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As filed with the Securities and Exchange Commission on November 10, 1998.
SEC Registration No. 333-_____
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SMLX TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 5047 84-1337509
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(State or Other Jurisdic- (Primary Standard Industrial (IRS Employer Iden-
tion of Incorporation) Classification Code Number) tification Number)
376 Ansin Boulevard, Hallandale, FL 33009
(954) 455-0110
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(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business)
Colin N. Jones, President
376 Ansin Boulevard, Hallandale, FL 33009
(954) 455-0110
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(Name, Address and Telephone Number of Agent for Service)
Copies to:
Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 Seventeenth Street, Suite 2700 South Tower, Denver, Colorado 80202
(303) 893-2300
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM
CLASS OF SECUR- TO BE OFFERING AGGREGATE AMOUNT OF
ITIES TO BE REGIS- PRICE OFFERING REGISTRATION
REGISTERED TERED PER UNIT(1) PRICE FEE
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Common Stock 3,100,000 $1.0156 $3,148,360 $875.24
$.0001 Par Value Shares
(2)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 by reference to the average of the closing bid and ask
prices of the Registrant's Common Stock on November 9, 1998, as reported on
the OTC Bulletin Board.
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(2) To be offered by Selling Shareholders.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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PROSPECTUS SUBJECT TO COMPLETION DATED NOVEMBER 10, 1998
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The information in this Prospectus is not complete and may be
changed. The securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securi-
ties and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
SMLX TECHNOLOGIES, INC.
3,100,000 Shares of Common Stock
The Shares of Common Stock are being offered by certain
Selling Shareholders. We will not receive any of the proceeds
from the sale of the Shares by the Selling Shareholders.
The Common Stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board (Symbol: SMLX). On
November 9, 1998, the closing bid and ask prices of the Common
Stock were $1.00 and $1.03, respectively.
This investment involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. See
"Risk Factors" starting on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
_________, 1998
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TABLE OF CONTENTS
PAGE
Prospectus Summary .......................................... 3
Risk Factors ................................................ 5
Market Prices and Dividends ................................. 9
Management's Discussion and Analysis ........................ 10
Business .................................................... 12
Management .................................................. 22
Security Ownership of Management, Principal Shareholders
and Selling Shareholders .................................. 27
Transactions With Management and Others ..................... 30
Description of Securities ................................... 32
Plan of Distribution ........................................ 33
Legal Matters ............................................... 34
Experts ..................................................... 34
Additional Information ...................................... 34
Index to Financial Statements ............................... F-1
2
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PROSPECTUS SUMMARY
THE COMPANY
SMLX is engaged in the business of developing technological solutions for
the medical, dental and other industries and then bringing the technologies to
the marketplace. The first product which we have developed is a test for HIV,
the AIDS virus, which screens saliva instead of blood or urine.
Another product which we have developed is a disposable dental air
abrasion unit (named the Airbrator(R)) which can be attached to the standard
dental equipment found in most dentist's offices, and which we expect will be
priced for less than $10.00. The FDA has cleared the Airbrator(R) for
marketing for abrading, etching and polishing teeth, and the FDA has verbally
indicated that the product was technically cleared for use in cavity
preparation, and management expects it to be cleared for marketing once the
FDA has inspected the manufacturing site, and determined that it meets the
FDA's regulations. We have also been informed that the patent applied for on
the Airbrator(R) is being issued.
We have several other technologies which we have developed and these are
discussed in the Business section of this Prospectus.
Our offices are located at 376 Ansin Boulevard, Hallandale, Florida
33009. Our telephone number is (954) 455-0110.
OFFERING SUMMARY
Securities Offered: 3,100,000 Shares of Common Stock offered by
Selling Shareholders
Common Stock Presently
Outstanding: 10,600,000 Shares
FINANCIAL SUMMARY
This financial summary does not include all of the information in the
financial statements. You should read the financial summary along with the
financial statements and the notes to the financial statements which are
included in this Prospectus.
Balance Sheet Data: At June 30, 1998 At December 31, 1997
- ------------------ ---------------- --------------------
Total Assets $ 1,159,394 $ 348,194
Current Assets 909,930 187,190
Current Liabilities 197,154 206,211
Long-Term Debt 378,778 288,932
Working Capital (Deficit) 712,776 (19,021)
Stockholders' Equity (Deficit) 583,462 (146,949)
Cash Dividends Per Common Share 0 0
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For the Six For the Years Ended
Statement of Months Ended June 30, December 31,
Operations Data: 1998 1997 1997 1996
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Net Sales $ 202,891 $ 37,459 $ 71,461 $ 25,840
Net Income (Loss) (269,587) (229,217) (309,944) (434,640)
Net Income (Loss)
Per Share (0.03) (0.03) (0.05) (0.15)
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RISK FACTORS
Some of the statements contained in this Prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. Factors that could cause the results to differ include the risk
factors discussed below.
Investing in the Shares is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, among others:
Recently Organized Although SMLX was organized in 1987, it was generally
Business; Losses inactive until March 1997 when it acquired a medical
During Start-up diagnostics products company named Simplex Medical
Operations. Systems, Inc. From June 6, 1995, the date the acquired
business began, to December 31, 1997, we incurred a
We have incurred net loss of $805,896 on revenues of $119,431. During
losses since we the first six months of 1998, we incurred a net loss
began doing of $269,587 or $.03 per share on revenues of $202,891.
business. Our ability to operate profitably depends on increas-
ing our sales, achieving sufficient gross profit
margins, and bringing new products to the market.
SMLX is also subject to business risks associated with
new business enterprises. We cannot assure you that
SMLX will operate profitably.
We had a working At December 31, 1997, SMLX had a working capital
capital deficit and deficit of $19,021 and a stockholders' equity deficit
a negative stock- of $146,949. During 1998, we received $1,000,000
holders' equity at from the sale of stock in private transactions. We
December 31, 1997. cannot assure you that we will not need additional
We have met capital funds or that any needed funds will be available,
needs with private if at all, on acceptable terms. If we need additional
sales of securities. funds, our inability to raise them will have a very
adverse effect on our operations. If we raise funds
by selling equity securities, sales may dilute your
share ownership.
Our Auditors have The report issued by the independent certified public
raised a concern accountants who audited the financial statements of
about our ability SMLX at December 31, 1997, includes a paragraph which
to continue in raises doubts as to our ability to continue in busi-
business ness. The financial statements as of that date do
not include any adjustments that would be needed if
we went out of business.
No Product Liability We currently only have property and general liability
Insurance. insurance which excludes products liability coverage.
We intend to obtain products liability coverage before
we begin to sell any of our products in larger
quantities, but there is no assurance that we will be
able to obtain such liability insurance on acceptable
terms. If we are unable to obtain this insurance,
we would be exposed to significant losses in the event
someone is injured due to one of our products.
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Competition. Our market is very competitive. We are aware of
other companies, universities and research insti-
Currently, we tutions which have patented, developed or are
have several com- developing products which are or may be competitive
petitors, and with our products. These potential competitors are
may have more in better established and have greater resources than
the future. we do.
Dependence on Our business is largely dependent on our ability to
Management. hire and retain quality managers. Although we have
written employment agreements with each of our
We have a few Officers, the loss of any Executive Officer
key officers and could have an adverse effect on our business and
directors. prospects.
Key-man insurance. We do not currently maintain key-man life insurance
on any of our employees.
Control by As of the date of this Prospectus, our Officers and
Management. Directors beneficially own approximately 39% of our
outstanding shares. Upon completion of the offering
and the sale of all of the shares by the Selling
Shareholders, our Officers and Directors will bene-
ficially own approximately 16% of the then issued
and outstanding shares.
Risks Relating to We own one patent and we have filed federal patent
Patents. applications for six devices related to our
products. We are not certain whether any of these
patents will be granted. Even if we receive one or
more patents, they may not provide us with protection
from competitors.
