 1997
consisted solely of net current liabilities of $631,000.
3. NONCOMPETE AGREEMENTS
The Company has entered into noncompete agreements with three key employees, two
of which also served on the Company's Board of Directors, for $350,000. The
terms of the agreements are for the greater of five years or the term of the
related employee's employment contract. At December 31, 1998 and 1997, $35,000
and $150,000 remain payable, respectively, whenever sufficient cash flow is
available as determined by the Company's Board of Directors.
F-13
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
The Company has net operating loss carryforwards of approximately $15,367,000,
which expire in the years 2006 to 2013. Such net operating loss carryforwards
are subject to limitation under Section 382 of the Internal Revenue Code due to
the change in ownership resulting from the February 1997 initial public
offering.
Actual income tax benefit differs from the amount calculated using the Federal
statutory tax rate as follows (in thousands):
1998 1997
---- ----
Expected tax benefit $ (2,937) (2,476)
Effect of permanent differences 2,061 17
Change in valuation allowance for deferred tax assets 1,401 2,792
State tax benefit, net of federal benefit (136) (401)
Other (389) 68
-------- -------
$ --- ---
======== =======
The components of the deferred tax assets and liabilities as of December 31,
1998 and 1997 are as follows (in thousands):
1998 1997
---- ----
Deferred tax assets:
Net operating loss carryforward $ 6,070 4,059
Allowance for uncollectible accounts receivable 125 217
Unearned revenue and accrued expenses 1,161 1,466
Excess of capital losses over capital gains --- 79
-------- ------
Gross deferred tax assets 7,356 5,821
Valuation allowance (6,977) (5,576)
-------- ------
Net deferred tax asset 379 245
-------- ------
Deferred tax liabilities:
Capitalized software development costs 363 (54)
Accelerated depreciation for tax purposes 16 299
-------- ------
Gross deferred tax liabilities 379 245
-------- ------
Deferred tax asset, net $ --- ---
======== ======
In assessing the realizability of deferred tax assets, management considered
whether it is more likely than not that the deferred tax asset would be
realized. The ultimate realization of the deferred tax asset is dependent on the
generation of future taxable income in the period in which the temporary
differences become deductible. The Company has established a valuation allowance
for deferred taxes due to the uncertainty that the full amount of the deferred
F-14
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
tax asset will be utilized. In determining the valuation allowance, management
considered factors including the reversal of existing temporary differences and
estimates of future taxable income.
5. LEASES
The Company leases equipment and office space. Rental expense under operating
leases, included in general and administrative expenses in the accompanying
statements of operations, for the years ended December 31, 1998 and 1997 was
approximately $343,000, net of sublease income of $35,000, and $325,000,
respectively. Certain leases of equipment and fixtures are classified as capital
leases. A principal stockholder of the Company has personally guaranteed
repayment of certain capital lease obligations. Included in equipment and
fixtures in the accompanying balance sheets are the following assets held under
capital leases (in thousands):
December 31,
----------------------
1998 1997
---- ----
Furniture and fixtures $ 127 127
Machinery and equipment 179 179
Computer hardware and software 518 582
----- -----
Assets under capital lease 824 888
Less accumulated amortization (669) (468)
----- -----
Assets under capital lease, net $ 155 420
===== =====
The following represents the minimum lease payments remaining under capital
leases and the future minimum lease payments for all noncancelable operating
leases included in continuing operations at December 31, 1998 (in thousands):
Capital Operating
Leases Leases
------- ---------
1999 $ 116 $ 201
2000 73 192
2001 37 171
2002 19 157
2003 and thereafter - 485
----- ------
Total minimum lease payments $ 245 $ 1,206
----- ======
Less amount representing interest (49)
-----
Present value of minimum lease payments 196
Less current portion of obligations under capital lease (91)
-----
Obligations under capital lease, less current portion $ 105
=====
F-15
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the first quarter of 1999, the Company relocated its Rancho Cordova,
California office to another location in El Dorado Hills, California with a
lower lease payment. The Company terminated its previous lease. Also during the
first quarter, the Company relocated its Lakewood, Colorado office to a smaller,
less expensive location. The previous location has been sublet for an amount
that approximates the lease obligation. These transactions are reflected in the
minimum lease payments for operating leases above.
6. FINANCING AGREEMENTS
On April 14, 1998, Fronteer Capital, Inc. (Fronteer Capital), a wholly owned
subsidiary of Fronteer Financial Holdings, Ltd. (Fronteer Financial), and Heng
Fung Finance Company Limited (Heng Fung Finance) committed to provide to the
Company lines of credit for up to $1,650,000 and $1,500,000, respectively, for a
total combined loan commitment of $3,150,000 over the following twelve months.
The loans bear interest calculated at a rate of 12% per annum and originally
matured April 15, 1999. The loans have been extended to April 15, 2000.
Pursuant to the loan commitment provided by Heng Fung Finance, the Company
agreed that the Company's board of directors would not exceed nine and Heng Fung
Finance had the option to cancel all the Company's then existing management and
employee contracts. Heng Fung Finance appointed five members to the board of
directors of the Company. Since completion of the April 1998 Financing
Agreements and the appointment of the additional directors by Heng Fung Finance,
new employment contracts, approved by the Board, have been entered into with the
Chairman of the Board and Chief Executive Officer; the President and Chief
Operating Officer; and the Chief Financial Officer, Vice President, Finance and
Treasurer.
For issuing the commitment, Heng Fung Finance received warrants to purchase
6,000,000 shares of the Company's common stock. The warrants are exercisable at
$0.25 per share for up to 10 years and the Company registered the warrants and
the underlying shares for resale under the Securities Act of 1933 (1933 Act.)
Using the Black-Scholes model for estimating the fair value of the warrants to
purchase 6,000,000 shares of the Company's common stock, the Company recorded
$5,340,000 as deferred financing costs as of April 14, 1998, to be amortized
straight-line over the term of the loan.
For issuing the commitment, Fronteer Capital received warrants to purchase
1,000,000 shares of the Company's common stock. When the line of credit was
drawn upon, in October 1998, Fronteer Capital received additional warrants to
purchase 5,000,000 shares of the Company's common stock. The warrants are
exercisable at $0.25 per share for up to 10 years and the Company registered the
warrants and the underlying shares for resale under the 1933 Act. Using the
Black-Scholes model for estimating the fair value of the warrants, the Company
recorded $890,000 as deferred financing costs as of April 14, 1998, to be
amortized straight-line over the term of the loan and $4,450,000 as deferred
financing costs as of October 30, 1998, to be amortized straight-line over the
remaining term of the loan.
The Company's Registration Statement registering the 12,000,000 warrants and
underlying shares became effective February 16, 1999.
The loan commitment provided by Fronteer Capital has substantially the same
terms and conditions as the loan commitment provided by Heng Fung Finance except
that, if Heng Fung Finance had not appointed directors to the Company's board of
directors, Fronteer Capital had the right to appoint a maximum of three members
to the board of directors of the Company. Dr. Michael I. Ruxin, the Chief
F-16
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Executive Officer of the Company, has agreed to personally guarantee the
repayment of $1,650,000 of the Fronteer Capital line of credit. The guarantee is
limited to certain of Dr. Ruxin's assets.
If the Company defaults on the repayment of any amount borrowed by the Company
pursuant to the Heng Fung Finance commitment, all original existing members of
the board of directors of the Company would have to resign and Heng Fung Finance
would have the right to appoint all new members to the board of directors; Heng
Fung Finance would also have the right to convert the outstanding amount of the
loan into shares of the Company's common stock at a conversion price of $0.05
per share which has subsequently been increased to $0.25 per share in the 1999
Financing Agreement described below, all employment contracts of the management
and officers of the Company existing at the time of the financing will be
invalid immediately, and their employment will be subject to reconfirmation by
Heng Fung Finance. If there is no default on the repayment to Heng Fung Finance,
or if there is default and Heng Fung Finance does not exercise its rights on
default, Fronteer Capital will have the same rights on default.
On September 11, 1998, Fronteer Capital entered into an agreement with eBanker
USA.com, Inc. (eBanker), formerly known as Fronteer Development Finance, Inc., a
majority owned subsidiary of Fronteer Financial, whereby Fronteer Capital agreed
to assign to eBanker its rights to and obligations under the loan commitment to
the Company. On September 28, 1998, the Company approved the Assignment,
Assumption and Consent Agreement by and between the Company, Dr. Ruxin, Fronteer
Capital and eBanker whereby the Company consented to the assignment by Fronteer
Capital to eBanker of all of the rights, duties and obligations under the
Fronteer Capital line of credit agreement described above.
In October 1998, the Company, Heng Fung Finance and eBanker entered into a Loan
and Warrant Purchase and Sale Agreement whereby Heng Fung Finance sold, and
eBanker purchased, $1,000,000 of the Heng Fung Finance loan and warrants to
purchase 4,000,000 shares of the Company's common stock. Heng Fung has returned
the original notes and its warrant to purchase 6,000,000 shares of the Company's
common stock to the Company, and the Company has issued a $500,000 promissory
note and a warrant to purchase 2,000,000 shares of the Company's common stock to
Heng Fung Finance and a $1,000,000 promissory note and a warrant to purchase
4,000,000 shares of the Company's common stock to eBanker.
The Company agreed to pay a cash finder's fee of 9% of the Fronteer Line of
Credit to American Fronteer Financial Corporation (AFFC), payable as the eBanker
line of credit is drawn. As of December 31, 1998, the Company had paid AFFC
$108,000 under the agreement. AFFC is a majority-wholly owned subsidiary of
Fronteer Financial.
On March 19, 1999, the Company drew the remaining $450,000 available on the line
of credit with eBanker. Also on March 19, 1999, the Company entered into
agreements for a comprehensive financing package that includes: (1) an
$8,000,000 preferred stock private placement through American Fronteer Financial
Corporation (AFFC); (2) exercise of 2,000,000 warrants at $.25 per warrant; (3)
extension of the balance on the $2,650,000 line of credit with eBanker USA.Com,
Inc. (eBanker), formerly Fronteer Development Finance, Inc., until April 15,
2000, with a change in the default conversion rate from $0.05 contained in the
original loan agreement to $0.25 per share; and (4) a $750,000 bridge loan which
bears interest at 12% per annum.
The Company executed a Letter Agreement with AFFC for an $8 million convertible
preferred stock private placement. The convertible preferred stock will be
convertible into common stock at $2.50 per share any time after twelve months of
F-17
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the closing date of the stock sale. There will be a forced conversion of the
convertible preferred stock into common stock if the closing bid market price of
the common stock is at $4.00 or more for at least 15 business days. The
convertible preferred will carry a 15% coupon paid semi-annually in free trading
Company common stock.
Heng Fung Finance is in the process of surrendering the promissory note in the
amount of $500,000 in exercise of the warrants to acquire 2,000,000 shares of
common stock of the Company. This transaction is expected to be completed in
April 1999.
The remaining $2,650,000 loan from eBanker will be extended until April 15, 2000
with the previous conversion price of $0.05 per share being increased to $0.25
per share. Accordingly, the balance on the loan from eBanker of $2,200,000 as of
December 31, 1998 has been classified as a long-term liability in the
accompanying balance sheet.
The $750,000 bridge loan bears interest at 12% and is convertible in 6 months
into shares of common stock of the Company at the 15-day average closing bid
price prior to the date of closing.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000. The agreement provides a line of
credit, with interest at 12% per annum payable monthly, due April 12, 2000
(April 1999 Financing Agreement). As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in shares of
common stock of the Company. The line of credit will be convertible, at Heng
Fung's option, into shares of the Company's common stock at a price based on the
average closing bid price of the Company's common stock for a period of 15
business days prior to April 13, 1999.
7. STOCKHOLDERS' EQUITY
On September 1, 1998, the Company issued 120,000 shares of its common stock to
an escrow account, in exchange for services. The cost of the services and the
fair market value of the shares were $93,750 and the cost was recorded in
prepaid expenses pending completion of the services. During the year ended
December 31, 1998, 40,000 shares were released from escrow, valued at $31,250
and have been expensed to general and administrative expense.
In December 1998, the Company issued a total of 563,624 shares of its common
stock in connection with the exercise of certain warrants at $0.55 per share
which was 75% of the market value of the shares on the date of the grant of the
warrants. The Company received $311,000 in cash proceeds and recognized general
and administrative expenses in the amount of $104,000.
During the first quarter of 1997, certain note holders converted approximately
$349,000 of principal and accrued interest into 93,003 shares of common stock.
Common stock issuable related to the detachable warrants provided in conjunction
with the 10% Notes amounts to 187,800 shares. During January 1997, the Company
received $450,000 from two unaffiliated investors related to an offering
consisting of notes which accrued interest at an annual rate of twelve percent
(the 12% Notes). In connection with the 12% Notes, the Company issued 150,000
common stock warrants which are exercisable at eighty-five percent of the price
per share of the Company's common stock included in the Offering. In the first
quarter of 1997, the Company incurred $79,000 of expense in connection with the
issuance and registration of the 150,000 warrants, which is included in other
expenses in the accompanying 1997 statement of operations.
During February 1997, the Company completed an initial public offering (the
Offering) whereby it issued 1,337,000 units, each unit consisting of two shares
of common stock and one common stock purchase warrant (the Units), at $7.00 per
Unit. Net proceeds from the Offering (including net proceeds from the
underwriter's overallotment option) were approximately $8.2 million. During
February 1997, the Company used a portion of the net proceeds from the Offering
to repay $450,000, plus accrued interest of approximately $5,000, related to the
F-18
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12% Notes. In March 1997, the Company paid approximately $355,000 to certain
holders of the 10% Notes, who did not convert their 10% Notes and accrued
interest into common stock, from a portion of the net proceeds of the Offering.
Approximately $190,000 of the $355,000 was paid to affiliates of the Company
under the same terms and conditions as nonaffiliates.
Stock Compensation Plan
In the fourth quarter of 1997, the Company adopted a stock compensation plan
(the Stock Compensation Plan). The Stock Compensation Plan, as amended in 1998,
provides for the issuance of up to 200,000 shares of common stock to employees,
consultants and others involved in the Company's business. During the fourth
quarter of 1997, the Company issued 12,500 shares of common stock to a corporate
marketing enterprise. These shares were issued under the Stock Compensation
Plan. Effective August 27, 1998, the Company issued 50,000 shares of its common
stock to a director in exchange for services. The fair value of the stock on the
date of the grant was $33,000 and is reflected in the statement of operations as
general and administrative expenses. These shares were issued pursuant to the
Stock Compensation Plan, as amended. As of December 31, 1998 and 1997,
respectively, there were a total of 100,000 and 87,500 shares of common stock
reserved for future issuance under the Stock Compensation Plan.
8. STOCK OPTION PLANS AND WARRANTS
The Amended and Restated Stock Option Plan Provides for the issuance of options
to purchase up to 2,200,000 shares of common stock to employees, officers,
directors and consultants of the Company. Options may be granted as incentive or
non-qualified stock options. Only employees of the Company are eligible to
receive Incentive Options. Unless terminated sooner, the Plan will expire on May
31, 2000. As of December 31, 1998, options to purchase 1,821,216 shares of the
Company's common stock at exercise prices ranging from $0.75 to $3.75 per share
through 2008 were outstanding, of which options to purchase 393,900 shares were
exercisable.
1998 and 1997 Activity
On May 27, 1998, incentive options to purchase 350,000 shares of the Company's
common stock and non-qualified options to purchase 5,000 shares were issued to
certain officers at an exercise price of $0.75 per share, and are exercisable
for ten years. The options vest at the rate of 20% per year.
On May 27, 1998, the board of directors granted a non-qualified option to
purchase 55,248 shares of the Company's common stock to a former officer of the
Company. The exercise price is $0.92 per share; the option was vested
immediately and is exercisable for ten years. In accordance with the provisions
of Statement of Financial Accounting Standard No. 123, Accounting for
Stock-Based Compensation, the fair value of the option was recorded as general
and administrative expense in the amount of $41,000.
On June 3, 1998, the Company authorized the issuance of incentive stock options
to purchase 340,000 shares of the Company's common stock at $1.0625 per share,
exercisable for ten years, to certain employees. The options become fully vested
on March 3, 1999.
On August 27, 1998, the Company authorized the issuance of non-qualified stock
options to purchase an aggregate of 900,000 shares of the Company's common stock
at $0.75 per shares, exercisable for ten years, to members of the Board of
Directors in consideration for serving on the Board and on the Executive
Committee of the Board. The Company also authorized the issuance of incentive
options to certain officers of the Company to purchase 600,000 shares of the
Company's common stock and non-qualified stock options to purchase an aggregate
of 32,000 shares of the Company's common stock to certain employees. All of
these grants are at $0.75 per share and exercisable for ten years. The options
vest at the rate of 20% per year.
F-19
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Pursuant to Dr. Ruxin's Employment Agreement, the Company authorized the
issuance to Dr. Ruxin of a non-qualified stock option to purchase 1,000,000
shares of the Company's common stock at $0.75 per share, exercisable for ten
years. The Company is in the process of amending the grant so the option may be
exercisable only when the Company's annual audited financial statements reflect
earnings of $0.01 per share or after a vesting period of sixty months, whichever
occurs first.
Also on August 27, 1998, non-qualified options to purchase 250,000 shares of the
Company's common stock at $0.75 per share, for a period of ten years, were
issued to certain officers for the year ended December 31, 1998. The options
vest at the rate of 33-1/3% per year.
On October 14, 1998, the Company authorized the issuance of non-qualified stock
options to purchase an aggregate of 130,000 shares of the Company's Common Stock
at $0.75 per share, exercisable for ten years, to two officers of the Company.
On November 19, 1998, non-qualified options to purchase 25,000 shares of the
Company's Common Stock at $0.85 per share, exercisable for ten years were
granted to an employee. On December 17, 1998, non-qualified options to purchase
40,000 shares of the Company's Common Stock at $0.76 per share were granted to
an employee. The options vest at the rate of 20% per year.
On January 4, 1999, the board of directors authorized incentive stock option
grants to purchase a total of 45,000 shares of the Company's common stock to
three employees at $0.78 per share. The options are for ten years and 25,000
vest at 20% per year beginning in September 1999 and the remaining options for
20,000 shares vest at the rate of 50% immediately and 50% on March 28, 1999.
Also on January 4, 1999, non-qualified options to purchase 60,000 shares of the
Company's common stock at $.78 per share were granted to two employees, one of
which is an officer, and non-qualified options to purchase 500 shares of the
Company's common stock at $.78 per share were granted to a consultant. The
employee grants vest at the rate of 20% per year beginning in 1999, and the
consultant options were 100% vested on the grant date. All of the options are
for a term of ten years.
On February 16, 1999, the board of directors approved a resolution to register
1,829,788 shares of the Company's common stock which underlie outstanding Class
A Warrants (1,456,988 shares at $4.55), 10% Note Warrants (187,800 shares at
$3.75), and specified non-qualified stock options (185,000 shares at $2.50 and
$1.81). As an incentive to exercise of the aforementioned warrants and options,
the board of directors agreed to discount the exercise price per share by an
amount up to 33-1/3% of the bid price on the common stock on the effective date
of the registration statement. Under current accounting guidance, this
transaction will result in a significant non-cash charge to the statement of
operations on the effective date of the registration statement. However, it also
results in a significant infusion of cash to the Company for its operations.
Unless otherwise stated, options to purchase shares of the Company's common
stock are granted at the fair market value of the common stock on the effective
date of the grant.
During 1997, the Company recognized expense of $314,000 related to certain
grants of stock options within the Company's Stock Option Plan. This amount
consists of approximately $146,000 included in sales and marketing expense,
$136,000 included in general and administrative expense, $22,000 included in
research and development expense and $10,000 included in costs of revenue in the
accompanying 1997 consolidated statement of operations. During 1997, holders of
14,000 common stock options, which were originally within the Company's Stock
F-20
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Option Plan, exercised their options at an exercise price of $1.54 per share.
The Company recognized approximately $26,000 in expense related to this
issuance.
Pro forma disclosures
The fair value of options granted during 1998 and 1997 were determined using the
following assumptions:
A risk-free rate of approximately 4.6% and 5.8% for the years ended December 31,
1998 and 1997, respectively; and an average expected life of five years and ten
years, respectively, and a dividend yield of 0%; and volatility of 208% and
139.4% for the years ended December 31, 1998 and 1997, respectively.
For the purposes of pro forma disclosures, the estimated fair value of the
employee options is amortized to expense over the options' vesting period. Pro
forma information is as follows (in thousands, except per share amounts):
1998 1997
---- ----
Pro forma net loss $ (8,985) (7,513)
Pro forma net loss per share (1.09) (0.97)
The weighted average fair value of options granted during the year ended
December 31 were:
1998 1997
---- ----
Stock price equals exercise price $ 0.90 1.96
Stock price greater than exercise price 0.70 1.89
Stock price less than exercise price 0.82 1.85
Because Statement No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 2001.
F-21
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Summary of Stock Option Activity
A summary of the Company's stock option activity and related information
regarding the Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Incentive Stock Non-qualified Stock
Option Plan Option Plan
----------------------------------- --------------------------------
Stock Stock
Number of Option Number of Option
Stock Price Stock Price
Options Range Options Range
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1996 504,100 $ 1.00 - 3.75 63,529 $ 1.54 - 3.75
Granted 371,248 1.54 - 2.00 381,691 1.00 - 2.875
Exercised (14,000) 1.54 --- ---
Forfeited (421,350) 1.00 - 3.75 (25,000) 2.50
--------- ----------- -------- ------------
Outstanding, December 31, 1997 439,998 1.81 - 3.75 420,220 1.00 - 3.75
Granted 1,647,000 0.75 - 1.81 55,248 0.92
Forfeited (615,498) 0.92 - 3.75 (125,752) 1.81 - 3.75
--------- ----------- -------- ------------
Outstanding, December 31, 1998 1,471,500 $ 0.75 - 3.75 349,716 $ 0.92 - 3.75
========= =========== ======== ============
</TABLE>
During the second quarter of 1996, the Company entered into an agreement with a
business advisory enterprise (the 1996 Stock Option Agreement). In connection
with the 1996 Stock Option Agreement, the Company granted 160,000 stock options
at an exercise price of $2.50 per share. During 1997, the Company and the
business advisory enterprise agreed to change certain terms and conditions of
the 1996 Stock Option Agreement. As a result, the Company recognized expense in
1997 of $155,000. These amounts are included in sales and marketing expense in
the accompanying statements of operations. These options were not granted as
part of the Company's Stock Option Plan and are not included in the summary of
the Company's stock option activity table above. To date, no options have been
exercised as a result of the 1996 Stock Option Agreement.
Warrants
On August 27, 1998, pursuant to the provisions of an agreement for consulting
services with a Director of the Company, the Company authorized the issuance of
warrants to purchase 600,000 shares of the Company's common stock, at $0.75 per
share, exercisable for ten years. Using the Black-Scholes model for estimating
the fair value, the Company recorded $247,000 as consulting expense as of August
27, 1998.
Other Option Activity
In addition, to the options granted pursuant to the Second Amended and Restated
Stock Option Plan, the Company has issued non-qualified options to purchase
2,542,000 shares of the Company's common stock, exercisable for ten years from
the date of grant, pursuant to the terms of the stock option agreements. The
F-22
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
details of these options are included in 1998 and 1997 Activity above. The
common stock underlying the options is not included in the Company's effective
registration statement on Form S-8 registering shares authorized pursuant to the
Second Amended and Restated Stock Option Plan.
9. CONTRIBUTIONS TO RETIREMENT PLAN
The Company has a 401(k) retirement plan which covers eligible employees, as
defined, of the Company (the 401(k) Plan). Employees may defer up to fifteen
percent of their annual compensation up to the maximum amount as determined by
the Internal Revenue Service. Under the 401(k) Plan, the Company, at its
discretion, may make contributions to the plan. No Company contributions were
made to the 401(k) Plan in 1998 or 1997. The Company paid 401(k) Plan
administrative expenses of approximately $500 and $4,000 for the years ended
December 31, 1998 and 1997 respectively. Such 401(k) Plan expenses are included
in general and administrative expenses in the accompanying statements of
operations.
10. EMPLOYMENT AGREEMENTS
On August 1, 1998, the Company entered into an employment agreement with Dr.
Ruxin for a period of three years commencing August 1, 1998. Under the
agreement, Dr. Ruxin receives a salary of $190,000 per year and certain other
fringe benefits. If the agreement is terminated by the Company for any reason
other than cause or permanent disability, the Company must pay Dr. Ruxin
compensation, benefits and incentives at the rate in effect at termination for
twenty-four months following the date of termination.
On August 1, 1998, the Company also entered into an employment agreement with
Alan K. Geddes for a period of three years commencing August 1, 1998. Under the
agreement, Mr. Geddes receives a salary of $125,000 per year and certain other
fringe benefits. Mr. Geddes' employment under the employment agreement may be
terminated by Mr. Geddes under the same circumstance as set forth in Dr. Ruxin's
employment agreement. If Mr. Geddes' employment agreement is terminated by the
Company for any reason other than cause or permanent disability, the Company
must pay Mr. Geddes compensation, benefits and incentives at the rate in effect
at termination for twelve months following the date of termination. The Company
also paid Mr. Geddes' temporary living expenses associated with his relocation
to Sacramento, California.
On August 1, 1998, the Company also entered into an employment agreement with
Thomas F. Marcinek for a period of three years commencing August 1, 1998. Under
the agreement, Mr. Marcinek receives a salary of $125,000 per year and certain
other fringe benefits. Mr. Marcinek's employment under the employment agreement
may be terminated by Mr. Marcinek under the same circumstance as set forth in
Dr. Ruxin and Mr. Geddes' employment agreements. If Mr. Marcinek's employment
agreement is terminated by the Company for any reason other than cause or
permanent disability, the Company must pay Mr. Marcinek compensation, benefits
and incentives at the rate in effect at termination for twelve months following
the date of termination.
On February 1, 1999, the Company entered into an employment agreement with James
R. Flynt. As compensation for services rendered under the agreement, Mr. Flynt
receives a salary at the rate of $100,000 per annum. Mr. Flynt's employment
under the employment agreement also may be terminated by reason of Mr. Flynt's
death or disability or for cause as set forth in the employment agreement.
Following the termination of the employment agreement by the Company for any
F-23
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reason other than cause, death, or the temporary or permanent disability of Mr.
Flynt, Mr. Flynt shall be entitled to compensation and benefits for eight months
following the date of termination.
As a condition to the April 14, 1998 Financing Agreements, each of the Company's
Officers and certain employees provided the lenders with undated releases of
their respective employment agreements and tendered resignations, which are
being held in escrow. Until the releases are accepted or rescinded by the
lenders, the following employment agreements between the Company and its
Officers are still in effect.
On May 24, 1995, the Company had entered into a five year employment agreement
with William J. Collard. The agreement provided for an annual salary of
$100,000. If Mr. Collard's agreement was terminated by the Company for any
reason other than cause or permanent disability, the Company would be required
to pay him a lump sum severance payment of $2.5 million. During 1997, Mr.
Collard received approximately $11,000 for tax expenses related to the May 1995
Wyndgate merger. Mr. Collard and the Company reached an agreement whereby Mr.
Collard's employment agreement would be terminated and Mr. Collard would retire
effective February 4, 1999. The Company agreed to pay Mr. Collard $64,000, in
monthly installments of $3,000 per month for approximately 22 months commencing
December 30, 1998. In addition, the Company agreed to pay Mr. Collard
approximately $237,500, in 42 monthly installments, also commencing December 30,
1998.
The Company also has an employment agreement with Gerald F. Willman, Jr. with an
annual salary of $95,000. 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
$1,000,000. Mr. Willman received approximately $8,000 for vacation related
expenses in 1996. During 1997, Mr. Willman received approximately $25,000 for
tax expenses related to the May 1995 Wyndgate merger.
11. COMMITMENTS AND CONTINGENCIES
Insurance. The Company maintains malpractice insurance coverage on a claims made
basis through a commercial insurance carrier. Should the current claims made
policy not be renewed or replaced with equivalent insurance at a future date,
claims based on occurrences during its term but subsequently reported will be
uninsured. Based upon historical experience, management believes the Company has
adequately provided for the ultimate liability, if any, from the settlement of
such potential claims.
The Company maintains product liability insurance for Wyndgate's software
related products. To date, no claims have been filed against the Company related
to its Wyndgate developed SAFETRACE(R) software product and services or any
other of its software-related products and services.
Royalty Group. As part of the consideration for the Royalty Group funding
approximately $1,100,000 of the development of SAFETRACE(R) Wyndgate agreed to
pay the Royalty Group certain royalty payments on future software license fees.
All payments are due 30 days after each quarter and are based on software
license fees collected. Royalty expenses related to this agreement were
approximately $60,000 and $65,000 for the years ended December 31, 1998 and
1997, respectively, and are included in cost of revenues in the accompanying
statements of operations. The time period under the royalty schedule is based
upon the first date of customer invoicing, which was September 14, 1995. The
royalty payment schedule is as follows: From September: 1995 - 1997, 12 percent;
1997 - 1998, 9 percent; 1998 - 1999, 6 percent; 1999 - thereafter, 3 percent.
F-24
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Institute For Transfusion Medicine. Pursuant to a Development Agreement
(Development Agreement) dated July 1996, between the Company and The Institute
for Transfusion Medicine (ITxM), the Company agreed to develop and has completed
the development of Commercial Centralized Transfusion System Software
(Commercial CTS Software), which is Wyndgate's SAFETRACE TX(TM) software
product. The Development Agreement provided for a royalty payment to ITxM for
revenues received from the sale of the Commercial CTS Software, net of certain
fees and charges. The royalty period starts with the first commercial transfer
for value of the Commercial CTS Software which was March 31, 1999. The
Development Agreement further granted ITxM a non-exclusive, perpetual and
fully-paid license to operate SAFETRACE TX(TM) for internal use, which includes
companies which ITxM controls as defined in the Development Agreement and
companies which ITxM has the ability to cause the direction of management,
whether through ownership of voting securities, by contract or otherwise.
In January 1998, the Company and ITxM agreed (the January 1998 Agreement) that
the Company would not be required to pay monetary penalties, accrued in 1997, in
the approximate amount of $485,000 to ITxM, which were incurred as a result of
delays in development of SAFETRACE TX(TM), in consideration of the Company
providing to ITxM additional maintenance services and product upgrades and
substitute liquidated damage provisions for delays.
Ortho-Clinical Diagnostics, Inc. In 1996, the Company entered into an
Exclusivity and Software Development agreement (the Exclusivity Agreement) with
Ortho-Clinical Diagnostics, Inc. (OCD) successor to Ortho Diagnostic Systems
Inc., a wholly-owned subsidiary of Johnson & Johnson. The Exclusivity Agreement
provided OCD the exclusive right to negotiate with the Company with respect to
the Company's activities and developments in information technology and
intellectual property relating to donor and transfusion medicine.
In May 1997, the Company received a request from OCD to continue its evaluation
of the Company's technology, on a non-exclusive basis, with the intent of
responding to the Company by July 14, 1997 regarding whether or not OCD would
propose some form of transaction with the Company. The Company and OCD had
agreed to further extensions of this non-exclusive agreement through December
31, 1998 to enable OCD to complete its strategic evaluation. The Company also
agreed to perform certain software development services. In connection with the
extension to December 31, 1998, the parties agreed that OCD has until June 30,
1999 to elect to require the Company to provide the software development
services as defined in the Exclusivity Agreement.
F-25
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 10-KSB
GLOBAL MED TECHNOLOGIES, INC.
39
<PAGE>
EXHIBIT INDEX
Exhibit
Number DESCRIPTION
- ------- ----------------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation, filed June 2, 1995 (1)
3.2 Articles of Amendment to the Articles of Incorporation, filed March 5,
1996 (1)
3.3 Articles of Amendment to the Articles of Incorporation, filed May 30,
1996 (1)
3.4 Bylaws, as amended (1)
4.1 Form of Representative's Warrants to Purchase Units (1)
4.2 Form of Class A Common stock Purchase Warrant Certificate (1)
4.3 Specimen copy of stock certificate for Common stock, $.01 par value
(1)
10.1 Lease Agreement, dated April 15, 1992, and Lease Addendums, dated
April 8, 1992 and October 21, 1994 (1)
10.2 Lease Agreement, dated July 19, 1995, and Lease Addendum (1)
10.3 Employment Agreement, dated May 24, 1995, between the Registrant and
Michael I. Ruxin, as amended July 8, 1995, August 1, 1995, September
21, 1995 and July 15, 1996 (1)
10.4 Employment Agreement, dated May 24, 1995, between the Registrant and
William J. Collard, as amended July 22, 1996 (1)
10.5 Employment Agreement, dated June 28, 1995, between the Registrant and
Joseph F. Dudziak (1)
10.6 Employment Agreement, dated February 8, 1996, between the Registrant
and L.E. "Gene" Mundt (1)
10.7 Amended and Restated Stock Option Plan, as amended on May 5, 1995, May
29, 1996 and December 11, 1996 (1)
10.7(A) Amendment dated March 31, 1997, to the Amended and Restated Stock
Option Plan. (2)
10.8 Voting Agreement, dated May 23, 1995 (1)
10.9 Shareholders' Agreement dated August 16, 1991, as amended on May 5,
1995 September 1996, June 24, 1996, July 25, 1996, Consent and Waiver,
dated July 12, 1996, and Rescission of Shareholder's Agreement, dated
June 22, 1996 (1)
10.10 Agreement dated April 8, 1996, between the Registrant and LMU &
Company, and Stock Purchase Option, dated April 8, 1996 (1)
10.11 Form of Drug Testing Service Contract (1)
40
<PAGE>
10.12 Form of License Agreements (1)
10.13 Warrant Agreement, dated February 11, 1997, between Global Med
Technologies, Inc. and American Securities Transfer & Trust, Inc. (1)
10.14 Exclusivity and Software Development Agreement, dated November 14,
1996, between and among Global Med Technologies, Inc. and Ortho
Diagnostic Systems Inc. (1)
10.15 Amendment, dated November 14, 1996, to Agreement dated April 8, 1996,
between the Registrant and LMU & Company, and Stock Purchase Option,
dated April 8, 1996 (1)
10.16 Amendment, dated January 14, 1997, to Agreement dated April 8, 1996,
between the Registrant and LMU & Company, and Stock Purchase Option,
dated April 8, 1996 (1)
10.17 Interim Management Agreement, dated July 7, 1997, between the
Registrant and National Medical Review Offices, Inc. (1)
10.18 Asset Purchase Agreement, dated August 18, 1997, between the
Registrant and National Medical Review Offices, Inc. (1)
10.19 Third Amendment to Exclusivity and Software Development Agreement,
dated September 17, 1997 between Global Med Technologies, Inc. and
Ortho Diagnostic Systems, Inc. (1)
10.20 Second Amended and Restated Stock Option Plan, as amended October 3,
1997 and December 2, 1997 (3)
10.21 Fourth Amendment to Exclusivity and Software Development Agreement,
dated December 22, 1997 between Global Med Technologies, Inc. and
Ortho Diagnostic Systems, Inc. (4)
10.22 Development Agreement, dated July 12, 1996 between Global Med
Technologies, Inc. and The Institute for Transfusion Medicine, dated
July 12, 1996, as amended January 12, 1998 (4)
10.23 Loan Commitment, dated April 14, 1998, between Heng Fung Finance
Company Limited and the Company, as amended on April 16, 1998 (4)
10.24 Loan Commitment, dated April 14, 1998, between Fronteer Capital, Inc.
and the Company, as amended on April 16, 1998 (4)
10.25 Amendment to Loan Commitment, dated April 16, 1998, between Heng Fung
Finance Company Limited and the Company (4)
10.26 Amendment to Loan Commitment, dated April 16, 1998, between Fronteer
Capital, Inc. and the Company (4)
10.27 Second Amendment to Loan Commitments, dated April 20, 1998 between the
Company, Heng Fung Finance Company Limited and Fronteer Capital, Inc.