Patent protection We cannot assure you that any pending patent appli-
is uncertain. cation will result in a patent being issued, or that
any patent obtained will be effective in thwarting
competition. Our failure to obtain patent protection,
or illegal use by others of any patents we may obtain,
may have an adverse effect on our business, financial
condition and operating results. In addition, the
laws of certain foreign countries do not protect
proprietary rights to the same extent as the laws
of the United States.
Costs of prose- We cannot assure you that claims for patent infringe-
cuting and ment or claims for damages resulting from any such
defending patent infringement will not be asserted or prosecuted
infringement against us. Even if we obtain patent protection for
claims are sig- our products, the validity of any patents may be
nificant. challenged. Any such claims, with or without merit,
could be time consuming and costly to defend, divert-
ing management's attention and our resources.
Social, Political Currently, nearly all of our revenues come from the
and Economic Risks sales of our Rapid Saliva Tests to customers in
Associated with foreign countries. Social, political and economic
Foreign Operations conditions inherent in foreign operations and inter-
and International national trade may change, including changes in the
Trade. laws and policies that govern foreign investment and
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international trade. To a lesser extent social,
political and economic conditions may cause changes
in U.S. laws and regulations relating to foreign
investment and trade. Social, political or economic
changes could, among other things, make it more
difficult or more expensive for us to sell our test
kits in foreign countries. Accordingly, we cannot
assure you that changes in social, political or
economic conditions will not have a substantial
adverse effect on our business.
Potential Our Shares are not listed on Nasdaq or any exchange.
liquidity Trading is conducted in the over-the-counter market
problems. on the OTC Bulletin Board, which was established for
securities that do not meet the Nasdaq or exchange
listing requirements. Consequently, selling SMLX
Shares is more difficult because smaller quantities
of shares are bought and sold and security analysts'
and news media's coverage of SMLX is limited. These
factors could result in lower prices and larger
spreads in the bid and ask prices for our shares.
Risks of low- Because our Shares are not currently listed on Nasdaq
priced Shares. or an exchange, they are subject to Rule 15g-9 under
the Exchange Act. That rule imposes additional sales
practice requirements on broker-dealers that sell
low-priced securities to persons other than estab-
lished customers and institutional accredited in-
vestors. For transactions covered by this rule, a
broker-dealer must make a special suitability
determination for the purchaser and have received
the purchaser's written consent to the transaction
prior to sale. Consequently, the rule affects the
ability of broker-dealers to sell our Shares and may
affect the ability of shareholders to sell SMLX Shares
in the secondary market.
No Dividends We intend to retain any future earnings to fund the
Anticipated. operation and expansion of our business. We do not
anticipate paying cash dividends on our Shares in
the foreseeable future.
Shares Eligible We currently have 10,600,000 shares outstanding and
for Future Sale. the following is a breakdown of these shares:
We cannot predict * Free Trading 4,405,800 Shares
the depressive * Restricted:
effect of resales. Currently eligible for
sale under Rule 144 3,094,200 Shares
Being offered in this
Prospectus 3,100,000 Shares
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* Total Restricted Shares 6,194,200 Shares
We are unable to predict the effect that sales made
in this offering or under Rule 144 may have on the
then prevailing market price of our Shares. It is
likely that market sales of large amounts of these
or other SMLX shares (or the potential for those
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sales even if they do not actually occur) will have
the effect of depressing the market price of our
shares.
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MARKET PRICES AND DIVIDENDS
The Company's Common Stock trades in the over-the-counter market, under
the symbol "SMLX". Other than a few sporadic trades during November 1996, the
trading commenced during February 1997. The following table shows the high
and low bid prices for the Company's Common Stock for the periods indicated as
reported by the OTC Bulletin Board. These prices are believed to be
inter-dealer quotations and do not include retail mark-ups, mark-downs, or
other fees or commissions, and may not represent actual transactions.
Quarter Ended High Bid Low Bid
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March 31, 1997 $3.3125 $.03125
June 30, 1997 $3.0625 $1.75
September 30, 1997 $2.875 $1.4375
December 31, 1997 $2.3125 $1.1875
March 31, 1998 $1.78125 $ .75
June 30, 1998 $4.3125 $ .625
September 30, 1998 $3.375 $1.03125
December 31, 1998
(through October __, 1998) $______ $______
As of September 25, 1998, the Company had approximately 100 shareholders
of record. This does not include shareholders who hold stock in their
accounts at broker/dealers.
Holders of Common Stock are entitled to receive dividends declared by the
Company's Board of Directors. No dividends have been paid on the Company's
Common Stock and no dividends are anticipated to be paid in the foreseeable
future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS ENDED JUNE 30, 1997
During the six months ended June 30, 1998, the Company had $202,891 in
revenue compared to $37,459 in revenue during the corresponding prior year
period. The increase in revenue was the result of international sales of the
Company's Rapid Saliva Tests.
Operating expenses for the six months ended June 30, 1998, increased to
$372,693 as compared to $248,060 in the corresponding prior year period. The
increase was due to the increased level of overall activity in the Company's
business. Payroll costs increased due to the addition of a President, a lab
technician, and a marketing director.
June 1998 was the first month the Company started generating a material
amount of sales revenue. Its sales for the month of June were $103,000 with
an additional $20,000 licensing fee being received, making the gross income
for the month $123,000, which was equal to 60.6% of the revenues received for
the entire six months.
YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER 31, 1996
The Company's revenues during the year ended December 31, 1997 were
$71,461 as compared to $25,840 during the year ended December 31, 1996. The
increased revenues were due to increased sales of the Company's saliva test
kits to distributors in foreign countries for the purpose of testing the
products and obtaining approvals to sell the products in these countries.
Costs of goods sold increased from $25,269 in the year ended December 31,
1996 to $48,121 in the year ended December 31, 1997 due to the increased
sales. Cost of goods sold as a percentage of sales dropped from 98% in 1996
to 67% in 1997. The margin on the Company's saliva test kits will increase
significantly once the Company starts manufacturing the kits in commercial
quantities.
Selling, general and administrative expenses increased from $403,049 in
the year ended December 31, 1996 to $485,086 in the year ended December 31,
1997 due to the increased level of activity in the Company's business, and the
fact that the Company completed a reverse acquisition with a public company
during March 1997 which caused the Company's legal and accounting expenses to
increase.
During the year ended December 31, 1997 the Company received other income
of $167,360 from the forfeiture of customer deposits for marketing rights to
the Company's HIV test kits, and the Company received $30,000 from Sybron
Dental Specialities, Inc. pursuant to the distribution agreement relating to
the Airbrator(R).
Interest expense increased from $6,469 in the year ended December 31,
1996 to $19,505 in the year ended December 31, 1997 due to the increased
amount of debt outstanding during 1997.
The net loss for the year ended December 31, 1997 declined to $309,944
from $434,640 for the year ended December 31, 1996 due primarily to the other
income received during 1997 related to the forfeiture of customer deposits and
the license fees.
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CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 1998, the Company had working capital of approximately
$712,776 compared to approximately $(19,021) at December 31, 1997. The
increase in working capital was primarily due to the sale of stock in private
transactions during the six months ended June 30, 1998.
The Company's working capital was a negative $19,021 at December 31, 1997
as compared to a positive $32,577 at December 31, 1996. The decrease in
working capital was primarily due to the net loss for 1997 of $309,944.
During the year ended December 31, 1997, cash used in operating
activities was $303,861 as compared to $532,289 of cash used in operating
activities for the year ended December 31, 1996. The principal contributing
factor was the 1997 loss of $309,944.
During the year ended December 31, 1997 net cash used in investing
activities was $50,581 as compared to $101,084 in the prior year.
During the year ended December 31, 1997 the net cash provided by
financing activities was $342,336 as compared to $607,781 in the prior year.
In 1997 the Company received $294,990 in loans from a shareholder and an
additional $50,000 loan from an investor.
As of June 30, 1998, the Company had commitments for capital expenditures
in the amount of approximately $50,000 to complete the build out of its new
facilities.
Management believes that the Company's current working capital will be
sufficient to meet its anticipated needs for the rest of 1998.