(4)
10.28 Employment Agreement, dated August 1, 1998, between the Registrant and
Michael I. Ruxin (5)
10.29 Employment Agreement, dated August 1, 1998, between the Registrant and
Alan K. Geddes (5)
41
<PAGE>
10.30 Employment Agreement, dated August 1, 1998, between the Registrant and
Thomas F. Marcinek (5)
10.31 Consultancy Agreement, dated August 1, 1998, between the Registrant
and Jeffrey M. Busch, Esq. (5)
10.32 Warrant to Purchase Common Shares dated April 20, 1998, issued by the
Registrant to Heng Fung Finance Company Limited (5)
10.33 Warrant to Purchase Common Shares dated April 20, 1998, issued by the
Registrant to Fronteer Capital, Inc. (5)
10.34 Loan Agreement, dated August 12, 1998, between the Registrant and Heng
Fung Finance Company Limited (5)
10.35 Loan Agreement, dated August 12, 1998, between the Registrant and
Fronteer Capital, Inc. (5)
10.36 Personal Guaranty, dated August 12, 1998, by Michael I. Ruxin, M.D. as
Guarantor, the Registrant as Debtor and Fronteer Capital, Inc. as
Beneficiary (5)
10.37 Assignment, Assumption and Consent Agreement, dated September 28,
1998, by the Registrant, Michael I. Ruxin, M.D., Fronteer Capital Inc.
and Fronteer Development Finance, Inc. (5)
10.38 Loan and Warrant Purchase and Sale Agreement, dated October 7, 1998,
between the Registrant, Heng Fung Finance Company Limited and Fronteer
Development Finance (5)
10.39 Promissory Note, dated October 30, 1998, by the Registrant as Maker
and Fronteer Development Finance as the Holder (5)
10.40 Warrant to Purchase Common Shares, dated October 30, 1998, issued by
the Registrant to Fronteer Development Finance Inc. (5)
10.41 Promissory Note, dated October 26, 1998, by the Registrant as Maker
and Fronteer Development Finance, Inc. as the Holder (5)
10.42 Promissory Note, dated October 26, 1998, by the Registrant as the
Maker and Heng Fung Finance Company Limited as the Holder (5)
10.43 Warrant to Purchase Common Shares, dated October 26, 1998, issued by
the Registrant to Fronteer Development Finance, Inc. (5)
10.44 Warrant to Purchase Common Shares, dated October 26, 1998, issued by
the Registrant to Heng Fung Finance Company Limited (5)
10.45 Employment Agreement, dated February 1, 1999, between the Registrant
and James Flynt
10.46 Bridge Loan Agreement, dated March 18, 1999, between the Registrant
and eBanker USA.Com, Inc.
10.47 First Amendment to Loan Agreement among the Registrant, Michael I.
Ruxin, M.D., eBanker USA.Com, Inc. and Heng Fung Finance Company
Limited, dated March 18, 1999.
42
<PAGE>
10.48 Office Lease between the Registrant and Golden Hill Partnership, dated
January 11, 1999
10.49 Standard Industrial/Commercial Multi-Tenant Lease between the
Registrant and James W. Cameron, Jr., dated February 8, 1999
10.50 Settlement Agreement and Release of All Claims between the Registrant
and William J. Collard and Hollis Gailey, dated December 22, 1998
21 Subsidiaries of the Company (1)
23 Consent of Independent Auditors--KPMG LLP
23.1 Consent of Independent Auditors--Ernst & Young LLP
27 Financial Data Schedule
99 Proxy and Right of First Refusal Agreement, dated November 14, 1996,
between and among Ortho Diagnostic Systems Inc. and Michael I. Ruxin,
William J. Collard, Gerald F. Willman, Jr., Lori J. Willman, Timothy
Pellegrini and Gordon Segal (1)
-----------
(1) The documents identified are incorporated by reference from the Company's
Registration Statement on Form SB-2 (No. 333-11723).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 333-28155).
(3) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 333-45031).
(a) During the last quarter of the year ended December 31, 1997, the
Company filed one Current Report on Form 8-K, dated December 15, 1997,
reporting the closing of the sale of the Company's DataMed
International division under Item 2 thereof.
(b) Required exhibits are attached hereto or are incorporated by
reference.
(4) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
(5) Incorporated by reference from the Company's Registration Statement on Form
SB-2 (No. 3- 52761).
43
EXHIBIT 10.45
Employment Agreement dated February 1, 1999 between
the Registrant and James Flynt
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of February 1999 between Global Med
Technologies, Inc., a Colorado corporation (the "Employer") and James Flynt (the
"Employee").
WHEREAS, Employee is presently employed by Employer;
WHEREAS, Employer desires to continue the employment of Employee and
has negotiated with Employee with respect to the terms of such employment;
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Employer and Employee hereby agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
1.1 Employment. The Employer agrees to continue to employ the Employee
and the Employee agrees to continue to be employed by the Employer upon the
terms and conditions hereinafter set forth.
1.2 Term. The employment of the Employee by the Employer as provided
herein shall commence February 1, 1999 and shall end January 31, 2002, unless
otherwise superseded by section 4.1 or 4.4.3, provided, however, that at the
close of the second year of this agreement the initial term hereof shall be
automatically extended for an additional two years beyond the initial term (for
a new initial term of five years from the Closing Date) unless Employer or
Employee provides notice of the contrary at least 90 days prior to the close of
the second year.
1.3 Office and Support. Employee shall be provided an office and
support staff, as appropriate, at Employer's Wyndgate division in Sacramento,
California.
ARTICLE II
DUTIES OF THE EMPLOYEE
2.1 Duties. The Employee shall be employed with the title of Vice
President Operations, Wyndgate Technologies, with responsibilities and authority
as are customarily performed by such an employee, as defined in schedule 2.1,
and as may from time to time be assigned to Employee by Employer's President and
Chief Operating Officer or Board of Directors. Employee shall report directly to
the President and COO of Wyndgate Technologies.
2.2 Extent of Duties. Employee shall devote substantially his full
business time, attention and energies to the business of the Employer.
2.3 Disclosure of Information.
<PAGE>
2.3.1 The Employee recognizes and acknowledges that the
information, processes, developments, experimental work,
work in progress, business, list of the Employer's customers
and any other trade secret or other secret or confidential
information relating to Employer's business as they may
exist from time to time are valuable, special and unique
assets of Employer's business. Therefore, Employee agrees
that:
(i) Employee will hold in strictest confidence and not
disclose, reproduce, publish or use in any manner,
whether during or subsequent to his employment, without
the express authorization of the Board of Directors of
the Employer, any information, process, development or
experimental work, work in process, business, customer
lists, trade secret or any other secret or confidential
matter relating to any aspect of the Employer's
business, except 1) as such disclosure or use may be
required in connection with Employee's work for the
Employer and 2) where such information or items have
become publicly known and made generally available
through no wrongful act of employee.
(ii) Upon request or at the time of leaving the employ of
the Employer, the Employee will deliver to the
Employer, and not keep or deliver to anyone else, any
and all notes, memoranda, documents and, in general,
any and all material relating to the Employer's
business.
2.3.2 In the event of a breach or threatened breach by the
Employee of the provisions of this section 2.3, the Employer
shall be entitled to an injunction (i) restraining the
Employee from disclosing, in whole or in part, any
information as described above or from rendering any
services to any person, firm, corporation, association or
other entity to whom such information, in whole or in part,
has been disclosed or is threatened to be disclosed; and/or
(ii) requiring that Employee deliver to Employer all
information, documents, notes, memoranda and any and all
discoveries or other material as described above upon
Employee's leave of the employ of the Employer. Nothing
herein shall be construed as prohibiting the Employer from
pursuing other remedies available to the Employer for such
breach or threatened breach, including the recovery of
damages from the Employee.
2.4 Non-Solicitation.
2.4.1 Non-Solicitation of Employees: During the period of
employment and for a period of 12 months after the cessation
of employment for any reason, whether with or without cause,
it is agreed that the Employee shall not directly or
indirectly, either alone or in concert with others, solicit
or entice any employee of or consultant to the company to
leave the company or work for anyone or entity in
competition with the Employer. It is understood and agreed
between the parties that this non-solicitation provision is
necessary for the protection of trade secrets and other
confidential information of the Employer.
2
<PAGE>
2.4.2 Solicitation of Customers: During the period of employment
and for a period of 12 months after the cessation of
employment for any reason, whether with or without cause, it
is understood that Employee shall not directly or
indirectly, either alone or in concert with others, solicit,
entice, or in any way divert any of the company's customers
(or potential customers with whom Employee has come in
contact while employed by Employer) or suppliers to do
business with any business entity in competition with the
company. It is understood and agreed between the parties
that this non-solicitation provision is necessary for the
protection of trade secrets and other confidential
information of the Employer.
ARTICLE III
COMPENSATION OF THE EMPLOYEE
3.1 Compensation. As compensation for services rendered under this
Agreement, the Employee shall receive a salary at the rate of $100,000 per annum
to be paid in accordance with Employer's normal practices. The salary provided
in this subsection shall in no way be deemed exclusive and shall not prevent
Employee from participating in any other compensation or benefit plan of
Employer. Employee's salary shall be reviewed on an annual basis (from start
date of July 6, 1998) and if Employee's performance is deemed satisfactory, his
salary shall be increased at least in an amount equal to the cost of living
increase for the prior year, providing that at least one other senior
management's salary (CEO or CFO) is increased by a similar cost of living raise.
In addition, Employee shall be eligible for a performance increase.
3.2 Incentive Compensation. Annually, on July 6 of each year while this
employment agreement is in effect, solely at the option of the Employer, the
Employee may be entitled to receive incentive compensation of up to 50% of
Employee's base salary of $100,000 per year. This incentive compensation shall
be based on objectives which shall be established by the parties by December 31
of each year for as long as the Employee continues his employment with the
Company. The terms and conditions of the incentive compensation are to be
determined solely by the COO, CEO and/or the Board of Directors. The Employee
shall give input into the objectives.
3.3 Benefits. Employee shall be entitled to participate in all of
Employer's employee benefit plans and employee benefits, including any
retirement, pension, profit-sharing, stock option, insurance, hospital or other
plans and benefits which now may be in effect or which may hereafter be adopted,
it being understood that Employee shall have the same rights and privileges to
participate in such plans and benefits as any other executive employee during
the term of this Agreement. Participation in any benefit plans shall be in
addition to the compensation provided for in Section 3.1. Employer shall pay
premiums for health insurance as defined in Schedule 3.3.
3.4 Stock Options. Upon execution of this agreement and in addition to
the 100,000 nonqualified stock options granted, Employee will receive 50,000
nonqualified stock options to purchase an aggregate of 50,000 shares of
Employer's common stock. Twenty percent (20%) of the total options granted shall
vest and become exercisable upon the anniversary date of the initial stock
options grant.
If Employer: (i) sells substantially all of its assets, or (ii)
merges or consolidates with another entity or otherwise reorganizes whereby the
total market value of Employer's common stock exceeds $100,000,000 as a result
of such transaction (iii) terminates employee for any reason other than
malfeasance prior to employees contract expiration; then the total in options
granted to Employee shall become immediately 100% vested and immediately
exercisable on the date preceding the effective date of such sale, merger,
consolidation or other reorganization; provided, however, that Employer and
Employee acknowledge that a secondary public offering or private placement or
other such financing of Employer's securities is specifically excluded from this
accelerated vesting provision.
3
<PAGE>
Notwithstanding any other provision in this Agreement, regardless of
the vesting Employee must be employed by Employer at the time of exercise in
order to exercise such options. However, all of the stock options that are
fully vested at the time the Employee or the Employer terminates the
Employee's employment, for any reason, shall be able to be exercised by the
employee within the exercisable period, provided, however, that the Employee's
termination is not for cause. Employee shall also be entitled to receive
additional stock options as additional compensation on Employee's annual
reviews based solely on the discretion of the Board of Directors.
3.5 Expenses. Employee shall be entitled to prompt reimbursement,
upon production of original receipts, for all reasonable expenses incurred by
Employee in the performance of his duties hereunder. Employer shall advance
reasonable estimates of such expenses upon request of the Employee.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Termination. The Employee's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
4.1.1. By Employee. Upon the occurrence of any of the following
events this Agreement may be terminated by the Employee by
written notice to Employer:
(i) the sale by Employer of substantially all of its
assets;
(ii) a decision by Employer to terminate its business and
liquidate its assets;
(iii)the merger or consolidation of Employer with another
entity or an agreement to such a merger or
consolidation or any other type of reorganization;
(iv) employer makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, files
a petition or answer seeking a reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there
shall have been filed any petition or application for
the involuntary bankruptcy of Employer, or other
similar proceeding, in which an order for relief is
entered or which remains undismissed for a period of
thirty days or more, or Employer seeks, consents to, or
acquiesces in the appointment of a trustee, receiver,
or liquidator of Employer or any material party of its
assets;
(v) there are material reductions in Employee's duties and
responsibilities without his written consent or a
demotion from his current position.
(vi) termination by the Company of Employee's employment
with the Company for any reason other than cause (as
defined in Section 4.14 below);
(vii)a five percent reduction in Employee's base
compensation (not including bonus), other than any such
reduction which is part of, and generally consistent
with, a general reduction of salaries; or
4
<PAGE>
(viii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and
bonus) to which Employee is entitled immediately prior
to such reduction with the result that Employee's
overall benefits package (other than salary and bonus)
is substantially reduced (other than any such reduction
applicable to others in the Company generally).
(ix) Employer does not provide Employee with commercially
reasonable staffing, tools, or other necessary support
resources to implement and support Employer developed
products in manner consistent with industry standards
resulting in a mutually defined level of customer
satisfaction.
4.1.2 Death. This Agreement shall terminate upon the death of
Employee.
4.1.3 Disability. The Employer may terminate this Agreement upon
the permanent or temporary disability of the Employee.
Employee shall be considered disabled (whether permanent or
temporary) if: (1) he is disabled as defined in a disability
insurance policy purchased by or for the benefit of the
Employee; or (2) if no such policy is in effect, he is
incapacitated to such an extent that he is unable to perform
substantially all of his duties for 30 consecutive days for
Employer that he performed prior to such incapacitation.
4.1.4 Cause. The Employer may terminate the Employee's employment
hereunder for Cause. For purposes of this Agreement, the
Employer shall have "Cause" to terminate the Employee's
employment hereunder upon the following: (1) habitual
neglect of duties or (2) willful breach of duties. The
Employer will provide notice of these and allow Employee 30
days time to cure.
4.2 Notice of Termination. Any termination of the Employee's employment
by the Employer or by the Employee (other than termination pursuant to
subsection 4.1.2 above) shall be communicated by written Notice of Termination
to the other party. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4.3 Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by his death, the date of his death; and
(ii) if the Employee's employment is terminated for any other reason, the date
on which a Notice of Termination is received by Employer or Employee.
4.4 Payment of Salary/Severance Pay Following Termination.
4.4.1 In the event of temporary or permanent disability of the
Employee as described in subsection 4.1.3 hereof, Employee
shall be entitled to receive all compensation and benefits
payable up to the Date of Termination notwithstanding his
temporary or permanent disability during the 30 day period
preceding the Date of Termination; any such payment,
however, shall be reduced by disability insurance benefits,
if any, paid to Employee under policies (other than group
policies) for which Employer pays all premiums and Employee
is the beneficiary.
5
<PAGE>
4.4.2 Following the termination of this Agreement by the Employer
for Cause as provided in subsection 3.3.3 4.1.4 hereof, the
Employee shall be entitled only to compensation through the
Date of Termination.
4.4.3 nollowing the termination of this Agreement by the Employer
for any reason other than Cause, Death, or the temporary or
permanent disability of Employee, the Employee shall be
entitled to compensation and benefits for Eight months
following the date of termination.
4.5 Remedies. Any termination of this Agreement shall not prejudice any
other remedy to which the Employer or Employee may be entitled, either at law,
equity, or under this Agreement.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification. To the fullest extent permitted by applicable law,
Employer agrees to indemnify, defend and hold Employee harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including, without
limitation, reasonable attorneys' fees, hereafter or heretofore arising out of
or in connection with activities of Employer or its employees, including
Employee, or other agents in connection with and within the scope of this
Agreement to the fullest extent permitted by applicable law, Employer shall
advance to Employee expenses of defending any such action, claim or proceeding.
However, Employer shall not indemnify Employee or defend Employee against, or
hold him harmless from any claims, damages, expenses or liabilities, including
attorneys' fees, resulting from the gross negligence or willful misconduct of
Employee to include punitive damage claims against the Employee. The duty to
indemnify shall survive the expiration or early termination of this Agreement as
to any claims based on facts or conditions which occurred or are alleged to have
occurred prior to expiration or termination.
6
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
6.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
6.2 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in the City
and County of Sacramento, California, in accordance with the rules then existing
of the American Arbitration Association. Judgment upon the award may be entered
in any court having jurisdiction thereof. There shall be three arbitrators, one
to be chosen directly by each party at will, and the third arbitrator to be
selected by the two arbitrators so chosen. Each party shall be responsible to
pay the fees of the arbitrator he or she selects, and the fees of the third
arbitrator shall be borne equally by the parties. It is agreed and understood
that this arbitration clause means that each party waives their right to a jury
or bench trial over the controversies or claims mentioned in this paragraph. It
is further understood and agreed that the term "controversy or claim" as used in
this paragraph means any controversy or claim, including breach of contract,
breach of the covenant of good faith and fair dealing, discrimination claims,
harassment claims, claims of fraud, retaliation, whistleblowing, claims of
violations of the Americans With Disabilities Act, Older Workers Protection Act,
and any and all other state and federal laws under which a claim can be brought
by the employee or employer. This provision shall not restrict the right of
either the employee or the employer to seek injunctive relief from a court of
competent jurisdiction.
6.3 Entire Agreement. This Agreement supersedes any and all other
agreements, whether oral or in writing, between the parties with respect to the
employment of the Employee by the Employer.
6.4 Successors and Assigns. This Agreement, all terms and conditions
hereunder, and all remedies arising herefrom, shall inure to the benefit of and
be binding upon Employer, any successor in interest to all or substantially all
of the business and/or assets of Employer, and the heirs, administrators,
successors and assigns of Employee. Except as provided in the preceding
sentence, the rights and obligations of the parties hereto may not be assigned
or transferred by either party without the prior written consent of the other
party.
6.5 Notices. For purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: James Flynt
2400 Natoma Station Dr.
Apt. 95
Folsom, California 95630
If to Employer: Global Med Technologies, Inc.
12600 W. Colfax Avenue, Suite A-500
Lakewood, Colorado 80215
Attn.: Michael I. Ruxin, Chairman and CEO
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
6.6 Severability. If any provision of this Agreement is prohibited by
or is unlawful or unenforceable under any applicable law of any jurisdiction as
to such jurisdiction, such provision shall be ineffective to the extent of such
prohibition without invalidating the remaining provisions hereof.
7
<PAGE>
6.7 Section Headings. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of this
Agreement.
6.8 Survival of Obligations. Termination of this Agreement for any
reason shall not relieve Employer or Employee of any obligation accruing or
arising prior to such termination.
6.9 Amendments. This Agreement may be amended only by written agreement
of both Employer and Employee.
6.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument. This Agreement shall
become effective when copies hereof, when taken together, shall bear the
signatures of both parties hereto. It shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
6.11 Fees and Costs. If any action at law or in equity (in civil court
or in arbitration) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys fees,
costs and necessary disbursements in addition to any other relief to which that
party may be entitled.
6.12 Legal Review. The parties agree that the employee was provided
the opportunity to review this agreement with legal counsel.
"EMPLOYER"
GLOBAL MED TECHNOLOGIES, INC.
By /s/ Michael I. Ruxin
----------------------------------
Michael I. Ruxin, Chairman and CEO
"EMPLOYEE"
/s/ James Flynt
-------------------------------------
James Flynt
8
<PAGE>
Schedule 2.1
Duties of Employee
Employee shall be responsible for the operations and other projects and
responsibilities at Wyndgate Technologies under the direction of the COO.
Employee will report to the President and COO of Global Med Technologies, Inc.
9
<PAGE>
Schedule 3.3
Benefits
1. Employee will accrue vacation time at the rate of 13.33 hours per month.
Employee will also be entitled to all company paid holidays as are
customarily extended to company employees.
2. Employer shall pay 100% of the cost of health and dental insurance under
Employer's health plan for Employee and Employee's immediate family.
Employee shall have the right to select the desired health plan coverage
from the Employer's available health plan options.
10
EXHIBIT 10.46
Bridge Loan Agreement, dated March 18, 1999, between the Company and
eBanker USA.Com, Inc.
eBanker USA.COM, Inc.
1700 Lincoln Street
32nd Floor
Denver, Colorado 80203
March 18, 1999
Michael I. Ruxin, M.D.
Global Med Technologies, Inc.
12600 West Colfax
Suite C-420
Lakewood, CO 80215
Re: Bridge Loan $750,000 Convertible into Common Stock of Global Med
Technologies, Inc.
Dear Mick:
This letter confirms our understanding that eBanker USA.Com, Inc., a
Colorado corporation ("eBanker") will loan to Global Med Technologies, Inc.
("Global") Seven Hundred Fifty Thousand Dollars ($750,000) on or before April
15, 1999 for a period of six months, with interest at the rate of 12% per annum
payable monthly.
The promissory note is convertible into common stock of Global at a price
based upon the average bid price of Global's common stock for a period of 15
business days prior to April 15, 1999. The promissory note must be converted
into Global Common Stock prior to October 15, 1999.
Very truly yours,
eBanker USA.COM, Inc.
By: /s/ Fai H. Chan
---------------------------
Accepted:
Global Med Technologies, Inc.
By: /s/ Michael I. Ruxin
-------------------------------
Michael I. Ruxin, M.D.
Chairman and CEO
EXHIBIT 10.47
First Amendment to Loan Agreement among Global Med Technologies, Inc., Michael
I. Ruxin, M.D., eBanker USA.Com, Inc. and Heng Fung Finance Company Limited
dated March 18, 1999.
FIRST AMENDMENT TO LOAN AGREEMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT ("Agreement") is made and entered
into this 18th day of March, 1999 by and among GLOBAL MED TECHNOLOGIES, INC., a
Colorado corporation ("Global"), MICHAEL I. RUXIN, M.D., an individual ("Ruxin")
and eBANKER USA.COM, INC., a Colorado corporation ("eBanker") and HENG FUNG
FINANCE COMPANY LIMITED ("Heng Fung Finance").
WHEREAS, Global and Fronteer Capital, Inc. ("Capital") entered into that
certain Loan Agreement dated August 12, 1998 ("Loan agreement") whereby Capital
agreed, subject to certain terms, provisions and conditions among other things,
to make available to Global a loan in the maximum principal balance of
$1,650,000.00 pursuant to one or more Promissory Notes ("Notes") from Global to
Capital;
WHEREAS, pursuant to that certain Assignment, Assumption and Consent
Agreement dated September 11, 1998, by and between Global, Ruxin, Capital and
Fronteer Development Finance, Inc. ("Development"), Capital assigned,
Development assumed and Global and Ruxin consented to the assignment by Capital
and assumption by Development of the rights, duties and obligations of the Loan
Agreement;
WHEREAS, Heng Fung Finance entered into certain Loan Agreement dated August
12, 1998 ("Heng Fung Finance Loan Agreement") with Global whereby Heng Fung
Finance agreed, subject to certain term, provisions and conditions, among other
things to make available to Global a loan in the maximum principal amount of
$1,500,000 pursuant to one or more promissory notes ("Heng Fung Finance Notes")
from Global to Heng Fung Finance;
WHEREAS, pursuant to that certain Loan and Warrant Purchase and Sale
Agreement dated October 7, 1998 by and between Heng Fung Finance, Development
and Global, Heng Fung Finance sold and Development purchased, among other
things, a portion of the Heng Fung Finance Notes ("Acquired Notes");
WHEREAS, on March 4, 1999 Development merged into eBanker and eBanker
assumed Development's rights, duties and obligations under the Loan Agreement,
the Notes and the Acquired Notes;
WHEREAS, the obligation of Global under the Loan Agreement and the
corresponding Notes and Acquired Notes are guaranteed by Ruxin pursuant to
personal guaranties dated August 12, 1998 ("Guaranty");
WHEREAS, the parties to this Agreement desire to amend the terms of the
Loan Agreement and the corresponding Notes and the Acquired Notes; and
WHEREAS, capitalized terms not defined in this Agreement which are defined
in the Loan Agreement shall have the meaning set forth in the Loan Agreement.
<PAGE>
NOW THEREFORE in consideration of the premises, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
1. Amendment to Section 1.2. The last sentence of Section 1.2 of the Loan
Agreement (and the Heng Fung Loan Agreement as applicable to the Acquired Notes)
shall be amended so that as amended, it reads as follows:
If not sooner paid, the entire outstanding principal balance
of the Notes, together with all accrued but unpaid interest
thereon, all additional interest and all other sums due
thereunder, shall be due and payable in full on April 15,
2000.
2. Amendment to Section 6.2. Section 6.2(b)(iii) of the Loan Agreement (and
the Heng Fung Loan Agreement as applicable to the Acquired Notes) shall be
amended so that as amended, it reads as follows:
i. Convert any or all of the amounts due under any of
the Notes into common stock of the Borrower ("Conversion
Shares") at an exercise price equal to $0.25 per share.
Lender shall make such standard investment representations
to show an exemption from registration exists for the
issuance of such Conversion Shares.
3. Consideration. At consideration of eBanker's agreement to modify terms
of the Loan Agreement (and the Heng Fung Loan Agreement as applicable to the
Acquired Notes), Global hereby agrees to pay to eBanker an additional fee equal
to two percent (2%) of the total amount due and committed under the Acquired
Notes, the Notes and the Loan Agreement ($53,000). This fee shall be payable in
the common stock of global by dividing the total amount of the fee by the
average bid and asked prices of the common stock of Global over the ten business
days prior to the date of this Agreement.
4. Confirmation of Terms of Loan Agreement and Guaranty. In all other
respects, the Loan Agreement (and the Heng Fung Loan Agreement as applicable to
the Acquired Notes) and Guaranty, described above, shall remain unaffected,
unchanged and unimpaired by reason of this Agreement. All Notes made by Global
under the Loan Agreement (and the Heng Fung Loan
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Agreement as applicable to the Acquired Notes shall automatically be
modified to comply with the terms of this Agreement.
Executed as of the day and year first written.
eBANKER USA.COM, INC.,
a Colorado corporation
By: /s/ Fai H. Chan
-----------------------------
Its: Chairman, President and CEO
GLOBAL MED TECHNOLOGIES, INC.
a Colorado corporation
By: /s/ Michael I. Ruxin
------------------------------
Its: Chairman and CEO
3
OFFICE LEASE
THIS LEASE, made this 11th day of January 1999, by and between Golden Hill
Partnership(herein called "Landlord") and Global Med Technologies (herein called
"Tenant").
1 . LEASED PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord for the term, at the rental, and upon all of the conditions
set forth herein, that certain real property situated in the County of
Jefferson, State of Colorado, commonly known as Suite C-420 at 12600 W. Colfax
Avenue Lakewood, Colorado 80215 containing 1,252 rentable square feet. Said
leased property with all improvements and appurtenances is herein called "the
Demised Premises".
2. TERM. The, term of this Lease shall be for a period of three (3) years,
commencing on the 15th of February 1999 or the date Landlord delivers possession
of the Demised Premises, and ending at 12:00 midnight on the 14th day of
February 2002, three years thereafter. Landlord will use its best efforts to
complete Preparation of the Demised Premises pursuant to paragraph 0 prior to
the date the Term commences.
3. BASE RENT. In consideration of said demise, the Tenant agrees to pay the
Landlord as base rent for said Demised Premises for the full term aforesaid the
total sum of $56,340.00 payable as follows: $1,565.00 per month beginning
February 15, 1999 and each 15th thereafter through the term of this lease. A
deposit of $1,565.00 is due upon execution of this lease.
4. ADDITIONAL RENT.
a. Operating Expenses. Tenant shall pay Landlord additional annual
rental equal to the amount by which the operating expenses for the Building
exceed $ 1999 base year expenses per rentable square foot, multiplied by
Tenant's Proportionate Share of 7.% which is the ratio of the rentable area of
the Premises to the total rentable area in the Building.
Operating expenses shall be defined as:
(1) Taxes, assessments, and governmental charge whether Federal,
State, County or Municipal, which are levied on or charged against the real
estate where the Premises are located and any other taxes and assessments
attributable to said real estate or its operation excluding, however, Federal
and State income taxes;
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(2) Reasonable insurance premiums attributable to the real estate
of which the leases Premises form a part;
(3) All charges, for electricity, telephone, fuel, light or
power, and other such charges of a utility nature supplied to the property in
which Premises are located; and
(4) All other operating costs which shall be deemed to include,
but not be limited to, any and all additional expenses which have not been
specifically enumerated hereinabove which are incurred by Landlord in connection
with the maintenance, management, operation and repair (as defined in paragraph
4 A hereof) of the real estate of which the Leased Premises are a part.
b. Such rental above shall be paid at monthly intervals, on
the first day of each month, upon receipt of a statement of estimated charges
from Landlord, which statement shall be furnished by Landlord at least annually.
5. SECURITY DEPOSIT.
a. Tenant has deposited with Landlord the sum of $1,565.00 to secure
the full and faithful performance of every provision of this Lease to be
performed by Tenant. If Tenant defaults with respect to any provision of this
Lease, including but not. limited to the provisions relating to the payment of
rent, Landlord may use, apply or retain all or any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any other amount which Landlord may spend or become obligated to spend by reason
of Tenant's default, or to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall within five (5) days after written
demand therefor deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount, and Tenant's failure to do so shall
be a material breach of this Lease. Said deposit shall not be considered as
liquidated damages. If claims of Landlord exceed said deposit, Tenant shall
remain liable for the balance of such claims. Landlord shall not be required to
keep this security deposit separate from its general funds, and Tenant shall not
be entitled to interest on such deposit.
b. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the security deposit or any balance thereof
shall be returned to Tenant (or, at Landlord's option, to the last assignee of
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Tenant's interest hereunder) within sixty (60) days after the later of
expiration of the Lease term and Tenant's vacation of the premises. In the event
of termination of Landlord's interest in this Lease, Landlord shall transfer the
deposit to Landlord's successor in interest, whereupon Tenant agrees to release
Landlord from liability for the return of such deposit or the accounting
therefore.
c. As of the close of each calendar year, Landlord shall compute the
actual Operating Expenses and Taxes of the Building for the previous
twelve-month period (if the Building has been operating for less than twelve
months, the cost of operating the Building for a year shall be determined by
dividing the actual Operating Expenses and Taxes by the number of days of actual
operating and multiplying by 365). Landlord shall deliver to Tenant notice of
such cost and the amount due (taking into account the base year expenses per
square foot annual allowance, if any, from Tenant no later than April 15 of the
year immediately subsequent to the year to which such costs relate. Tenant shall
reimburse Landlord within thirty-days after notice of any deficiency between
estimated Operating Expenses and Taxes paid and actual Operating Expenses and
Taxes incurred. In the event of over-payment by Tenant, the Landlord shall apply
the excess to the next successive installments of Rent due hereunder unless
there are no further rent payments due from Tenant, in which case Landlord shall
pay such excess to Tenant within thirty days of notice. Nothing in the previous
sentence shall require Landlord to apply or reimburse any part of the Base Rent.
6. LATE CHARGES AND INTEREST. If the Tenant shall fail to pay any sum
provided herein within five (5) days of due date as stipulated herein, the
Tenant agrees to pay an additional sum of 10% for each monthly rental payment so
in default to defray the additional bookkeeping and collection costs, in
addition to the payment of any other costs incurred by the Landlord as provided
herein. All sums due to Landlord pursuant to this Lease shall accrue interest at
the rate of 12% per annum.
7. SERVICES. The Landlord agrees, during the period of this Lease:
a. to heat the Demised Premises whenever necessary during reasonable
business hours of customary heating season. To provide janitor and elevator
service, water and plumbing as determined by Landlord. To provide electricity
for all lighting and for miscellaneous office equipment and normal office
purposes required by Tenant, together with electric bulbs for lamps for
lighting the Demised Premises, which bulbs Landlord shall replace as necessary;
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b. In case Tenant requires electric energy for signs, or any
equipment not part of a normal office operation, such electricity shall be
furnished by Landlord, and the rental payable hereunder shall be increased by an
amount equivalent to the sum paid by the Landlord for such additional
electricity. Unless a flat rate can be mutually agreed upon between the parties
hereto, the additional rental shall be determined by measuring, through metering
equipment furnished and installed by the Tenant, the additional electricity so
required by Tenant and computing the cost thereof at the average rate charged
Landlord for electricity supplied to the building. In the event Tenant requires
heating and air conditioning during off hours, weekends and holidays, Landlord
shall on notice provide such services at a rate to be agreed upon in writing
with the Tenant prior to furnishing same.
c. To cause public halls to be lighted during the time and the manner
customary in the building. Landlord shall not be liable for failure to supply
such heating, janitor, elevator, lightinq or other services, or any of them,
when such failure is not due to gross negligence on its part, it being
understood that Landlord reserves the right to temporarily discontinue such
services, or any of them, at such times as may be necessary by reason of
accident, repairs, alterations or improvements, or whenever, by reason of
strikes, lockouts, riots, acts of God, governmental regulations, or any other
happening, Landlord is unable to furnish such services.
d. If any payment of rent as herein provided shall remain unpaid for
more than five days after the same shall become due, Landlord may, without
notice to Tenant, discontinue furnishing lighting, heating and janitor services,
until ail arrears of rent shall have first been paid and discharged, and that
Landlord shall not be liable for damages, and that such action shall in no way
operate to release Tenant from the obligations hereunder.