The Company has recently signed a letter of intent with an investor
whereby the investor will purchase 1,000,000 shares of the Company's Common
Stock for $950,000. There is no assurance of whether or not this transaction
will close.
YEAR 2000 COMPLIANCE
The Company is in the process of completing a review of the effect that
the year 2000 will have on its stand alone computer system related to its
ongoing operations, its internal control systems and preparation of financial
information. It has not yet been able to determine the extent, if any, of the
year 2000 problem. However, as the Company keeps both an electronic and paper
backup of all contracts, financial data and important correspondence, it does
not believe there will be any serious problem.
The Company is currently in the process of querying all vendors and
suppliers of services that might have an effect on our business to see if they
are year 2000 compliant, and if not, will they be compliant before the year
2000.
If vendors state that they will not be compliant by the year 2000, we
will make arrangements to switch vendors by July 1, 1999.
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BUSINESS
BACKGROUND
SMLX Technologies, Inc. (the "Company") was incorporated under Colorado
law on October 26, 1987, under the name The Trader's Edge Ltd. On March 28,
1996, the name was changed to Music Tones Ltd. The Company was generally
inactive through December 31, 1996. On March 28, 1997, the Company's
shareholders approved changing the Company's name to Simplex Medical Systems,
Inc., and on August 20, 1998, the Company's shareholders approved changing the
Company's name to SMLX Technologies, Inc.
In April 1996, the Company filed a registration statement with the
Securities and Exchange Commission on Form 10-SB, which registered its Common
Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended.
On March 5, 1997, the Company completed a reverse acquisition of 100% of
the outstanding common stock of Simplex Medical Systems, Inc., a Florida
corporation ("Simplex-Florida") in exchange for 3,453,000 shares of the
Company's Common Stock which resulted in the shareholders of Simplex-Florida
acquiring approximately 46.04% of the shares outstanding after the
transaction. In connection with the closing of this transaction, several
shareholders agreed to cancel a total of 31,953,000 shares of Common Stock.
As a result, after the acquisition of Simplex-Florida there were a total of
7,500,000 shares outstanding.
Unless the context otherwise requires, the term "Company" herein refers
to the Company and its wholly-owned subsidiaries, Simplex-Florida, Analyte
Diagnostics, Inc. ("ADI"), and IRT Management Corp. ("IRT"). Simplex-Florida
was incorporated in Florida in September 1995, ADI was incorporated in Florida
on June 6, 1995, and IRT was incorporated in Florida on January 14, 1997.
Simplex-Florida changed its name to SMLX Technologies of Florida, Inc. during
November 1998.
DESCRIPTION OF BUSINESS
GENERAL
SMLX is engaged in the business of developing technological solutions for
the medical, dental and other industries and then bringing the technologies to
the marketplace.
THE COMPANY'S PRODUCTS
Our products can be organized as follows:
1. Medical diagnostic tests - Development completed.
Cleared for (a) Rapid saliva tests for HIV, hepatitis, chagas disease,
use in certain prostrate cancer, H pylorea (ulcers), and drugs of
foreign abuse.
countries;
not in the
U.S.
2. Medical diagnostic tests - In development.
(a) Rapid saliva tests for mumps, measles and rubella.
(b) Blood or saliva test or periodontal disease.
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3. Dental products.
Cleared for (a) Airbrator(R) for polishing, cleaning and abrading teeth.
marketing by
FDA.
(b) Saliva Collector.
510(k) sub- (c) Airbrator(R) for use in cavity preparation.
mitted to
FDA.
4. Equine products in testing.
(a) Bioven - anti-inflammatory drug.
(b) Equine infectious anemia rapid test.
5. Other miscellaneous products.
(a) Flea and tick shampoo for small animals.
(b) Organic garden spray (in final testing).
(c) Flavor enhancement.
(d) Tissue fixatives.
A. THE SALIVA COLLECTION DEVICE. The Company's saliva collector is
designed to replace the more traditional methods of specimen collection for
clinical testing. Blood collection has the obvious disadvantage of an
invasive procedure with associated fear and pain; but most importantly
requires trained personnel to collect the specimen. Urine and fecal matter
have the unsavory attitudes as well as the troublesome handling and disposal
problems associated with these biological specimens. All of these specimens
have the disadvantage of being potentially infectious and are treated as bio-
hazardous materials. Saliva collected by the Company's collector can be used
in all routine laboratory equipment and analyzers; can be used by unskilled
personnel; requires little training in its use; and is well tolerated by the
patients and subjects. Literature references and data obtained by the Company
indicates that saliva collected by its collection system provides a biological
specimen which compares to blood in many of the routinely tested components,
such as HIV, Hepatitis, therapeutic drugs, and drugs of abuse, to name only a
few.
The saliva collector, when married to the Company's rapid testing
devices, provides the user with a rapid point-of-care test system which
requires little training, is stored at room temperature, needs no complicated
lab equipment, and provides results in 10 to 15 minutes. This combination
provides users such as Public Health Officials, prisons and the military with
an effective, rapid testing system. In relatively undeveloped countries the
on-site saliva testing system provides a means of population screening and
effective disease management through rapid definitive identification of
affected individuals.
In clinical tests, it has proven both safe and effective for the
collection of a clinically acceptable sample of saliva from a donor's mouth;
and the recovery thereof for constituent analysis. Because of the metabolic
constituents of saliva, the sample collector can be used with a number of
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diagnostic tests, including analysis for antibodies which indicate certain
diseases (such as HIV, hepatitis, measles and mumps).
During April 1998 the Company received a letter from the FDA stating that
the FDA had reviewed the Company's 510(k) notification regarding the saliva
collector and had approved marketing of the product in the United States for
use as a saliva absorber during dental procedures.
The fluid collection device to be manufactured and distributed by the
Company may also be used with a variety of screening tests for on-site
determination of the presence of pollutants in drinking water, waste streams
and environmentally sensitive habitats.
The countries which have approved or permitted the sale of these test
kits include Hong Kong, Spain, Peru, Costa Rica, Italy, Kuwait, New Zealand,
and Dominican Republic.
B. DENTAL AIRBRATOR(R). The Company has developed and applied for
patents and FDA approval on a disposable handpiece which attaches to standard
air abrasive etching devices used by dentists for tooth bonding procedures.
The product effectively abrades the surface of teeth, but has no effect at all
on soft tissue. Because it is disposable and there is no need for extensive
sterilization procedures, the product expedites the handling of patients.
During April 1997 the Company received a letter from the FDA stating that
the FDA had completed the scientific review portion of the Company's 510(k)
premarket notification regarding the Airbrator(R), and the Airbrator(R) was
cleared for marketing in the United States for the use of abrading the surface
of teeth. Subsequently, in response to the Company's second 510(k) premarket
notification regarding the Airbrator(R), the Company was informed verbally
that the Airbrator(R) was technically cleared for use in cavity preparation
and management expects it to be cleared for marketing once the FDA has
inspected the manufacturing site and determined that it complies with the
FDA's requirements. The Company has notified the FDA who the manufacturer
will be, and the FDA has indicated it will conduct the inspection during the
fourth quarter of 1998.
During July 1997, the Company entered into a Distribution Agreement with
Sybron Dental Specialties, Inc. ("Sybron") which appointed Sybron as the
exclusive worldwide distributor for the Airbrator(R). Several of the terms of
this agreement were amended during December 1997. The agreement, as amended,
provides that, subject to the Company satisfying its obligations under the
agreement, Sybron will purchase at least three million Airbrators(R) per year
commencing on December 1, 1998, and continuing for the five year term of the
agreement. Sybron paid a $30,000 one-time license fee to the Company during
1997 for the grant of this distributorship. Pursuant to the agreement, the
Company is responsible for using commercially reasonable efforts to produce,
supply and ship the Airbrators(R) in accordance with Sybron's orders. The
Company is currently holding discussions regarding the termination of this
agreement.