8. BUILDING ACCESS. Landlord reserves the right to close and keep locked
all entrance and exit doors of the building on weekends, legal holidays and on
other days between the hours of 6:00 p.m. and 8:00 a.m. and during such further
hours as Landlord may deem advisable for the adequate protection of said
building and the property of its tenants.
9. PARKING. Tenant shall have the non-exclusive right to use in common with
Tenants within the building, their guests, invites and customers, 4 surface and
1 covered passenger automobile parking space located in the parking lot adjacent
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to the building in which the Demised Premises are located. The Landlord takes no
responsibility in policing, the parking lot but reserves the right to promulgate
such rules and regulations as it may deem necessary from time to time.
10. CHARACTER OF OCCUPANCY. Tenant shall use and occupy the Demised
Premises in a careful, safe and proper manner, and only for the purpose of
general office use. Tenant will not use or permit the Demised Premises to be
used for any purposes prohibited by the laws of the United States or the State
of Colorado, or any of the ordinances of any city or county wherein the Demised
Premises are located. Tenant will not use or keep any substance or material in
or about the Demised Premises which may violate or affect the validity of the
insurance on said building or increase the hazard of the risk, or which may
prove offensive or annoying to other tenants of the building. Tenant will not
permit any nuisance to be committed in the Demised Premises. Tenant will pay on
demand for any damage to the Demised Premises caused by the misuse of same by
Tenant or his agents or employees.
11. BUILDING FINISH ITEMS.
a. Landlord will provide the following building standard finish to
Tenant:
(1) Directory. One building standard directory strip will be
provided by Landlord, along with hallway suite sign.
(2) Window Coverings. Building standard blinds or drapes on
exterior windows.
(3) Air Conditioning. Landlord will provide building standard
heating, ventilating and air conditioning system as well as a duct distribution
system. However, Tenant will be responsible for all construction costs
associated with changes to mechanical and electrical systems due to Tenant
requirements which exceed or differ from building standards, or from office as
is now existing.
(4) General. All of the items and finishes listed herein will
conform to standard building specifications, as to color, quality, and quantity.
In the event Tenant desires material of its choosing, different from the office
as it now exists, or desires light fixtures, electrical outlets or telephone
outlets or any other items, not already in the office, the cost of the same
shall be borne by the Tenant. The cost of modifications of building standards
for any item shall include the cost of architectural and engineering and the
increased cost of construction.
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(5) Fixtures. All improvements made to the Demised Premises shall
become a part of the property owned by the Landlord and be surrendered upon the
termination of, or the expiration of, the term of this Lease, in good condition,
ordinary wear and tear excepted.
(6) Limitations. The Landlord shall not be called upon for any
future expenditures on the Demised Premises during the term of said Lease except
as is specifically provided in this Lease.
b. Landlord shall advise Tenant, upon the execution of this Lease, of
the estimated cost of any items required by Tenant beyond the limitations set
forth above and the Tenant agrees to pay the Landlord 50% of the estimated costs
upon the execution of this Lease. Landlord hereby acknowledges receipt of
Tenant's share of such estimated costs in the sum of $-0-. Landlord may, within
sixty (60) days after Tenant's occupancy of the Demised Premises, render a final
itemized statement to the Tenant and a bill for the balance of amounts due.
Tenant agrees to pay in full, the balance of any such additional costs to the
Landlord within thirty (30) days of receipt of Landlord's bill and statement.
c. The Landlord does not provide interior decorating services, and all
of such design work shall be performed by others for the Tenant at the Tenant's
sole cost and expense. All such design work will be submitted to the Landlord by
Tenant, and, subject to Landlord's approval thereof, be paid by Tenant in
accordance with part b. of this paragraph.
12. AVAILABILITY OF PREMISES AND ACCEPTANCE. If for any reason the Demised
Premises shall not be ready or available for occupancy on the date specified
herein, this Lease shall nevertheless continue in full force and effect and the
Tenant shall have no right to rescind, cancel or terminate the same. The
Landlord shall not be liable for damages, if any, sustained by the Tenant on
account of failure to obtain possession at the date specified for commencement
of the term herein. In such event the rent for the Demised Premises shall not
commence until the Tenant is notified that Demised Premises are available and
ready for occupancy, and the date specified in the notification shall be used
for the beginning of the term of this Lease. The Tenant acknowledges that he has
examined the Demised Premises and appurtenances, and the taking of possession of
the Demised Premises by the Tenant shall be conclusive evidence, as against the
Tenant that the Demised Premises and appurtenance were in good and satisfactory
condition when possession of the same were taken.
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13. MAINTENANCE. Tenant shall not employ any person or persons other than
the janitor of Landlord for the purpose of cleaning the Demised Premises unless
otherwise agreed by landlord. Except with the written consent of Landlord, no
person or persons other than those approved by Landlord shall be permitted to
enter the Building for the purpose of cleaning the same. Tenants shall not
cause any unnecessary labor by reason of Tenant's carelessness or indifference
in the preservation of good order and Cleanliness. Landlord shall in no way be
responsible to any Tenant for any loss of property on the premises, however
occurring, or for any damage done to the effects of any Tenant by the janitor or
any other employee or any other person. Janitor service will be provided by
Landlord five (5) nights per week except for legal holidays and shall include
ordinary dusting and cleaning and shall not include cleaning of carpets or rugs,
except normal vacuuming, nor moving of furniture and other special services.
Janitor service will not be furnished on nights when rooms are occupied after
6:00 p.m. The janitor may at all times keep a passkey and shall be allowed
admittance to the leased premises.
14. ALTERATIONS.
a. The Landlord, its agents and servants, shall have the right at any
time to enter the Demised Premises to examine and inspect the same, or to make
such repairs, additions or alterations as it may deem necessary or proper for
the safety, improvement or preservation thereof, and shall at all times have the
right, at its election, to make such alterations or changes to other portions of
said building as it may from time to time deem necessary and desirable.
b. Tenant shall make no alterations in, or additions to the Demised
Premises without first obtaining the written consent of Landlord. All additions
or improvements made by the Tenant (except only unattached office furniture,
fixtures and equipment) shall be deemed a part of the real estate and permanent
structure thereon and shall remain upon, and be surrendered with, said Demised
Premises at the end of the term, by lapse of time, or otherwise. Prior to Tenant
undertaking any alterations or additions to the Demised Premises, Tenant shall
post the appropriate notices, as required by Landlord, so as to exclude and/or
protect Landlord and/or the Building from the filing of any mechanic's liens.
15. SUBLETTING. Tenant shall not sublet the Demised Premises, or any part
thereof, nor assign this Lease, or any interest therein, without the prior
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written consent of the Landlord. Tenant shall not sublease to existing tenants
in the same building, unless the Demised Premises of that tenant is directly
adjacent to the Demised Premises.
16. BREACH.
a. Re-entry. If default be made by the Tenant in the payment of rent,
or any part thereof, or if the Tenant shall fail to observe or perform any of
the conditions or agreements of this Lease, and such default shall continue for
a period of five days, then and in that event, and as often as the same may
happen, it shall be lawful for the Landlord, at its election, with or without
legal proceedings, using such force as may be necessary and without notice, to
re-enter and take possession of the Demised Premises, including all
improvements, fixtures and equipment located at, in, or about the Demised
Premises and take, operate, or relet same, in whole or in part, for the account
of Lessee at such rental, on such conditions, and to such tenant(s) as Landlord
in good faith may deem proper. Landlord shall receive all proceeds and/or
rentals accruing from such operation or reletting and shall apply such proceeds
and/or rentals, first, to the payment of all costs and expenses incurred by
Landlord in obtaining possession and in the operation or reletting of the
Demised Premises, fixtures, or equipment, including, but not limited to,
reasonable attorney's fees, commissions, and collection fees, and any
alterations or repairs reasonably necessary to enable Landlord to operate or
relet the Demised Premises, fixtures, or equipment; and second, to the payment
of all such amounts due or becoming due from Tenant under the provisions of this
Lease.
b. Insolvency. If Tenant shall be declared insolvent or bankrupt, or
if any assignment of Tenant's property shall be made for the benefit of
creditors or otherwise, or if Tenant's leasehold interest herein shall be levied
upon under execution, or seized by virtue of any writ of any Court of law, or a
Trustee in Bankruptcy or a Receiver be appointed for the property of Tenant
("involuntary breach"), whether under the operation of State or Federal
statutes, then and in any such case, Landlord may, at its option, immediately,
with or without notice (notice being expressly waived), terminate this Lease and
immediately retake possession of said premises, using such force as may be
necessary, without being guilty of any manner of trespass or forcible entry or
detainer, and without the same working any forfeiture of the obligations of
Tenant hereunder. In such event the Lessor shall be deemed to have a provable
claim in bankruptcy or receivership in an amount equal to: (1) the then-accrued
and unpaid rent, plus (2) an amount equal to the sum of the last nine (9)
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monthly installments of the rental provided for herein, which sum is fixed, not
as a penalty, but as liquidated damages by the parties hereto because the
actual damages incurred by Landlord as a result of the involuntary breach would
be difficult to ascertain.
c. Repossession or Reletting Not a Termination. Landlord's Right To
Terminate Not Forfeited. No re-entry, repossession, operation, or relettinq of
the Demised Premises or the fixtures and equipment therein shall be construed as
an election by Landlord to terminate this Lease Agreement unless a written
notice of such intention is given by Landlord to Tenant. Notwithstanding any
operation or reletting without terminating this Lease Agreement, Landlord may
at any time thereafter elect to terminate said Lease Agreement.
d. Tenant's Obligation to Pay Deficiencies. In the event the proceeds
or rentals received by Landlord pursuant to this paragraph are insufficient to
pay all costs and expenses incurred by Landlord and all amounts due and becoming
due under this Lease Agreement, Tenant shall pay to Landlord, on demand, any
such deficiency as may from time to time occur or exist.
e. Landlord's Right to Perform Tenant's Duties at Tenant's Expense.
Notwithstanding any notice provisions contained in this Lease Agreement to the
contrary, if, in the judgment of Landlord, the continuance of any default by
Tenant, other than default in the payment of money, for the full notice period
otherwise provided herein will jeopardize the Demised Premises, the Building, or
the rights of Landlord or other tenants, Landlord may, without notice, elect to
perform or cure, at the expense of Tenant, those acts in respect of which Tenant
is in default and Tenant shall, within ten (10) days following receipt of
written notice of same, reimburse Landlord for all costs and expenses incurred
by Landlord, together with interest thereon at the rate of eighteen percent
(18%) per annum until paid in full.
f. Landlord's Right to Terminate Lease. In the event of Tenant's
default as provided in this paragraph, Landlord may, at its option, without
further notice, terminate this Lease Agreement, and may thereupon immediately
reenter and take possession of the Demised Premises.
g. Landlord's Right on Termination to Recover Amount Equal to Rent
Reserved. If this Lease Agreement is terminated by Landlord on account of any
default by Tenant, Landlord shall be entitled to recover as damages from Tenant,
at the time of such termination, along with any and all other damages to which
it is entitled, the excess, if any, of the amount of rent provided herein for
the balance of the term hereof over the then reasonable rental value of the
Demised Premises for the same period. It is agreed that the "reasonable rental
value" shall be the amount of rental which Landlord can obtain as rent for the
remaining balance of the term.
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h. Landlord's Remedies Cumulative. Landlord shall have the right to
seek all remedies provided in this Lease Agreement and by the governing law.
Each and all of the remedies provided Landlord in this Lease Agreement or by law
shall be cumulative, and the exercise of one right or remedy by Landlord shall
not impair its right to exercise any other right or remedy.
i. Tenant's Waiver of Claims Against Landlord. Tenant hereby waives
all claim or demand for damages that may be caused by Landlord's re-entering and
taking possession of the Demised Premises as provided in this paragraph,
including, but not limited to, damages resulting from the destruction of, or
damage to, the Demised Premises and damages resulting from loss or injury to
property in or on the Demised Premises at the time of such reentry, belonging to
Tenant or any other person, firm or corporation.
17. SURRENDER OF POSSESSION. The Tenant shall deliver up and surrender to
the Landlord possession of the Demised Premises at the expiration or termination
of this Lease, by lapse of time or otherwise, in as good repair as when the
Tenant obtained the same at the commencement of said term, excepting only
ordinary wear and tear, or damage by the elements, (occurring without the fault
of the Tenant or other persons permitted by the Tenant to occupy or enter the
Demised Premises or any part thereof), or by act of God, or by insurrection,
riot, invasion or commotion, or of military or usurped power.
18. PAYMENTS AFTER TERMINATION. No payments of money by the Tenant to the
Landlord, after the giving of notice of termination or demand for possession by
the Landlord to the Tenant, shall reinstate, continue or extend the term of this
Lease or affect any notice given to the Tenant prior to the payment of such
money, it being agreed that after the service of notice or the commencement of a
suit or after judgment granting the Landlord possession of said premises, the
Landlord may receive and collect any sums of rent due, or any other sums of
money due under the terms of this Lease, and the payment of such sums of money,
whether as rent or otherwise, shall not waive said notice, or in any manner
affect any pending suit or any judgment theretofore obtained.
19. HOLDING AFTER TERMINATION. If the Tenant retains possession of the
Demised Premises, or any part thereof, after the termination of this Lease by
lapse of time or otherwise, the Tenant shall pay to the Landlord rent at 1.5
times the rate of rental specified in this Lease for the time the Tenant thus
remains in possession. If the Tenant remains in possession of the Demised
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Promises, or any part thereof, after the termination of the term by lapse of
time or otherwise, the Landlord may terminate the tenancy immediately and
without notice. The provisions of this Article do not waive the Landlord's
right of re-entry or any other right under this Lease.
20. REMOVAL OF TENANT'S PROPERTY. If the Tenant shall fail to remove all
personal property from the Demised Premises upon the abandonment or upon the
termination of the Lease for any cause whatsoever, the Landlord, at its option,
may remove the same in any manner that it shall choose, and store the personal
property without liability to the Tenant for loss thereof. Tenant agrees to pay
the Landlord on demand any and all expenses incurred in such removal, including
court costs and attorney's fees and storage charges on such property for any
length of time the same shall be in the Landlord's possession. The Landlord, at
its option, without notice, may sell said property, or any of the same, at
private sale and without legal process, for such prices as the Landlord may
obtain, and apply the proceeds of such sale upon any amounts due under this
Lease from the Tenant to the Landlord and upon the expense incident to the
removal and sale of said effects, rendering the surplus, if any, to the Tenant.
21. LOSS OR DAMAGE TO TENANT'S PROPERTY. All personal property of any kind
or description whatsoever in the Demised Premises shall be at the Tenant's sole
risk, and the Landlord shall not be held liable for any damage done to or loss
of such personal property, or for damage or loss suffered by the business or
occupation of the Tenant arising from any act or neglect of co-tenants or other
occupants of the building, or of their employees or the employees of the
Landlord or of other persons, or from bursting, overflowing or leaking of water,
sewer or steam pipes, or from heating or plumbing fixtures, or from electric
wires, or from gases, or odors, or other causes in any other manner whatsoever,
except in the case of willful neglect on the part of the Landlord.
22. FIRE OR OTHER CASUALTY.
a. In the event of minor damage to the Premises by fire or other cause
which renders the Premises untenantable in part but Tenant is able to conduct
its business therein, and Tenant continues to occupy them in part, the rent
shall be apportioned and reduced from the date the damage occurs in the
proportion that the unoccupied portion of the Premises bears to the entire
Premises until the damage has been repaired.
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b. In the event of substantial damage (including destruction) to the
Premises by fire or any other causes which renders the Premises untenantable in
whole or in such part that it is impractical for Tenant to conduct its business
therein, the rent shall wholly abate and be apportioned from the date the damage
occurs until the damage has been repaired.
c. In the event of either minor or substantial damage, unless this
Lease is terminated as hereafter provided in Paragraph 0 hereof, Landlord shall
commence within ten (10) days after the date the damage occurs (or within ten
(10) days after receipt of such notice is given) to repair the Premises to the
condition in which they were immediately prior to such damage, and Landlord
shall complete such repair with due diligence and dispatch. if the damage is not
repaired within a reasonable time or in any event within sixty (60) days from
the date the damage occurs in the case of minor damage and one hundred twenty
(120) days from the date the damage occurs in the case of substantial damage,
Tenant shall have the right to terminate this Lease by giving Landlord written
notice (served no later than thirty (30) days after such right to cancel and
terminate arises) of termination. Tenant may terminate this Lease immediately in
the event that the damage cannot be repaired within one hundred twenty (120)
days and Tenant provides to Landlord the written opinion of a registered
professional engineer so stating.
d. Tn the event the Premises are damaged at any time by fire or any
other cause to the extent of fifty percent (50%) or more of the replacement
value thereof as of the date such damage occurs, this Lease may be terminated at
the election of Landlord by giving notice in writing of such election to Tenant
within twenty (20) days from the date the damage occurs. Upon such termination,
any unearned rent or other payments and deposits paid in advance beyond the date
of the damage shall immediately be refunded to Tenant, and the Security
Instrument shall be returned to Tenant.