C. BIOVEN is an injectable, anti-inflammatory drug which is currently
being tested as a treatment for joint inflammation in horses. These tests are
being conducted at three sites in Florida. One of the Company's officers
developed BIOVEN after fifteen years of extensive research in the field of
immunology. BIOVEN is a result of years of experimentation, evaluation and
historical study in the field of peptide use. The BIOVEN mode of action is
believed to function by reversing the chemical/immunological imbalances that
are present in inflamatory processes.
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D. FLAVOR ENHANCEMENT. The Company has developed a proprietary process
which allows for the incorporation of flavor essences into an edible support
material using food grade materials and approved printable inks. This process
would allow a new form of advertising sampler which would let a consumer
sample new food and beverages through newspaper ads, point of sale displays or
direct mailings. The encapsulation process and method of manufacturing are
proprietary and the Company has applied for patent protection for this
technology.
E. FLEA AND TICK SHAMPOO. The Company has developed a proprietary flea
and tick shampoo for small animals, which is being marketed by the Company
under the name Neemodex(R). The active ingredient, Neem Oil, is an extract of
the Neem tree, a tropical evergreen that grows in Asia. This product is all
natural, non-insecticidal, non-toxic and environmentally safe. The Company is
the manufacturer of this product and expects to expand on its formulation line
by adding new pet grooming products in the future.
F. ORGANIC GARDEN SPRAY. The Company has recently acquired the rights
to an organic garden spray which is in the final stages of research and
development and field testing. This product is an all natural insecticide and
fungicide containing Neem Oil. It will be sold ready to use on ornamental and
vegetable plants. It controls aphids, spider mites, whitefly, thrips and
scale insects. It is environmentally safe and can be used on indoor or
outdoor plants.
G. EQUINE INFECTIOUS ANEMIA RAPID TEST. This is a rapid serum test for
equine infectious anemia. It utilizes a procedure that is simpler to run than
the other two available tests (the Coggin's test or the ELISA test), and it
does not require a trained technician to perform. It can be easily performed
at the stables. The Company has completed development of this test and is
currently working with a distributor in Brazil which is seeking approval from
Brazilian regulatory authorities to market the product in Brazil. The Company
plans to submit this test product to the U.S. Department of Agriculture for
their approval in the future.
RESEARCH AND DEVELOPMENT
The Company spent $103,324 on research and development of new products
during the year ended December 31, 1997, and it expects to spend approximately
three times this in the current fiscal year on development of the products
described above in addition to others.
THE MARKET
The Company believes that the saliva diagnostic market is in its infancy
and could become an extremely large industry. However, no market or
feasibility study has been undertaken by the Company. Commercial development
of immunoassays in diagnostic medicine commenced in the 1960's and has
increased significantly since then, due to the high degree of sensitivity and
specificity of such techniques.
Tests for hepatitis, HIV, mumps, measles, cancer tumor markers, EBV, CMV,
and many other diseases currently use blood as the source of the specimen.
These tests, while effectively performed in the clinical setting, are
expensive, time consuming and, at the least, painful for the patient. The
skill and expertise of the physician or other highly trained individual needed
to obtain the sample of blood for these tests also adds to the high cost of
the testing.
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The saliva collection and test system not only tends to solve these
problems but is easy to use and lends itself to home or "point of care"
testing. These advantages reduce the overall cost of immunological testing
and provide immediate results. The Company believes that testing with saliva
specimens has many potential advantages compared to testing with blood and
urine specimens. Unlike blood specimens, saliva specimens can be collected at
any time in any location. The sampling procedure is easy to administer and
monitor, and may be conducted on a group basis. The Company believes that,
unlike blood collection, the use of its products will not require special
training. Blood specimen testing requires the use of needles, which may
accidentally injure or infect the technician collecting the specimen or the
person giving the specimen. Saliva specimen collection does not require the
use of sharp objects. Additionally, after collection, blood specimens remain
potentially infectious (for example they can contain live HIV virus) whereas
saliva specimens are believed not to be infectious. The use of saliva
specimens also has advantages compared to the use of urine specimens since the
integrity of the saliva specimen can be maintained, chain of custody concerns
can be addressed and saliva collection can be used without significant
invasion of privacy.
Disadvantages of saliva collection include the stability of saliva as a
specimen and the impact of the subject's diet and enzymes on saliva.
Provisions must be made to assure that a sufficient amount of saliva is
collected, the specimen is adequately stabilized and bacterial growth does not
cause test interference.
Saliva based testing has been recognized by the World Health Organization
("WHO") and the FDA as efficacious and practical. Several tests have been
approved to be used in the clinical market based on saliva samples. Countries
such as Thailand, Brazil, Mexico, Russia and many others have already made
policy changes which allow for the use, and even encourage the use, of saliva
tests for HIV in their health programs.
The market currently is divided into three major components: the
"government" sector; the "captive audience" sector (military, criminal,
institutional, etc.); and the "private" sector or individual patient.
International markets for the Company's products include both government
and private business sectors. Subject to government approvals, the Company's
introduction of its saliva collector will be with an HIV diagnostic screening
test. The HIV test kit is initially planned for distribution and use by
governmental public health agencies and by foreign military establishment. In
certain foreign markets, the Company's HIV test kits are expected to be
advertised for sale directly to private physicians and the consuming public.
The Company already has products under evaluation in a number of
countries. Several countries have begun testing the HIV saliva test with the
goal of introducing the product to their military to replace the currently
used blood test. Public Health institutions in several foreign countries have
reviewed and tested the Company's HIV saliva collectors. Their goal is to use
the test to screen "at risk" populations in major cities and tourist areas.
These include legal prostitutes, drug addicts, the homosexual population and
the prison population. Results of this testing will be used to develop policy
for the education programs which must be implemented along with testing to
halt the rapid spread of this infection. Additionally, many of these countries
will use the results of this testing and mass screening to plan for the future
health needs of their country.
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The tremendous publicity of the HIV/AIDS epidemic has created a very
large demand by individuals who would like to have a test. However,
individuals are reluctant to submit to organized testing because of a fear of
being "reported" and the social consequences even if the test is negative. The
testing of partners is a common concern in the socially active. The simple and
confidential nature of saliva testing allows an individual to perform the
Company's test in the privacy of his own home at his convenience. As a
screening test this will reduce the unnecessary burden on clinical labs as
only persons with positive test results must be retested. Doctors office
visits will be reduced and a substantial savings in time will be realized.
All of this will lead to lower overall health costs for the individual.
GOVERNMENT REGULATION
The development, manufacture, testing and marketing of the Company's
diagnostic products and the Airbrator(R) are subject to regulation by the FDA
and other federal, state and foreign agencies. Under the FDC Act, the FDA
regulates almost all aspects of development, marketing and sale, including the
introduction, clinical trials, advertising, manufacturing, labeling,
distribution of and record keeping for the products in the United States.
Diagnostic products marketed for testing for drug abuse are regulated as
medical devices under the FDC Act for which FDA approval is required. The
Company may attempt to obtain marketing clearance through 510(k) Premarket
Notification for certain of its products used in connection with testing for
drug abuse. Following submission of a 510(k) Premarket Notification, the
manufacturer or distributor may not place the device into commercial
distribution until an order is issued by the FDA. The FDA has no specific time
limit by which it must respond to a 510(k) Premarket Notification. The FDA may
declare that the device is "substantially equivalent" to another legally-
marketed device, and allow the device to be marketed in the United States. The
FDA may, however, determine that the proposed device is not substantially
equivalent, or may require further information, such as additional test data,
before it is able to make a determination. There is no assurance that
marketing clearance will be obtained for any of the Company's products.
Other than the dental products, no FDA approval has yet been received for
any of the Company's products and there can be no assurance that such approval
will ultimately be obtained. Although the saliva collection device received
FDA approval in April 1998 for dental use only (see "The Company's Products"
above), the test kit which incorporates the collection device has not been
approved by the FDA for sale within the United States. It is however, the
Company's proposal to export the test kit in compliance with applicable laws
and regulations administered by the FDA. Initially, because the test device
has not been approved for use in the United States, the Company would have to
comply with the FDC Act if it wishes to export the device in its finished
form. To export the completed saliva test kit from the United States, the
Company does not only need to receive permission to export the product into
the foreign country, it also had to submit to the FDA, basic data regarding
the safety of the finished device in order for the agency to determine that
export is not contrary to public health and safety. The FDA cleared the
export of both the saliva collection device and the test kit for hepatitis B,
provided that the appropriate regulatory agency of the country to which the
product is exported has approved the importation and use of the product.