23. INSURANCE.
a. Property. Tenant shall procure and maintain at all times during the
term of this Lease at its own cost, primary insurance coverage for all of
Tenant's leasehold improvements and personal property in or about the Demised
Premises, in an amount not less than ninety percent (90%) of the replacement
cost thereof, including broad form fire and extended casualty coverage,
sprinkler leakage, vandalism and malicious mischief. The policy or policies
shall name Landlord as an additional insured. Landlord shall be entitled to
recover thereunder for any loss occasioned to Landlord by reason of Tenant's
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negligence. Any proceeds shall be first used for the repair or replacement of
leasehold improvements damaged or destroyed during the term of this Lease. Each
party for its insurers hereby waives all claims of subrogation, if any, such
insurer has against the other party so long as both parties can grant such
waivers under its insurance policies without payment of additional premiums.
b. Liability. Tenant shall procure and maintain at its cost public
liability insurance in amounts not less than $300,000.00 per person and
$500,000.00 per occurrence for personal injury, not less than $100,000.00 for
property damage coverage and worker's compensation insurance as required by law
to Protect Tenant's employees.
c. Certificates. Tenant shall deliver certificates evidencing all
insurance to Landlord before taking possession of the Demised Premises and not
less than ten (10) days before the expiration of any certificate previously
delivered.
24. INDEMNIFICATION. Tenant shall defend, indemnify and hold Landlord, its
employees and agents harmless from and against any and all claims, demands,
causes of action, damages, liabilities, judgments, and reasonable attorney fees
arising from: (i) any injury to or death of or damage to any person or property
sustained or incurring in, on or about the Demised Premises, unless due to the
gross negligence of Landlord, its agents or employees; (ii) any act, omission or
negligence of Tenant's concessionaires, licensees, customers, invitees or
guests; and (iii) any breach or default in the performance or observance of any
obligation on Tenant's part to be performed or observed under this Lease. In the
event any action or proceeding is brought against Landlord, its employees or
agents by reason of any such claim, Tenant, upon notice from Landlord, shall
defend such action or proceeding at Tenant's expense by counsel reasonably
satisfactory to Landlord (but Landlord shall accept counsel provided by Tenant's
insurance company defending such a claim).
25. CONDEMNATION. In the event the Demised Premises, or any part thereof,
shall be taken and condemned for public purposes by the proper authorities, then
and in that event the rental shall be adjusted in a fair and appropriate manner
depending upon the portion of the Demised Premises so taken. Otherwise, insofar
as the remainder of the Demised Premises is concerned, the said Lease shall
remain in full force and effect, at the option of the Landlord. It is further
agreed that in the event of condemnation proceedings, the Tenant shall have no
claim against the Landlord other than the adjustment of rent as hereinbefore
mentioned, and any award made shall be the sole property of the Landlord.
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26. ENCUMBRANCES. This Lease is subject and subordinate to the lien of any
trust, deeds or mortgages which now are, or at any time may be made a lien upon
the Demised Premises, or the building in which the Demised Premises are situate.
The Tenant agrees to execute and deliver upon request such further instrument or
instruments subordinating this Lease to the lien of any such trust deeds or
mortgages as shall be desired by any mortgagee or proposed mortgagee. The Tenant
hereby appoints the Landlord his attorney-in-fact irrevocably, to execute,
acknowledge and deliver any such instrument or instruments for the Tenant, as
the Landlord may deem necessary. Further, this Lease shall not take effect until
approved by the beneficiary of any such mortgage or deed of trust.
27. NOTICES. Any notice by the Landlord to the Tenant shall be deemed to be
duly given, if in writing and hand delivered to the Tenant in person, by handing
said notice to anyone at the Demised Premises, or posted on the Demised
Premises, or sent by registered or certified mail, in a prepaid envelope
addressed to the Tenant at the address of the Demised Premises. Any notice by
the Tenant to the Landlord shall be in writing and deemed to be duly given if
mailed by registered or certified mail, return receipt requested in a prepaid
envelope addressed to Landlord at 12600 West Colfax Avenue, Suite B-130,
Lakewood, Colorado 80215.
28. ATTORNEYS FEES AND COSTS. The Tenant shall pay all attorney's fees and
expenses of the Landlord incurred to enforce any of the obligations of the
Tenant under this Lease, or in any litigation involving Tenant or in any
litigation or negotiation, in which the Landlord shall, without its fault,
become involved, through, or on account of, the Tenant, his guests, servants or
employees.
29. NOTICE OF TERMINATION. In consideration of the rate of rental as
provided herein, at least one hundred twenty (120) days prior to the expiration
of the terms hereof, the Tenant shall give written notice to the Landlord of his
intention to surrender possession and vacate the Demised Premises during the
final sixty (60) day period of this Lease. Nothing herein contained shall be
deemed to require Landlord to extend the terms of this Lease with Tenant or to
enter into a new Lease with Tenant unless mutually agreed-upon terms are
negotiated and evidenced by a written document signed by all parties hereto.
30. RULES AND REGULATIONS. The rules and regulations attached hereto shall
be, and are hereby, made a part of this Lease. The Tenant agrees that his
employees and agents, and any others permitted by the Tenant to occupy or enter
said premises, will at all times abide by said rules. A default in the
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performance and observance thereof shall constitute a default under this Lease.
Said rules and regulations may be amended from time to time by Landlord and
shall be binding upon Tenant upon Tenant receiving notice of the same.
31. WAIVER. No waiver of any breach of any one or more of the conditions or
covenants of this Lease by the Landlord shall be deemed to imply or constitute a
waiver of any succeeding or other breach hereunder.
32. AMENDMENT OR MODIFICATION. The Tenant acknowledges and agrees that he
has not relied upon any statements, representations, agreements or warranties,
except such as are expressed herein, and that no amendment or modification of
this Lease shall be valid or binding unless expressed in writing and executed by
the parties hereto in the same manner as the execution of this Lease.
33. SALE BY LANDLORD. In the event of a sale, conveyance or other transfer
of Landlord's interest in the Building containing the Demised Premises, the same
shall operate to release Landlord from any further liability upon all of the
covenants or conditions, expressed or implied herein contained in favor of
Tenant. In such event, Tenant agrees to look solely to the responsibility of the
successor in interest of Landlord in and to this Lease. This Lease shall not be
affected by any such sale, and the Tenant agrees to attorn to the purchaser or
assignee, and execute any instrument requested to confirm such attornment.
34. RELOCATION. If the Demised Premises are less than 3,000 rentable square
feet, Tenant agrees that Landlord may relocate Tenant to comparable space,
agreed by both parties, in the Building containing at least the same amount of
rentable space as is contained in the Demised Premises, provided that the rent
is not increased above the amount payable hereunder and the costs of relocating
Tenant, including the cost of altering the new space to make it comparable to
the Demised Premises, is borne by Landlord.
35. PERSONAL PROPERTY TAXES. Tenant shall pay, before delinquent, all taxes
and charges levied, assessed, or imposed on Tenant's fixtures, equipment and all
other personal property in and on the Demised Premises, whether or not affixed
to the Real Property. Failure by Tenant to comply with this paragraph shall be,
at Landlord's option, a breach of this Lease.
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36. HEADINGS. The paragraph headings set forth herein are designed only to
facilitate examination hereof, and are not controlling as to, nor are they
limitations upon, the contents of the respective paragraphs.
37. APPLICABLE LAW. This agreement has been executed in the state of
Colorado and shall be governed by the laws thereof.
38. NUMBER AND GENDER. Unless the context otherwise requires, words
denoting the singular may be construed as denoting the plural, words denoting
the plural may be construed as denoting the singular, and words of one gender
may be construed as denoting another gender, as is appropriate.
39. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, personal representatives, successors and assigns of the
parties.
40. TENANT FINISH. Landlord will have space carpeted with "Moody Blue" pile
carpet. Also have the chip on the bottom corner of the main door filled, the
light panel that is not turning on repaired, the windowsill molding glued, any
chipped ceiling panels replaced and all panels put back into position.
Notwithstanding any provision to the contrary herein set forth, unless this
Lease is executed by the Tenant herein above named and returned to Propp Realty,
Inc. on or before the 12th day of January, 1999, then this Lease shall be null
and void and have no binding effect.
EXECUTED this 11th day of January, 1999.
LANDLORD:
By: /s/ Daryll Propp
--------------------------------------
Name: Daryll Propp
Title: Agent
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TENANT:
/s/ Global Med Technologies
------------------------------------------
By its COO
Personally By:
----------------------------
Name:
-------------------------------------
Title:
------------------------------------
17
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RULES AND REGULATIONS
1. The sidewalks, entries, passages, stairways shall not be obstructed by
the Tenant, or its agents, or used by them for any purpose other than ingress
and egress to and from their offices.
2. a. Furniture, equipment or supplies shall be moved in or out of the
building only during such hours and in such manner as may be prescribed by the
Landlord.
b. No safe or article, the weight of which may constitute a hazard to
the building or the equipment, shall be moved into the Demised Premises. The
Landlord shall have the right to designate the location of such articles in the
Demised Premises.
3. The name of the Tenant shall not be placed upon any part of the building
except upon the hall suite sign of the Demised Premises and then only by such
persons and of such size, form and color, as shall be first specified by the
Landlord.
4. Plumbing fixtures shall not be used for any purpose other than that for
which the same are intended, and any damage resulting to the same from misuse on
the part of the Tenant, its agents or employees, shall be paid for by the
Tenant. No person shall waste water by tying back or wedging the faucets, or in
any other manner.
5. No animals shall be allowed in the offices, halls or corridors in the
building.
6. Bicycles or other vehicles shall not be permitted in the offices, halls
or corridors in the building, nor shall any obstruction of sidewalks or
entrances of the building be permitted.
7. No person shall disturb the occupants of this or adjoining buildings or
Demised Premises by the use of any television, radio or musical instrument or by
the making of loud or improper noises.
8. The Tenant shall not allow anything to be placed on the outside window
ledges of the building, nor shall anything be thrown by the Tenant, its agents
or employees, out of the windows or doors, or down the courts or skylights of
the building.
9. No additional lock or locks shall be placed by the Tenant on any door in
the building unless written consent of the Landlord shall first have been
obtained. A reasonable number of keys to the Demised Premises and to the toilet
<PAGE>
rooms will be furnished by the Landlord, and neither the Tenant, the agents or
employees, shall have any duplicate key made. At the termination of this
tenancy, the Tenant shall promptly return to the Landlord all keys to offices,
toilet rooms or vaults.
10. No awninqs shall be placed over the windows.
11. The Tenant, before closing and leaving the Demised Premises at any
time, shall close all operable windows in order to avoid possible damage from
fire, storm, freezing or the elements.
12. The use of oil, gas or inflammable liquids for heating, lighting or any
other purpose is expressly prohibited. Explosives or other articles deemed extra
hazardous shall not be brought into the building.
13. The Tenant shall not mark upon, paint signs upon, cut drill into, or in
any way deface the walls, ceiling, partitions or floors of the Demised Premises
or of the building, and any defacement, damage or injury caused by the Tenant,
its agents or employees, shall be paid for by the Tenant.
14. The Landlord shall at all times have the right, by its officers or
agents, to enter the Demised Premises to inspect and examine the same and to
show the same to persons wishing to Lease, purchase or mortgage.
15. The Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to time be
needful and desirable for the safety, care and cleanliness of the Demised
Premises and for the preservation of good order therein.
16. Tenant agrees to furnish at its cost and use chair pads under all
chairs and stools in the carpeted areas of the building throughout the term of
this Lease unless the prior written consent of Landlord is obtained.
Attachment
2
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
February 8, 1999 is made by and between James W. Cameron, Jr. ("Lessor") and
[text deleted and initialed by /s/AG;/s/CWC] Global Med Technologies, Inc.
("Lessee"), (collectively the "Parties," or Individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of, 4925 Robert J. Mathews Pkwy. #100,
located in the City of El Dorado Hills, County of El Dorado, State of CA, with
zip code 95762, as outlined on Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): Approximately 15,000
sq ft of a 40,000 sq ft building in a 60,000 sq ft complex named Cameron
Business Center.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Industrial
Center." (Also see Paragraph 2.)
1.2(b) Parking: 60 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking Spaces").
(Also see Paragraph 2.6.)
1.3 Term: 7 years and 2 months ("Original Term") commencing April 1, 1999
("Commencement Date") and ending May 31, 2006 ("Expiration Date"). (Also see
Paragraph 3.)
1.4 Early Possession: per Addendum pp 50 ("Early Possession Date"). (Also
see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $ Addendum pp 50 per month ("Base Rent"), payable on the
first day of each month commencing Addendum pp 50 (Also see Paragraph 4.)
[x] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum pp 50, attached hereto.
1.6(a) Bass Rent Paid Upon Execution:$8,200 as Base Rent for the period
June, 1999.
1.6(b) Lessee's Share of Common Area Operating Expenses: twenty-five
percent (25%) ("Lessee's Share") as determined by [x] prorata square footage of
the Premises as compared to the total square footage of the 60,000 square feet
complex.
1.7 Security Deposit: $13,582 ("Security Deposit"). (Also see Paragraph 5.)
1.8 Permitted Use: Office and related uses ("Permitted Use") (Also see
Paragraph 6.)
INITIALS: AG
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1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[x] Cemo-Coker represents Lessor exclusively ("Lessor's Broker");
[x] Corporate Advisory Group represents Lessee exclusively ("Lessee's Broker");
or
[c] ----------------- represents both Lessor and Lessee ("Dual Agency"). (Also
see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of
$--------) for brokerage services rendered by said Broker(s) in connection with
this transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by Lessee, per Addendum pp 60 ("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 61, and Exhibits A through B, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and tree
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
2 INITIALS: AG
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<PAGE>
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 [deleted and initialed [/s/AG;/s/CWC]
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) an those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) if Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
3 INITIALS: AG
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<PAGE>
2.8 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas - Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term, The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and if Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
4 INITIALS: AG
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<PAGE>
3.3 Delay In Possession. If for any reason Lessor cannot deliver possession
of the Premises to Lessee by the Early Possession Date, if one is specified in
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not he subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the
same may be adjusted from time to time, to Lessor in lawful money of the United
States, without offset or deduction, on or before the day on which it is due
under the terms of this Lease, Base Rent and all other rent and charges for any
period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses, Lessee shall pay to Lessor during the
term hereof, In addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:
(i) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service
the Common Areas.
(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.
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(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be paid
by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(viii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense,
(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver
to Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incured during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessor shall be credited the amount of such over-
payment against Lessee's Share of Common Area Operating Expenses next becoming
due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year
were less than Lessee's Share as indicated on said statement, Lessee shall pay
to Lessor the amount of the deficiency within ten (10)days after delivery by
Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee falls
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
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additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the Initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring Premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenant,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include. but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
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with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition. Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, of proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
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6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
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7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can he removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or b subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
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(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
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8. Insurance; Indemnity.
8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, [added and initialed/s/CWC;/s/AG and all
other policies Lessor deems appropriate] in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof it, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.
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(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, Insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
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amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
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(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage - Insured Loss. If Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. It Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day period,
and if Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage - Uninsured Loss. If Premises Partial Damage that is not
an Insured Loss occurs, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in full force and effect), Lessor may at Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
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In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the data of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
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9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 Termination - Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real Property
Taxes" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, the execution of this Lease, or any
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modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
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(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at this time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
it disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
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(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations, under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security hold by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason at the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
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the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to use the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
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(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, it applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1 (b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continuous for a period of thirty (30) days after written notice thereof by or
on behalf of Lessor to Lessee; provided, however, that it the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
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and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (1) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13.1 (b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph
13.1(b),(c) or (d). In such case, the applicable grace period under the unlawful
detainer statue shall run concurrently after the one such statutory notice, and
the failure of Lessee to cure the Default within the greater of the two (2) such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor falls within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
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the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. [paragraph deleted and initialed /s/AG;/s/CWC]
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the Indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
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16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including but not limited to Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises, in the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days following
the date on which it was due, shall bear interest from the date due at the prime
rate charged by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
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23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor an account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
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27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall effect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
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without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced
in connection with such Default or resulting Breach. Broker(s) shall be
intended third party beneficiaries of this Paragraph 31.
32. Lessor's Access, Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lesser
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lesser, shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the
holder of any such lesser interest, shall constitute Lessor's election to have
such event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
29 INITIALS: AG
CWC
<PAGE>
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the following
meaning: (a) the right to extend the term of this Lease or to renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor; (b)
the right of first refusal to lease the Premises or the right of first offer to
lease the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor; (c) the
right to purchase the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other property
of Lessor.