During April 1997 the Company received a letter from the FDA stating that
the FDA had completed the scientific review portion of the Company's first
510(k) premarket notification regarding the Airbrator(R), and that the
Airbrator(R) was released for marketing in the United States for the use of
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abrading, polishing and cleaning the surface of teeth. Subsequently, in
response to the Company's second 510(k) premarket notification regarding the
Airbrator(R), the Company was informed verbally that the Airbrator(R) was
technically cleared for use in cavity preparation, and management expects it
to be cleared for marketing once the FDA has inspected the manufacturing site
and determined that it complies with the FDA's requirements.
FOREIGN REGULATION
Agencies similar to the FDA regulate medical devices in some foreign
countries, whereas other countries allow unregulated marketing of such
devices. The Company's products will be required to meet the regulations, if
any, of the foreign countries in which they are marketed. Once a product has
been registered in a foreign country, the Company is required to obtain a
certificate of exportability from the FDA before the product can be shipped.
MANUFACTURING
The Company will manufacture the key components of its rapid saliva test
products because of the need to maintain quality control standards coupled
with the need to closely guard the technology. The saliva collector is being
manufactured by a contract manufacturer for the Company.
The two sub-assemblies of the Airbrator(R) are manufactured by East Coast
Plastics, a contract molding company and these components will then be filled,
assembled and packaged by National HealthCare, Inc., a contract manufacturer.
The other products described above will generally be manufactured by the
Company.
The Company believes that most components used in the manufacture of its
current and proposed products are currently available from numerous suppliers
located in the United States, Europe and Asia. However, certain components are
available only from a limited number of suppliers. Although the Company
believes that it will not encounter difficulties in obtaining these
components, there can be no assurance that the Company will be able to enter
into satisfactory agreements or arrangements for the purchase of commercial
quantities of such components.
The Company anticipates that it will not be required to maintain
significant inventory levels of products until the Company's products are
deemed acceptable for sale. The Company does not currently have any material
backlog. Until the Company is able to market its products on a broad basis, it
does not anticipate that its backlog or inventory level will be material. At
that time, the Company intends to cause these products to be manufactured for
it shortly before they are required for shipment. The Company does not
foresee that an extensive period of time will be required from the time of its
manufacturing order to the time of final delivery of its products.
COMPETITION
The markets in which the Company participates are highly competitive. The
Company is aware of specialized biotechnology firms, universities and other
research institutions which have patented, developed, or are developing
technologies and products which are competitive with the Company's products
and technologies. These entities, most of which are established, have
substantially greater research, marketing and financial resources than the
Company. The Company expects that the number of products competing with its
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saliva-based test products will increase as the potential benefits of saliva-
based testing become more widely recognized.
The Company is attempting to develop strategic alliances with companies
to jointly develop diagnostic tests which use saliva and/or blood as the
testing specimen.
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company owns the rights to U.S. Patent Number 5424219 dated June 13,
1995, which relates to the "Method of Performing Assays for Biomolecules and
Solid Supports for Use in Such Methods." The Company has licensed its rights
under this Patent to Polyfiltronics, Inc. (See "License Agreement with
Polyfiltronics, Inc." below.)
The Company presently has pending, two (2) patent applications in the
United States, on certain aspects of its saliva collection testing device.
Since the Company plans to sell its products in foreign markets it intends to
seek foreign patent protection on such products and technologies. The patent
laws of other countries may differ from those of the United States as to the
patentability of the Company's products and technologies and the degree of
protection afforded.
The Company also has one pending patent application in the United States
relating to the dental air abrasion device (Airbrator(R)), and three other
applications for other technologies which the Company is developing. The FTC
has informed the Company's patent counsel of the allowance of the Airbrator(R)
patent, and it should be issued within 90 days.
Much of the technology developed or owned by the Company is subject to
trade secret protection. To reduce the risk of loss of trade secret protection
through disclosure, the Company generally enters into confidentiality
agreements with its employees. There can be no assurance that the Company will
be successful in maintaining such trade secret protection or that others will
not capitalize on certain of the Company's technology.
The Company has also registered four trademarks with the U.S. Patent and
Trademark Office. These include the trademarks "Simplex", "Neemodex",
"Airbrator(R)", and "Cytech".
LICENSE AGREEMENT WITH POLYFILTRONICS, INC.
In June 1998, the Company entered into an agreement with Polyfiltronics,
Inc. which grants Polyfiltronics an exclusive license of the Company's rights
under a patent owned by the Company relating to a micro titer filter plate
technology and an opaque wall micro strip system. Polyfiltronics paid the
Company $40,000 for the license and certain related tools and molds, and will
pay a royalty to the Company based on a percentage of sales of products using
the technology. The term of the license is for twenty years or the life of
the patent, whichever is shorter.
Polyfiltronics is a U.S. subsidiary of Whatman PLC, an English company,
with a worldwide presence in research laboratories, academic and teaching
facilities and industrial laboratories. Polyfiltronics is a technical leader
in filter plate technology. Filter plates are commonly used in medical
diagnostics, forensic medicine, DNA research, drug discovery and other
scientific fields for the analysis of small quantities of chemical or
biological components.
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ACQUISITION OF MINORITY INTEREST IN AUTOMATED HEALTH TECHNOLOGIES, INC.
During May 1998, the Company acquired a 19% interest in Automated Health
Technologies, Inc. ("AHT") in exchange for 500,000 shares of the Company's
Common Stock. The shares were exchanged pursuant to the terms of a Share
Exchange Agreement dated May 20, 1998, between the Company and AHT. The Share
Exchange Agreement provides that AHT has the right to require the Company to
exchange an additional 1,000,000 shares of Common Stock for all of the
remaining outstanding shares of AHT under certain conditions. AHT may
exercise this right prior to May 20, 2003, if, at the time of exercise, AHT
has a net worth of at least $200,000, no debt other than up to $25,000 in
trade payables, and year-to-date positive cash flow. In addition, AHT may
exercise this right if it sells the business of its subsidiary - Rx Automation
Incorporated, and escrows $1,000,000 from the proceeds of such a sale. In the
event that AHT exercises its right, the Company and AHT will in good faith
negotiate a merger or other exchange agreement necessary to effect the
additional exchange, and file a registration statement on Form S-4 to register
the transaction.
AHT is a medical services company that processes pharmacy and retail drug
store expired drug returns.
EMPLOYEES
The Company currently has eight employees. The Company is not subject to
any collective bargaining agreement and believes that its relationships with
its employees are good.
FACILITIES
The Company presently maintains its corporate offices and warehouse
facilities at 376 Ansin Boulevard, Hallandale, Florida 33009. The five year
lease on these facilities commenced April 1, 1998, and requires monthly rental
payments of $4,000 plus tax. The Company has the option to renew the lease
for five additional years.
LEGAL PROCEEDINGS
Other than the law suits described below, there are no pending legal
proceedings in which the Company is a party, and the Company is not aware of
any threatened legal proceedings involving the Company.
In August 1995, Americare Transtech, Inc. ("Americare"), Americare
Biologicals, Inc. and International Medical Associates, Inc., through their
principal, Joseph D'Angelo ("D'Angelo"), filed a lawsuit against six parties
in the Broward County circuit court under case no. 95-011256 (21). The
Complaint was dismissed and subsequently amended on or about May 17, 1996, and
included Simplex-Florida as a defendant in one count of the amended Complaint.
The Complaint alleges that ADI misappropriated Americare's proprietary and
trade secret technology relating to the saliva sample collection system and
non-invasive glucose detection technology. No specified amount of damages was
alleged other than to claim that the amount exceeded $15,000. Nine
affirmative defenses have been filed in response to the allegations. The
Company intends to aggressively defend the case and believes that the action
lacks merit and has been filed as a retaliatory measure by D'Angelo as a
result of an earlier action filed against D'Angelo and Americare by one of the
Company's principals. The suit is currently in the discovery stage and it is
expected to go to trial late in 1998.
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On or about September 1, 1998, John Faro filed a Complaint against
Simplex Medical Systems, Inc., f/k/a Music Tones Ltd., a Colorado corporation;
Simplex Medical Systems, Inc., a Florida corporation; Nicholas Levandoski;
Henry B. Schur; John Trafton; D.L. Ross a/k/a Debra Ross; and Corporate Stock
Transfer, Inc., a Colorado corporation. The Complaint was filed in Miami-Dade
County Circuit Court under Case Number 98-19091 CA-4.
The Complaint contains eight counts alleging various causes of action
which all seek 230,000 shares of stock of Simplex Medical Systems, Inc., a
Florida corporation. SMLX has moved to dismiss the Complaint on various legal
grounds and the Court has scheduled the hearing on the Motion to Dismiss for
January 6, 1999.
REPORTS TO SECURITY HOLDERS
The Company is subject to the reporting requirements of Section 13(a) and
to the proxy requirements of Section 14 of the Securities Exchange Act of
1934, as amended, and in accordance therewith files periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information concerning the Company may be inspected or
copied at the public reference facilities at the Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York, 7 World Trade Center, New York, New York 10048,
and in Chicago, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such documents can be obtained at
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file
electronically.
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MANAGEMENT
DIRECTORS AND OFFICERS
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS HELD
---- --- --------------
Colin N. Jones 77 President and Chairman of the Board
Nicholas G. Levandoski 61 Vice President - Research and
Development, Secretary, Treasurer
and Director of the Company, and
Director of Research and Development
for Simplex-Florida
Henry B. Schur 53 Vice President - Operations and
Director of the Company, Vice
President and a Director of
Simplex-Florida
Thomas E. Glickman 43 Vice President of Sales and
Marketing
Joel Marcus 58 Director
Kenneth H. Robertson 59 Director
Gerald M. Wochna 55 Director
There is no family relationship between any Director or Executive Officer
of the Company.
The Company has audit, compensation and executive committees, which were
set up on August 20, 1998. The audit committee consists of Joel Marcus and
Gerald Wochna. The compensation committee consists of Joel Marcus, Gerald
Wochna and Kenneth Robertson. The executive committee consists of Colin
Jones, Henry Schur and Kenneth Robertson.
Set forth below are the names of all directors and executive officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during at least the last five
years:
COLIN N. JONES has served as the President and Chairman of the Board of
the Company since April 10, 1998. Mr. Jones served as CEO and Chairman of
Automated Health Technologies from November 1996 to April 1998 and was a
consultant to that firm from February 1996 to November 1996. From July 1994
until January 1996, he served as Chairman, International of INTEC, an
international consulting firm specializing in reengineering. From February
1983 until March 1988, he served as Chairman of Proximity Technologies and
continued as Vice President, International until July 1994 for Franklin
Electronics, which had purchased Proximity Technologies. From June 1974 until
February 1983, he owned and operated his own merger and acquisition firm.
From January 1970 until June 1974, he was President and CEO of Sensormatic
Electronics and remained a consultant until June 1984. From September 1950
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until January 1970, he was employed by IBM in various positions with his final
position being Manager of Sales Programs for the Office Products Division.
Mr. Jones received a BSME Degree from the University of Texas in 1949.
NICHOLAS LEVANDOSKI has served as the Vice President of Research and
Development, Secretary, Treasurer and a director of the Company since March 5,
1997. He also served as acting President from March 5, 1997 until April 10,
1998. He has served as Director of Research and Development for Simplex-
Florida since June 1995. Mr. Levandoski has extensive research and clinical
experience, including military, industry and hospital environments. Mr.
Levandoski received a B.S. degree in Chemistry/Biology from the University of
Notre Dame in 1958. After a brief period in private industry (Abbott
Laboratories, N. Chicago, Illinois), Mr. Levandoski enlisted and served in the
Medical Service Corps. of the U.S. Army from 1959 to 1962. While on active
duty in Medical Service Corps., Mr. Levandoski enrolled and attended the
graduate school of the University of Denver where he continued his studies in
organic chemistry. Upon release from active duty in 1962, Mr. Levandoski was
hired as the Director of Laboratory of Metabolic Division of the U.S. Army
Research and Nutrition Laboratory, Denver, Colorado, from 1962 to 1964, and he
completed his graduate studies in 1964. He thereafter held responsible
positions in industry, including Cordis Corps., Miami, Florida, from 1965 to
1971, in the Diagnostic Products Division; Benasil Corporation, Miami, Florida
from 1977 to 1979; and Director of Corporate Compliance (FDA) for North
American Biologicals, Miami, Florida. In 1979, Mr. Levandoski returned to
active duty in the U.S. Army as Executive Officer and Hospital Administrator
for a 1,000-bed general hospital in Miami, Florida. In 1982, Mr. Levandoski
was selected to attend the National War College, Ft. McNair, Washington, D.C.;
and was thereafter assigned to the Pentagon in Washington, D.C., Division of
Reserve Affairs, where he remained until his retirement as a full Colonel in
1984.
HENRY SCHUR has served as the Company's Vice President of Marketing and a
Director since March 5, 1997. He has served as President of Analyte
Diagnostics, Inc., a wholly owned subsidiary of Simplex-Florida since June
1995. He is the Company's principal scientist and one of the principal
inventors of the Company's products. Mr. Schur has an undergraduate degree in
Health Sciences from Florida International University and post graduate
studies in Business Management at the University of Oklahoma. In the course
of Mr. Schur's professional career, he has occupied responsible positions with
companies engaged in the manufacture of diagnostics products and biochemicals,
including specifically, Arcade, Inc., Chattanooga, Tennessee (1986 to 1987),
and Cordis Corporation, Miami, Florida (1966 to 1968). Mr. Schur, in 1991,
was formerly employed by Americare, with whom Mr. Schur is now in litigation.
Mr. Schur is a principal inventor of a number of the Company's products and
has a number of issued U.S. and foreign patents to his credit.
THOMAS E. GLICKMAN has served as the Vice President of Sales and
Marketing since January 1998, and he has been employed by the Company since
October 1997. From 1993 until December 1997 he owned and operated KenStar
Corporation, a company which marketed diagnostic test kits and equipment to
clinical laboratories worldwide. Mr. Glickman sold KenStar to join the
Company. From 1986 until 1987 he served as the Director of Marketing for DVM,
the veterinary division of Ivax Corporation, which manufactured and sold skin
care products for dogs and cats to veterinarians. From 1987 until 1993 he
served as Vice President of Worldwide Sales and Marketing for the Diamedix
Division of Ivax. Diamedix manufactures enzyme immunoassay test kits for
infectious diseases and autoimmune diseases for use in clinical laboratories.
Prior to his employment with Ivax, Mr. Glickman spent 9 years with the Dade
Division of Baxter Travenol beginning as a Technical Sales Representative in
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the Maryland, Delaware and Washington D.C. areas. Later he held positions as
Product Manager for Hematology and National Accounts Manager. The Dade
Division manufactured and sold a wide range of diagnostic reagents and
controls for clinical laboratories worldwide.
JOEL MARCUS has served as a Director of the Company since December 1997.
He has been self-employed as a certified public accountant in Florida since
1974 when he became a licensed CPA. Mr. Marcus received a Bachelor of Science
Degree in Business Administration from Hofstra University in New York in 1960
and completed graduate studies at CW Post Tax Institute in 1963.
KENNETH H. ROBERTSON has been a Director of the Company since August
1998. Mr Robertson is President and CEO of Conference-Call USA, Inc., a
successful teleconferencing company which he co-founded in 1987 and sold in
December 1996 to Citizens Utilities, Inc. Following the sale, he has
continued as CEO of that entity, and it has continued to grow under his
leadership. Mr. Robertson has extensive experience in a diverse range of
business activities with special emphasis on sales and financial management.