30 INITIALS: AG
CWC
<PAGE>
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (1) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or affect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
31 INITIALS: AG
CWC
<PAGE>
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
32 INITIALS: AG
CWC
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES, NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures
Executed at: Executed at:
------------------------- ---------------------
on: 2/19/99 on: 2/19/99
--------------------------------- -----------------------------
By LESSOR: /s/ James W. Cameron, Jr. By LESSEE:
James W. Cameron, Jr. Wyndgate Technologies
- ------------------------------------- ---------------------------------
Global Med Technologies, Inc.
- ------------------------------------- ---------------------------------
By: /c/ Clark H. Cameron By: /s/ Alan Geddes
--------------------------------- ------------------------------
Name Printed: his attorney in fact Name Printed: Alan Geddes
------------------------ --------------------
Title: Title: CFO
------------------------------- ---------------------------
By: By:
--------------------------------- -----------------------------
Name Printed: Name Printed:
------------------------ --------------------
Title: Title:
------------------------------ --------------------------
Address: Address:
---------------------------- ------------------------
- ------------------------------------- ---------------------------------
Telephone:( ) Telephone: ( )
---------------------- ------------------
Facsimile:( ) Facsimile: ( )
---------------------- ------------------
BROKER: BROKER:
Executed at: Executed at:
---------------------- --------------------
on: on:
--------------------------------- -----------------------------
By: By:
--------------------------------- -----------------------------
Name Printed: Name Printed:
------------------------ --------------------
Title: Title:
------------------------------ --------------------------
Address: Address:
---------------------------- ------------------------
- ------------------------------------- ---------------------------------
Telephone:( ) Telephone: ( )
---------------------- ------------------
Facsimile:( ) Facsimile: ( )
---------------------- ------------------
NOTE:These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So.
Figueroa St., M-1, Los Angeles, CA 90071. (213) 687-8777.
C1993 by American Industrial Real Estate Association. All rights reserved. No
part of these words may be reproduced in any form without permission in writing.
<PAGE>
FLOOR PLAN 4925 ROBERT J. MATHEWS 15,000 SF
[GRAPHIC OMITTED]
EXHIBIT "A'
INITIALS: AG
CWC
<PAGE>
[GRAPHIC OMITTED]
EXHIBIT "B'
INITIALS: AG
CWC
<PAGE>
FIRST ADDENDUM
to the Triple-Net Lease, dated February 8, 1999
between James W. Cameron, Jr., as Lessor, and
[deleted and initialed /s/ CWC; /s/ AG] Global Med Technologies, Inc. as Lessee
for approximately 15,000 square feet of office & technical space
located at 4925 R. J. Mathews Pkwy., Suite 100, El Dorado Hills, Calif.
49. PREMISES. The Premises are as shown on Exhibit A. All measurements are to
the outside of the outside walls (the drip line), and to the middle of interior
demising walls. Measurements include square feet as a pro rata share of the
bathrooms, bathroom halls, showers, and the electrical and telephone room that
are common to the building. Square footage amounts are approximate. For Lease
purposes, the rented portion of the building is 15,000 square feet.
50. RENT. Rent shall be on a "triple-net" basis, with Lessee paying his
proportionate costs of taxes/assessments, insurance, and maintenance of the
building and common area. Lessee's responsibilities for payment of costs are
further discussed in Paragraphs 4, above, and 54, below. Lessee is leasing and
has the right to occupy the entire 15,000 square feet during the entire duration
of the Lease. The first two month's of occupancy shall be rent free, with Lessee
paying for use of gas and electric utilities. Lessee shall be charged rent for
10,000 square feet during the third through 14th months, and thereafter 15,000
square feet during the remaining six years of the Lease. At the time of signing
this Lease, Lessee shall pay to Lessor the third month's rent ($8,200) and the
Security Deposit ($13,852), a total of $22,052. Following is the rental
schedule. Triple-net charges that are now approximately $0.14 per square foot
per month are in addition to the Monthly Base Rent.
Dates Monthly Base Rent
----- -----------------
Apr 1, 1999 - May 31, 1999 $00
Jun 1, 1999 - May 31, 2000 $8,200
Jun 1, 2000 - May 31, 2001 12,546
Jun 1, 2001 - May 31, 2002 12,797
Jun 1, 2002 - May 31, 2003 13,053
Jun 1, 2003 - May 31, 2004 13,314
Jun 1, 2004 - May 31, 2005 13.580
Jun 1, 2005 - May 31, 2006 13,852
CWC
AG
<PAGE>
FREE RENT. Lessee shall have the right to occupy the Premises at zero rent from
April 1, 1999 through May 31, 1999, with occupancy as soon as the following have
occurred:
(a) This Lease must be fully executed.
(b) The Deposit of $22,052 has been paid in full.
52. FINANCIAL INFORMATION. Prior To February 15, 1999 Lessee shall provide
Lessor with Lessee's latest 10Q, 10K, annual report, and proxy, and a
representation that information is current and no material charges have
occurred.
53. TENANT IMPROVEMENTS. Following shall apply. With the exception of rest
rooms, break room, common rest rooms and showers, Lessor shall paint interior
walls of the entire 15,000 square feet. Carpet will not be replaced now or
during the term of the Lease. All floor covering to remain as now exists. If
Lessee is not otherwise in default of Lease terms and conditions, Lessor, at
Lessor's expense, shall segregate the utilities and make changes approximately
as shown by Lessee on the attached site plan, and more specifically described in
construction plans to be designed by Lessor and approved by Lessee. Lessee to
work with Lessor to site walls so that HVAC , lighting, fire sprinkler heads,
etc., do not need to be modified. New walls are to be constructed of steel
studs, 5/8 inches sheet rock, and painted/textured to approximately match
existing. Site plans and improvements by Lessor at Lessor's expense, include
separating utilities from Suite 115 improvements, with completion no later than
four (4) months after Lessor receives a permit for same. Until utilities are
segregated, Lessee shall agree to make utilities payments to Lessor as required
in paragraph 55, below.
54. CC&R'S COMPLIANCE. Lessee agrees to comply with the El Dorado Hills Business
Park Standards and CC&R's, and to correct any violation thereof within ten (10)
calendar days after written notice of violation.
55. OTHER LESSEE RESPONSIBILITIES. In addition to the requirements of payment of
triple-net charges, Lessee shall be responsible for payment of gas, electric,
and telephone utilities to the leased premises, and for providing janitorial
services, including janitorial/cleaning supplies, paper products for kitchen and
non-common rest rooms, for light bulbs, for waste disposal products such as
plastic bags, and for other consumables. Until Lessor has split the utilities,
beginning with the date of occupancy, and including the time period of free
rent, Lessee shall pay the monthly sum charged to Lessee by Lessor in addition
to all other payments agreed to herein, for gas and electric service to the
premises. Said payment shall be made within 10 days of receipt of billing by
Lessor. Security of the leased space, and telephone and computer wiring and
systems are Lessee's sole responsibilities and cost.
CWC
AG
<PAGE>
56. SIGNS. Lessee is occupying 37.5% of the 40,000 square feet of the building
and has the right to use of approximately 37.5% of the company signage area of
the building's monument sign. Lessee's area to be at the top area of the sign.
Lessor shall provide identification on monument sign per mutually approved
specifications, at Lessor's expense, within 60 days of Lessee's occupancy.
57. RIGHT OF FIRST REFUSAL. Until June 30, 2003, Lessee, if he is not otherwise
in default hereunder, shall have the ongoing Right of First refusal on
contiguous space. Within seven calendar days after Lessee has received written
notification from Lessor of future availability of contiguous space, and
Lessor's terms and conditions pertaining to the contiguous space, Lessee shall
provide a written reply to Lessor stating Lessee's desire to lease the space.
Failure to reply within the allotted time shall cancel this Right of First
Refusal.
58. EXPANSION OPTION. If during the term of this Lease, Lessee requests
expansion beyond the leased 15,000 square feet, Lessor, at Lessor's sole and
exclusive option, may provide the opportunity for Lessee to move into other
space that Lessor owns, or builds, or builds-to-suit for the Lessee in the El
Dorado Hills Business Park. Lessee's request for expansion shall be made as
early as possible, providing Lessor with the maximum opportunity to accommodate
Lessee's needs. Lessee shall meet Lessor's then-existing financial criteria for
providing leased space to Lessee. Lessor shall not be under any obligation to
build a new building unless Lessor, in his sole discretion, agrees.
59. OPTION TO RENEW. Lessee shall have one, five-year option to renew at 90
percent of market, or of the then existing rent, whichever rental amount is
greater. Rent shall continue to increase annually by 2% during the option
period. In writing, Lessee shall notify Lessor of its intention to renew the
Lease at least 6 months prior to expiration.
60. SIGNATORIES. Representing Lessee, the Lease shall be signed by the
[Vice] President and [Chief Financial Officer] of both Wyndgate Technologies,
Inc. and its parent/partner, Global Med Technologies, Inc. [added text initialed
/s/CWC; AG]
61. LESSEE'S CONTINGENCY. This Lease is contingent upon Lessee sub-leasing his
office space at Lessee's present location, 11060 White Rock Road, Suite 200,
Sacramento, California, to EDS. If Lessee notifies Lessor, in writing, on or
before February 26, 1999 of his failure to successfully sub-lease his offices,
Lessee may cancel this Lease and Lessor shall return Lessee's deposits to
Lessee. A statement from Lessee to Lessor that the sub-lease is successful, or
failure to notify Lessor by [March 5,] [initialed /s/CWC; AG] 1999, shall serve
to satisfy this contingency.
CWC
AG
<PAGE>
62. BROKER COMMISSION. Lessor, at Lessor's sole cost and expense, shall pay to
Jim Niethammer of Corporate Advisory Group, a leasing commission equal to 2.5%
of the Base Rent consideration for the initial 60 months in which rent is paid,
and 1.25% of the Base Rent consideration thereafter. The first one half of the
commission is due upon Lessee receiving an additional round of funding in April,
1999, and the second half due in April, 2000, if Lessee is not otherwise in
default. In the event Tenant does not receive additional funding, beginning in
June, 1999, one-twenty-fourth (1/24) of the total commission shall be paid
monthly until fully paid; if Lessee is otherwise in default during the period of
commission payment, the monthly payment of the commission will be delayed until
the default has been cured, and then re-started until paid in full.
AGREED AND ACCEPTED
Lessor: James W. Cameron, Jr.
/s/ James W. Cameron, Jr.
by Clark H. Cameron 2/19/99
- ------------------------------------ -------
his attorney in fact
Signature Date
Lessee: Global Med Technologies, Inc.
/s/ Alan Geddes 2/19/99
- ------------------------------------- -------
Alan Geddes, Vice President & CFO Date
SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS
This Settlement Agreement and General Release ("Release") is made as a
compromise between GLOBAL MED TECHNOLOGIES, INC., and all related companies and
divisions, and including its parent corporation(s), subsidiaries, shareholders,
officers, trustees, employees, past and present, successors, predecessors,
assigns, and agents ("GLOBAL") and WILLIAM J. COLLARD and HOLLIS GAILEY
("COLLARD/GAILEY") in the complete, final, and binding settlement of all claims
and potential claims, if any, with respect to their present and past employment
and business relationships.
IN CONSIDERATION of the obligations identified below assumed by each of the
parties, it is hereby agreed by and between the parties that all disputes,
controversies, and potential disputes or causes of action or claims arising out
of, or in any way connected with COLLARD/GAILEY' employment relationship with
GLOBAL, whether known or unknown, suspected or unsuspected, which COLLARD/GAILEY
have or may have had against GLOBAL are settled on the following material terms:
1. Settlement Proceeds. GLOBAL will pay to Mr. WILLIAM COLLARD the
following sums:
a. Mr. COLLARD's last day of work will be November 20, 1998.
b. GLOBAL will pay Mr. COLLARD a portion of the settlement proceeds in
accordance with "Schedule 1" attached hereto and incorporated herein by
reference. Upon receiving monetary proceeds under a contract with the Australian
Red Cross Blood Service in a cumulative amount equal to TWO HUNDRED THOUSAND
DOLLARS AND NO/100 ($200,000.00), or if GLOBAL at any time after the date of
this agreement obtains equity financing for the company of a non-debt nature in
a cumulative amount equal to or greater than TWO MILLION FIVE HUNDRED THOUSAND
DOLLARS AND NO/100 ($2,500,000.00), the Schedule 1 monthly payments will
immediately be increased from THREE THOUSAND DOLLARS AND NO/100 ($3,000.00) to
SIX THOUSAND DOLLARS AND NO/100 ($6,000.00) until the total SIXTY-FOUR THOUSAND
TWO HUNDRED THIRTY DOLLARS AND 77/100 ($64,230.77) has been paid to Mr. COLLARD.
C. GLOBAL will pay Mr. COLLARD the balance of the settlement proceeds
in accordance with "Schedule 2", attached hereto and incorporated herein by
reference.
d. Upon receiving written notice from GLOBAL that the GLOBAL MED
TECHNOLOGIES, INC., shares have reached FOUR DOLLARS AND NO/100 ($4.00) or more
per share, and so long as COLLARD/GAILEY can sell their shares at FOUR DOLLARS
AND NO/100 ($4.00) or more per share, COLLARD/GAILEY agree to immediately
(within 7 days of receiving GLOBAL's written notice) sell a minimum of 40,600
shares stock of GLOBAL in which they own or have an interest, in an orderly
manner through American Frontier Financial Corporation or its subsidiary (in
accordance with the agreement existing between GLOBAL and RAF). The gross
proceeds from such a sale of stock will be (subject to paragraph e next below)
credited towards and reduce any amounts not yet due but which are scheduled to
be paid by GLOBAL to Mr. COLLARD in accordance with Schedule 2, as if it had
been paid by GLOBAL. If COLLARD/GAILEY voluntarily sell stock of GLOBAL which
they own or have an interest in at any time after the date of this Agreement for
TWO DOLLARS AND 50/100 ($2.50) or more per share, COLLARD/GAILEY will notify
GLOBAL in writing within fifteen (15) days of such sale and the gross proceeds
from such a sale of stock will be (subject to paragraph e next below) credited
towards and reduce any amounts not yet due but which are scheduled to be paid by
GLOBAL to Mr. COLLARD in accordance with Schedule 2, as if it had been paid by
GLOBAL.
e. Mr. COLLARD will receive all Schedule 1 payments, and payments of
at least $75,000 in accordance with Schedule 2, without offset regardless of
whether or not COLLARD/GAILEY ever sell their stock of GLOBAL.
- 1 -
<PAGE>
f. If Mr. COLLARD dies before all payments provided for in Schedule 1
and Schedule 2 have been paid in full, all scheduled payments shall continue to
be paid to the then acting trustee of the W. J. AND H. COLLARD 1997 TRUST,
established July 11, 1997, or to the trustee of any successor or replacement
trust thereof.
g. If any of the events listed in this paragraph g occur, Mr. COLLARD
or his successor in interest may declare the entire unpaid balances of all
payments provided for in Schedule 1 and Schedule 2 to be made by GLOBAL to Mr.
COLLARD, to be immediately all due and payable, and GLOBAL shall then pay that
amount upon demand.
(i) GLOBAL fails to make any payment set forth in Schedule 1 or
Schedule 2 when due and has not cured such failure to pay within a fifteen (15)
day period commencing with written notice from Mr. COLLARD or his successor in
interest to GLOBAL of such missed payment. Any missed payment shall bear
interest at the highest rate allowed under California Law from the date that
such missed payment was due until paid in full.
(ii) GLOBAL sells substantially all of its assets or merges,
consolidates or combines with any other business entity unless the acquiring,
succeeding or continuing corporation or business entity expressly assures and
confirms in writing the obligations of GLOBAL under this Agreement.
(iii) GLOBAL decides to terminate its business.
h. Mr. COLLARD or his successor in interest may hire or pay any person
or entity to help collect GLOBAL's obligations hereunder if GLOBAL does not pay.
GLOBAL shall also pay to Mr. COLLARD or his successor in interest the costs of
collection. Such costs include, subject to any limits under applicable law,
attorneys' fees and other legal expenses including court costs whether or not
there is a lawsuit.
i. It is understood GLOBAL may not be withholding payroll taxes or
other withholdings from payments made to Mr. COLLARD. Such payments will be
issued with an IRS 1099 Form. If any employer [/s/TM;/s/WJC] payroll taxes are
assessed, it is the responsibility of GLOBAL to pay such assessment.
2. References. GLOBAL agrees that Mr. COLLARD will receive a favorable
recommendation if any prospective employer should request a recommendation. Mr.
COLLARD will refer all prospective employers to Dr. Mick Ruxin as GLOBAL's
point of contact for such references.
3. Announcement of Termination. GLOBAL agrees to make a general
announcement between February 4 and February 11, 1999, through standard company
distribution channels to other employees of the company at the Rancho Cordova
office that Mr. COLLARD has elected to leave the company by retiring. During the
period between Mr. COLLARD's last day of work on November 20, 1998 and February
4, 1999, Mr. COLLARD shall be allowed to enter his office in order to pick up
mail, e-mail and phone messages. Mr. COLLARD's termination date shall be
February 4, 1999 unless extended by written agreement by and between Mr. COLLARD
and GLOBAL. During the period between Mr. COLLARD's last day of work on November
20, 1998 and February 4, 1999, Mr. COLLARD shall be allowed to seek and accept
employment with any person, firm, corporation, association or other entity
provided that such person, firm, corporation, association or other entity is not
a business which is in direct competition with the type of business conducted by
GLOBAL.