In 1981 he moved to Florida as President and CEO of Alo-Scherer Healthcare
(now Scherer Healthcare, Inc.) and held that position until 1983 at which time
he resigned and has remained a director of this NASDAQ-listed company. Mr.
Robertson received a Bachelor's Degree in Economics from Wabash College in
1956.
GERALD M. WOCHNA has been a Director of the Company since August 1998.
Since 1984, he has been involved in the formation, financing and development
of several small businesses, both individually and as a member/manager of
Robertson & Partners, L.L.C. He is currently a director of Automated Health
Technology. Since 1984, Mr. Wochna has been involved in land development and
the development, construction, leasing and financing of retail, warehouse and
office properties. From 1973 to 1984, he practiced law with a law firm he
established in Boca Raton, Florida. Mr. Wochna continued to practice law on
an "of counsel" basis from 1984 to 1989, when he retired from that profession.
Mr. Wochna received his Bachelor's Degree from John Carroll University,
Cleveland, Ohio in 1964, and he graduated from Cleveland State University Law
School in 1968.
The Company's executive officers hold office until the next annual
meeting of the Directors of the Company. Except as described below, there are
no known arrangements or understandings between any director or executive
officer and any other person pursuant to which any of the above-named
executive officers or directors or nominees was selected as an officer or
director or nominee for director of the Company.
Colin N. Jones, Gerald M. Wochna and Kenneth R. Robertson were nominated
for election as directors of the Company pursuant to the terms of a
Stockholders' Agreement dated May 15, 1998, among the Company and certain
shareholders of the Company. (See "TRANSACTIONS WITH MANAGEMENT AND OTHERS --
STOCK SALES IN MAY AND JUNE 1998 AND STOCKHOLDERS' AGREEMENT.")
EXECUTIVE COMPENSATION
The following tables set forth information regarding executive
compensation for the Company's President and Chief Executive Officer and each
other executive officer who received total annual salary and bonus in excess
of $100,000 for any of the years ended December 31, 1997, 1996 or 1995.
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<TABLE>
<CAPTION>
Summary Compensation Table
Long-term Compensation
Awards Payouts
------------------------
Securi-
Annual Compensation ties
--------------------- Re- Underly- All
Other strict- ing Other
Name and Annual ed Options/ LTIP Com-
Principal Compen- Stock SARs Pay- pensa-
Position Year Salary Bonus sation Award(s) (Number) outs tion
- ---------- ---- -------- ----- ------- -------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nicholas G. 1997 $43,500 -- $19,400 -- 250,000 -- --
Levandoski, 1996 $ -- -- $21,956 -- -- -- --
President
</TABLE>
Aggregated Option Exercises in Year Ended
December 31, 1997 and December 31, 1997 Option Values
Securities Under- Value of Unexer-
Shares lying Unexercised cised in-the
Acquired Options Money Options/
On at 12/31/97 at 12/31/97
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
---- -------- -------- ---------------- ----------------
Nicholas Levandoski -0- $ -0- 0 / 250,000 $ 0 / 0
Options / Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date
---- ------------ ------------ ----------- ----------
Nicholas Levandoski 250,000 51.0% $1.58 8/27/02
Effective July 1, 1998, the Company entered into two-year employment
agreements with Colin Jones, Nicholas Levandoski and Henry Schur, Executive
Officers of the Company. Under these agreements, each of these persons will
receive a base salary of $80,000 per year (which amount is to be reviewed
annually) plus one-third of a bonus pool. The bonus pool will be equal to a
percentage of the audited pre-tax profit of the Company, or a minimum of
$40,000, if the corporate achievements set forth below are met. The
determination of the bonus pool is summarized below:
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Achievement
Year Profit (Loss)(1) Percentage Estimated Pool
---- ---------------- ---------- --------------
1998 $ (300,000) 12% $ 40,000 (minimum)
1999 $1,200,000 10% $120,000
2000 $2,900,000 8% $232,000 (2)
______________
(1) No bonus pool will be created unless the audited pre-tax profit (loss)
is equal to or better than the achievement level for that year.
(2) Since the employment agreements will end on June 30, 2000, any bonuses
paid for 2000 will be one-half of the amount determined and will not
be paid until completion of the year-end audit.
Each of the employment agreements provide that in the event of a
termination of employment by the Company without cause (as defined in the
agreements), the Company will be required to pay the terminated officer a lump
sum equal to the base salary remaining under the agreement, up to one year,
plus an amount equal to one years' base salary. If such a termination occurs
within six months of a change in control of the Company, the terminated
officer will receive a lump sum equal to the base salary remaining under the
agreement (without a one year limitation) plus one years' base salary.
STOCK OPTION PLAN
During August 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan"), and on August 20, 1998, the Corporation's shareholders approved
the Plan. The Plan authorizes the issuance of options to purchase up to
2,000,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time that the option is granted whether the
option will be an Incentive Stock Option (an option which qualifies under
Section 422 of the Internal Revenue Code of 1986) or an option which is not an
Incentive Stock Option. Vesting provisions are determined by the Board at the
time options are granted. The option price for any option will be no less
than the fair market value of the Common Stock on the date the option is
granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
The Company has granted options to purchase a total of 880,000 shares of
Common Stock at prices ranging from $1.58 to $3.26 per share under the Plan.
26
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT,
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, and as
adjusted for the sale of the shares offered by the Selling Shareholders, the
stock ownership of each person known by the Company to be the beneficial owner
of five percent or more of the Company's Common Stock, all Directors
individually and all Directors and Executive Officers of the Company as a
group, and the Selling Shareholders. Except as noted, each person has sole
voting and investment power with respect to the shares shown.
Per- Per-
centage Number centage
Amount of of Class of of Class
Name and Address of Beneficial Prior Shares After
Beneficial owner Ownership to Sales Offered Sales
- ------------------- ---------- -------- --------- --------
Henry B. Schur 1,142,500 (1) 10.7% -0- 10.7%
376 Ansin Boulevard
Hallandale, FL 33009
Debra L. Ross 1,142,500 (2) 10.7% -0- 10.7%
376 Ansin Boulevard
Hallandale, FL 33009
Colin N. Jones 220,000 (3) 2.0% -0- 2.0%
193 Cove Road
West Palm Beach, FL 33413
Nicholas G. Levandoski 250,000 (4) 2.3% -0- 2.3%
376 Ansin Boulevard
Hallandale, Florida 33009
Joel Marcus 190,000 (5) 1.8% -0- 1.8%
676 West Prospect Road
Fort Lauderdale, FL 33309
Kenneth H. Robertson 2,600,000 (6) 24.5% 2,600,000 0.0%
No. 206 (6)
855 S. Federal Highway
Boca Raton, FL 33432
Gerald M. Wochna 2,600,000 (7) 24.5% 2,600,000 0.0%
No. 206 (7)
855 S. Federal Highway
Boca Raton, FL 33432
John E. Trafton 708,000 6.7% -0- 6.7%
Apartment 16
285 Sunrise Drive
Key Biscayne, FL 33149
Software & Healthcare 1,000,000 9.4% 1,000,000 0.0%
Technology Fund, LLC
No. 206
855 S. Federal Highway
Boca Raton, FL 33432
27
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<PAGE>
Robertson & Partners, L.L.C. 1,600,000 17.0% 1,600,000 0.0%
No. 206
855 S. Federal Highway,
Boca Raton, FL 33432
International Technologies 900,000 8.5% -0- 8.5%
Ltd.
c/o William Smith
P.O. Box F-40729
Freeport, Bahamas
Automated Health 500,000 4.7% 500,000 0.0%
Technologies, Inc.
1025 Park of Commerce Blvd.
Delray Beach, FL 33445
All Directors and Executive 4,402,500 39.1% 2,600,000 16.0%
Officers as a Group
(6 Persons)
_______________________
(1) Includes 862,500 shares held of record by Mr. Schur's wife, Debra Ross,
80,000 shares held by Mr. Schur's daughter, 100,000 shares held in trust
for Mr. Schur's daughter, and 100,000 shares underlying options held by
Mr. Schur.