4. Confidentiality. COLLARD/GAILEY and GLOBAL agree that the events
leading to this Release, the fact of the Release, and the terms and conditions
of the Release are and shall be maintained in privacy and confidence. The
parties agree that this confidentiality is a material term of the Release.
Without waiving their agreement concerning confidentiality, the parties agree
- 2 -
<PAGE>
that the information regarding the monetary terms of this settlement may be
disclosed to any state or federal taxing authority or pursuant to any state or
federal securities law, regulations, or procedure as required by law. Further,
GLOBAL may disclose the terms and conditions of this agreement as necessary to
implement and comply with the agreement. Such disclosure shall not be deemed a
breach of this Release. Nothing in this paragraph is intended to restrict
COLLARD/GAILEY from communicating with prospective employers and job referral
sources about their job experiences at GLOBAL, the nature and extent of their
job responsibilities, their level of performance, the dates of their employment,
and the fact that they resigned voluntarily for retirement and personal reasons
respectively. Both COLLARD/GAILEY and GLOBAL agree that they will do nothing to
disparage the other in any communications after the date of this Release.
5. Release of GLOBAL. In addition to the terms above, and subject to
GLOBAL's obligations created in this Agreement including the obligation to
indemnify COLLARD/GAILEY in accordance with Section 10 below, COLLARD/GAILEY, on
behalf of their heirs, spouses, and assigns, hereby completely release and
forever discharge GLOBAL from any and all claims, of any and every kind, nature
and character, known or unknown, foreseen or unforeseen, based on any act or
omission occurring before the date of their signing this Release, including any
claims arising out of any offer of employment or employment or termination of
employment with GLOBAL and any claims they have as shareholders, directors,
officers, owners, or lenders to GLOBAL. The matters released include any claims
under federal, state or local laws, including any claims arising under the Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of
1964, the California Fair Employment and Housing Act, any common law tort or
contract claims, and any claims for attorneys fees and costs.
It is understood and agreed that this Release extinguishes all claims,
whether known or unknown, foreseen or unforeseen.
COLLARD/GAILEY expressly waive any rights or benefits under California Civil
Code section 1542, which provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known to him must have materially
affected his settlement with the debtor."
COLLARD/GAILEY fully understand that, if any fact with respect to any
matter covered by this Release is found hereafter to be other than or different
from the facts now believed by them to be true, they expressly accept and assume
that this Release shall be and remain effective, notwithstanding such
differences in the facts.
COLLARD/GAILEY agree neither to file nor to encourage or knowingly permit
another to file any claim, charge, action, or complaint concerning any matter
referred to in this Release. if either or both COLLARD/GAILEY have previously
filed any such claim, they agree to take all reasonable steps to cause it to be
withdrawn without any further delay.
This Release constitutes the entire agreement between COLLARD/GAILEY and
GLOBAL with respect to any matters referred to in this Release. This Release
supersedes any and all of the other agreements between COLLARD/GAILEY and
GLOBAL. No other consideration, agreements, representation, oral statements,
understandings of course of conduct that are not expressly set forth in this
Release should be implied or are binding. COLLARD/GAILEY are not relying upon
any other agreement, representation, statement, omission, understanding or
course of conduct that is not expressly set forth in this Release.
COLLARD/GAILEY understand and agree that this Release shall not be deemed or
construed at any time or for any purposes as an admission of any liability or
wrongdoing by either COLLARD/GAILEY or GLOBAL. COLLARD/GAILEY also agree that if
any provision of this [deletion /s/TM; /s/WFC] Release is deemed invalid, the
remaining provisions will still be given full force and effect.
- 3 -
<PAGE>
Prior to execution of this Release, COLLARD/GAILEY have apprised themselves
of sufficient relevant information in order that they might intelligently
exercise their own judgment. GLOBAL has informed COLLARD/GAILEY in writing to
consult an attorney before signing this Release, if they wish. GLOBAL has also
given COLLARD/GAILEY at least twenty-one (21) days in which to consider this
Release, if they wish. COLLARD/GAILEY also understand that for a period of seven
(7) days after they sign this Release COLLARD/GAILEY may revoke this release
agreement and that the Release shall not become effective until a week from
signatures by COLLARD/GAILEY.
COLLARD/GAILEY have read this Release and understand all of its terms.
COLLARD/GAILEY further acknowledge and agree that this Release is executed
voluntarily, without coercion, and with full knowledge of its significance.
COLLARD/GAILEY also understand and agree that if any suit is brought to enforce
the provisions of this Release, the prevailing party shall be entitled to costs,
expenses, and attorneys' fees as well any and all other remedies.
6. Release of COLLARD/GAILEY. GLOBAL subject to COLLARD/GAILEY obligations
created in this Agreement including the obligations of COLLARD/GAILEY set forth
in Sections 7, 8 and 9 below, hereby completely releases and forever discharges
COLLARD/GAILEY jointly and severally from any and all claims, of any and every
kind, nature and character, known or unknown, foreseen or unforeseen, based on
any act or omission of either of COLLARD/GAILEY, including but not limited to
any claims arising out of any act by either COLLARD/GAILEY as an officer,
director, employee, agent, representative or shareholder, or owner of, or
borrower from GLOBAL. The matters released include any claims under federal,
state or local laws, any common law tort or contract claims, and any claims for
attorneys fees and costs.
It is understood and agreed that this Release extinguishes all claims,
whether known or unknown, foreseen or unforeseen. GLOBAL expressly waives any
rights or benefits under California Civil Code section 1542, which provides as
follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known to him must have materially
affected his settlement with the debtor."
GLOBAL fully understands that, if any fact with respect to any matter
covered by this Release is found hereafter to be other than or different from
the facts now believed by GLOBAL to be true, GLOBAL expressly accepts and
acknowledges that this Release shall be and remain effective, notwithstanding
such differences in the facts.
GLOBAL agrees neither to file nor to encourage or knowingly permit another
to file any claim, charge, action, or complaint concerning any matter referred
to in this Release. If GLOBAL has previously filed any such claim, GLOBAL shall
take all reasonable steps to cause it to be withdrawn without any further delay.
GLOBAL is not relying upon any other agreement, representation,
statement, omission, understanding or course of conduct that is not expressly
set forth in this Release. GLOBAL understands and agrees that this Release shall
not be deemed or construed at any time or for any purposes as an admission of
any liability or wrongdoing by either COLLARD/GAILEY or GLOBAL. GLOBAL also
agrees that if any provision of this Settlement Agreement and Release is deemed
invalid, the remaining provisions will still be given full force and effect.
7. Agreement to Maintain Trade Secrets. Confidences, and Proprietary
Materials.
- 4 -
<PAGE>
a. COLLARD/GAILEY acknowledge that during the course of their
employment with GLOBAL, they received or became aware of trade secrets,
confidential information, and proprietary material. COLLARD/GAILEY agree to
return to GLOBAL no later than January 4, 1999, any and all material,
information, documents, or electronically stored information which is a trade
secret, confidential or proprietary. COLLARD/GAILEY agree to maintain in
confidence all trade secrets, confidential information, and proprietary material
relating to GLOBAL, and to not disclose said trade secrets, confidential
information, and proprietary material relating to GLOBAL to any third party
without the written consent of GLOBAL. Both parties acknowledge that said trade
secrets, confidential information, and proprietary material relating to GLOBAL
are material to the financial well-being of GLOBAL and, thus, this provision is
material to this agreement.
b. COLLARD/GAILEY recognize and acknowledge that the information,
processes, developments, experimental work, work in progress, business, list of
GLOBAL's customers and any other trade secret or other secret or confidential
information relating to GLOBAL's business as they may exist from time to time
are valuable, special and unique assets of GLOBAL's business. Therefore,
COLLARD/GAILEY agree that:
(i) COLLARD/GAILEY will hold in strictest confidence and not
disclose, reproduce, publish or use in any manner without the express
authorization of the Board of Directors of GLOBAL, any information, process,
development or experimental work, work in process, business, customer lists,
trade secret or any other secret or confidential matter relating to any aspect
of GLOBAL's business.
(ii) COLLARD/GAILEY will deliver to GLOBAL, and not keep or
deliver to anyone else, any and all notes, memoranda, documents and, in general,
any and all material relating to the GLOBAL's business.
(iii) In the event of a breach or threatened breach by
COLLARD/GAILEY of the provisions of this Paragraph b., GLOBAL shall be entitled
to an injunction (1) restraining COLLARD/GAILEY from disclosing, in whole or in
part, any information as described above or from rendering any services to any
person, firm, corporation, association or other entity to whom such information,
in whole or in part, has been disclosed or is threatened to be disclosed,
provided that such person, firm, corporation, association or other entity is in
business or intends to do business which is in direct competition with the type
of business conducted by GLOBAL; and/or (2) requiring that COLLARD/GAILEY
deliver to GLOBAL all information, documents, notes, memoranda and any and all
discoveries or other material as specifically identified in a written request by
GLOBAL delivered to COLLARD/GAILEY on or before December 31, 1998.
c. For a period beginning with the date of this Agreement and ending
March 23, 2002, Mr. COLLARD will not, within the State of Colorado (or, even
though the parties agree that such limitation is reasonable, if such locations
are determined by a court to be too broad, such geographic area as such court
may determine is reasonable) directly or indirectly, own, manage, operate,
control, be employed on a full time basis in a managerial capacity by,
participate in or be connected in any manner with the ownership, management,
operation or control of any business in direct competition with the type of
business conducted by GLOBAL. In the event of an actual or threatened breach by
COLLARD/GAILEY of the provisions of this paragraph, GLOBAL shall be entitled to
seek an injunction restraining COLLARD/GAILEY from owning, managing, operating,
controlling, being employed by, participating in or being in any way so
connected with any business in direct competition with the type of business
conducted by GLOBAL during the term of this Agreement.
- 5 -
<PAGE>
8. Nonsolicitation of COLLARD/GAILEY. For a period of twenty-four (24)
months beginning November 20, 1998 or for as long as GLOBAL makes monthly
payments pursuant to Schedule 1 and Schedule 2, whichever is longer,
COLLARD/GAILEY shall not directly or indirectly, either alone or in concert with
others, solicit, or entice any employee of or consultant to GLOBAL to leave
GLOBAL or work for anyone in competition with GLOBAL.
9. Nonsolicitation of Customers. For a period of twenty-four (24)
months beginning November 20, 1998 or for as long as GLOBAL makes monthly
payments pursuant to Schedule 1 and Schedule 2, whichever is longer,
COLLARD/GAILEY shall not directly or indirectly, either alone or in concert with
others, solicit, entice or in any way divert any of GLOBAL's existing customers
or suppliers or potential customers or suppliers with whom COLLARD/GAILEY had
become acquainted while employed with GLOBAL, to do business with any business
in direct competition with GLOBAL.
10. Indemnification. To the fullest extent permitted by applicable
law, GLOBAL agrees to indemnify, defend and hold COLLARD/GAILEY, jointly and
severally, harmless from any and all claims, actions, costs, expenses, damages
and liabilities, including, without limitation, reasonable attorneys' fees,
hereafter or heretofore arising out of or in connection with activities of
GLOBAL or its employees, including COLLARD/GAILEY, or other agents in connection
with or by reason of the fact that either COLLARD/GAILEY was a director,
officer, employee, or agent of GLOBAL or any affiliate of GLOBAL. To the fullest
extent permitted by applicable law, GLOBAL shall pay as incurred expenses of
defending any such action, claim or proceeding. However, GLOBAL shall not
indemnify COLLARD/GAILEY or defend COLLARD/GAILEY against, or hold
COLLARD/GAILEY harmless from any claims, damages, expenses or liabilities,
including attorneys' fees, resulting from the gross negligence or willful
misconduct of COLLARD/GAILEY.
- 6 -
<PAGE>
I have read the foregoing and understand, approve and voluntarily
agree to the terms of the Release.
Dated: 12/22/98.
/s/ William J. Collard
-------------------------------------------------
WILLIAM J. COLLARD
I have read the foregoing and understand, approve and voluntarily
agree to the terms of the Release.
Dated: 12/22/98.
/s/ Hollis Gailey
-------------------------------------------------
HOLLIS GAILEY
I have read the foregoing and understand, approve and voluntarily
agree to the terms of the Release.
Dated: 12/31/98.
/s/ Thomas F. Marcinek for
-------------------------------------------------
By: GLOBAL MED TECHNOLOGIES, INC.
- 7 -
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
Month of Payment Payment Month of Payment Payment
Amount Amount
<S> <C> <C> <C>
December 30, 1998 $3,000.00 January 1, 2000 $3,000.00
January 1, 1999 $3,000.00 February 1, 2000 $3,000.00
February 1, 1999 $3,000.00 March 1, 2000 $3,000.00
March 1, 1999 $3,000.00 April 1, 2000 $3,000.00
April 1, 1999 $3,000.00 May 1, 2000 $3,000.00
May 1, 1999 $3,000.00 June 1, 2000 $3,000.00
June 1, 1999 $3,000.00 July 1, 2000 $3,000.00
July 1, 1999 $3,000.00 August 1, 2000 $3,000.00
August 1, 1999 $3,000.00 September 1, 2000 $1,230.77
September 1, 1999 $3,000.00
October 1, 1999 $3,000.00
November 1, 1999 $3,000.00
December 1, 1999 $3,000.00
TOTAL $64,230.77
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
Month of Payment Payment Month of Payment Payment
Amount Amount
<S> <C> <C> <C>
December 30, 1998 $6,250.00 September 1, 2000 $5,416.67
January 1, 1999 $6,250.00 October 1, 2000 $5,416.67
February 1, 1999 $6,250.00 November 1, 2000 $5,416.67
March 1, 1999 $6,250.00 December 1, 2000 $5,416.67
April 1, 1999 $6,250.00 January 1, 2001 $5,416.67
May 1, 1999 $6,250.00 February 1, 2001 $5,416.67
June 1, 1999 $6,250.00 March 1, 2001 $5,416.67
July 1, 1999 $6,250.00 April 1, 2001 $5,416.67
August 1, 1999 $6,250.00 May 1, 2001 $5,416.67
September 1, 1999 $6,250.00 June 1, 2001 $5,416.67
October 1, 1999 $6,250.00 July 1, 2001 $5,416.67
November 1, 1999 $6,250.00 August 1, 2001 $5,416.67
December 1, 1999 $5,416.67 September 1, 2001 $5,416.67
January 1, 2000 $5,416.67 October 1, 2001 $5,416.67
February 1, 2000 $5,416.67 November 1, 2001 $5,416.67
March 1, 2000 $5,416.67 December 1, 2001 $5,416.67
April 1, 2000 $5,416.67 January 1, 2002 $5,416.67
May 1, 2000 $5,416.67 February 1, 2002 $5,416.67
June 1, 2000 $5,416.67 March 1, 2002 $5,416.67
July 1, 2000 $5,416.67 April 1, 2002 $5,416.67
August 1, 2000 $5,416.67 May 1, 2002 $5,416.67
TOTAL $237,500.10
</TABLE>
- 9 -
Consent of Independent Auditors
Board of Directors
Global Med Technologies, Inc.:
We consent to incorporation by reference in the Registration Statements (No.
333-28155, No. 333-39193, No. 333-45031 and No. 333-69851) on Form S-8 of Global
Med Technologies, Inc. of our report dated April 9, 1999, relating to the
balance sheet of Global Med Technologies, Inc. as of December 31, 1998, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the year then ended, which report appears in the December 31, 1998, annual
report on Form 10-KSB of Global Med Technologies, Inc.
KPMG LLP
Denver, Colorado
April 14, 1999
Consent of Independent Auditors
We consent to the incorporation by reference in the following registration
statements of our report dated April 10, 1998, with respect to the financial
statements of Global Med Technologies, Inc. included in this Form 10-KSB for the
year ended December 31, 1998.
1. Registration Statement on Form S-8 (No. 333-28155) pertaining to the
registration of 1,234,279 shares of Global Med Technologies, Inc. stock
dated May 30, 1997 for the Amended and Restated Option Plan.
2. Registration Statement on Form S-8 (No. 333-39193) pertaining to the
registration of 100,000 shares of Global Med Technologies, Inc. stock dated
October 31, 1997 for the 1997 Employee Stock Compensation Plan.
3. Registration Statement on Form S-8 (No. 333-45031) pertaining to the
registration of 965,721 shares of Global Med Technologies, Inc. stock dated
January 27, 1998 for the Second Amended and Restated Stock Option Plan.
4. Registration Statement on Form S-8 (No. 333-69851) pertaining to the
registration of 100,000 shares of Global Med Technologies, Inc. stock dated
December 29, 1998 for the 1997 Employee Stock Compensation Plan.
/s/ Ernst & Young LLP
Denver, Colorado
April 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 821
<SECURITIES> 0
<RECEIVABLES> 521
<ALLOWANCES> (65)
<INVENTORY> 0
<CURRENT-ASSETS> 1,395
<PP&E> 1,682
<DEPRECIATION> (1,117)
<TOTAL-ASSETS> 7,589
<CURRENT-LIABILITIES> 3,923
<BONDS> 0
0
0
<COMMON> 89
<OTHER-SE> 1,272
<TOTAL-LIABILITY-AND-EQUITY> 7,589
<SALES> 4,439
<TOTAL-REVENUES> 4,787
<CGS> 2,250
<TOTAL-COSTS> 5,416
<OTHER-EXPENSES> 5,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> (8,637)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,637)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