(2) Includes 862,500 shares held directly by Mrs. Ross, 80,000 shares held
by Mrs. Ross' daughter, 100,000 shares held in trust for Mrs. Ross'
daughter, and 100,000 shares underlying options held by Mrs. Ross'
husband.
(3) Includes 20,000 shares held directly and 200,000 underlying options held
by Mr. Jones.
(4) Represents 250,000 shares underlying stock options held by Mr.
Levandoski.
(5) Includes 90,000 shares held directly and 100,000 shares underlying stock
options held by Mr Marcus.
(6) Represents 1,600,000 shares held by Robertson & Partners, L.L.C. ("R&P")
and 1,000,000 shares held by Software & Healthcare Technology Fund,
L.L.C. ("SHTF"). Mr. Robertson is a majority owner and a manager of R&P
and R&P is the manager of SHTF. Mr. Robertson is also an investor in
SHTF. Mr. Robertson therefore has shared voting and shared investment
control over the 2,600,000 shares.
(7) Represents 1,600,000 shares held by Robertson & Partners, L.L.C. ("R&P")
and 1,000,000 shares held by Software & Healthcare Technology Fund,
L.L.C. ("SHTF"). Mr. Wochna is a 20% owner and a manager of R&P and R&P
is the manager of SHTF. Mr. Wochna, therefore, has shared voting and
shared investment control over the 2,600,000 shares.
Robertson & Partners L.L.C. ("R&P"), a Selling Shareholder, is affiliated
with the Company in that Kenneth H. Robertson, who is a manager and a majority
owner of R&P, is a Director of the Company. Gerald M. Wochna, who is a
manager and 20% owner of R&P, is also a Director of the Company. Software &
Healthcare Technology Fund, LLC ("SHTF"), a Selling Shareholder, is managed by
R&P and Kenneth H. Robertson is an investor in SHTF.
28
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<PAGE>
SHTF, R&P, Automated Health Technologies, Inc., Jennifer J. Schur Trust,
Joel Marcus, Debra L. Ross, Jennifer J. Schur, and the Joel Marcus Irrevocable
Trust have agreed to vote the shares which they hold on the conditions and
subject to the terms of a Stockholders' Agreement dated May 15, 1998. (See
"TRANSACTIONS WITH MANAGEMENT AND OTHERS -- STOCK SALES IN MAY AND JUNE 1998
AND STOCKHOLDERS' AGREEMENT.")
There are no known agreements, the operation of which may at a subsequent
date result in a change in control of the Company.
29
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<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
ACQUISITION OF SIMPLEX-FLORIDA
On March 5, 1997, the Company completed the acquisition of 100% of the
outstanding Common Stock of Simplex Medical Systems, Inc. ("Simplex-Florida")
in exchange for 3,453,000 shares of the Company's Common Stock. The shares
were exchanged on the basis of one share of the Company's Common Stock for one
share of Simplex-Florida common stock. In connection with the closing of this
transaction, several shareholders submitted for cancellation a total of
31,953,000 shares of common stock. As a result, after the acquisition of
Simplex-Florida, there were a total of 7,500,000 shares outstanding.
The stock issuances were made pursuant to an Agreement ("Agreement")
between the Company and Simplex-Florida. The terms of the Agreement were the
result of negotiations between the managements of the Company and Simplex-
Florida. However, the Board of Directors did not obtain any independent
"fairness" opinion or other evaluation regarding the terms of the Agreement,
due to the cost of obtaining such opinions or evaluations.
TRANSACTIONS INVOLVING THE COMPANY
On March 20, 1996, the Company issued to each of Mesdames Colleen E.
Schmidt, a Director of the Company, and a Company Director, and Sandra S.
Steinberg, a Director of the Company, 15,000,000 shares of the Company's
Common Stock, $.0001 par value per share (a total of 30,000,000 shares of
Common Stock), in consideration, in each case, for the sum of $5,000 in cash
(a total of $10,000 in cash). These shares collateralized two non-interest
bearing promissory notes in the principal amount of $2,500 each (an aggregate
face amount of $5,000), due and payable on May 31, 1996, of which each of
Mesdames Schmidt and Steinberg are the makers and the Company is the holder.
During the year ended December 31, 1997, the Company entered into several
short term notes payable with Joel Marcus, a director of the Company, totaling
$294,990, bearing interest at 10% per annum. Joel Marcus subsequently
assigned these notes to International Technologies Ltd., a principal
shareholder. As a of December 31, 1997, $284,990 of these notes payable had
expired terms. On April 2, 1998, the Company entered into an agreement with
International Technologies Ltd. to extend the terms of the notes for a three
year period with interest at 10% per annum. These notes will be amortized
over the three year period with payments on principal to be made only if the
Company records pre-tax earnings in excess of the principal amount due. If an
additional extension of time is necessary, this agreement grants an extension
until such time as pre-tax profits are sufficient to amortize the loans over
the three year period.
STOCK SALES IN MAY AND JUNE 1998 AND STOCKHOLDERS' AGREEMENT
On May 15, 1998, the Company sold 1,000,000 shares of Common Stock to
Software & Healthcare Technology Fund, L.L.C. ("SHTF") for $400,000 in cash
and on June 30, 1998, the Company sold 1,600,000 shares of Common Stock to
Robertson & Partners, L.L.C. ("R&P") for $600,000 in cash. These sales were
made pursuant to subscription agreements dated May 15, 1998. R&P is the
managing member of SHTF. The Company also granted SHTF a 120-day right of
first refusal with regard to any offerings of the Company's securities.
In connection with these stock sales, SHTF, R&P, Automated Health
Technologies, Inc. ("AHT"), Jennifer Shur, the Jennifer Shur Trust, Joel
Marcus, The Joel Marcus Irrevocable Trust and Debra L. Ross, shareholders of
30
<PAGE>
<PAGE>
the Company, entered into a Stockholders' Agreement dated May 15, 1998, which
provides, among other things, that the shareholders who are parties to the
Shareholders' Agreement will vote their shares for certain director nominees
selected by SHTF, R&P and AHT, and in such a manner as is necessary to carry
out the intent of the Stockholders' Agreement. For the Annual Meeting of
Shareholders held on August 20, 1998, the nominees selected were Gerald M.
Wochna, Kenneth H. Robertson and Colin N. Jones. (Colin Jones was added to
the Board on April 10, 1998.) The Stockholders' Agreement also provides that
during the term of that agreement none of the shareholders who are parties
thereto will transfer their shares except in accordance with the terms of the
agreement.
The Company is also a party to the Stockholders' Agreement and has agreed
that it will not sell any of its securities in any transactions unless it
provides the shareholders who are parties to the Stockholders' Agreement a
preemptive right to purchase a pro rata portion of such securities on the same
terms and conditions. This preemptive right will not apply to securities
issued to any officer, director or employee of the Company under a benefit or
compensation plan, or for services or assets (other than cash or notes).
The Company also granted "piggy-back" registration rights to SHTF and R&P
with respect to their shares of Common Stock under certain conditions.
Certain provisions of the Stockholders' Agreement, including those
related to the preemptive rights and piggyback registration rights will
terminate on the later of May 15, 2000, or on the 90th consecutive day on
which the bid price of the Company's Common Stock exceeds $4.00 per share.
The remaining provisions will terminate on May 15, 2005.
31
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<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company includes 100,000,000 shares
of Common Stock, $.0001 par value. All shares have equal voting rights and
are not assessable. Voting rights are not cumulative, and so the holders of
more than 50% of the Common Stock of the Company could, if they chose to do
so, elect all the Directors.
Upon liquidation, dissolution or winding up of the Company, the assets of
the Company, after the payment of liabilities and any liquidation preferences
on outstanding preferred stock, will be distributed pro rata to the holders of
the Common Stock. The holders of the Common Stock do not have preemptive
rights to subscribe for any securities of the Company and have no right to
require the Company to redeem or purchase their shares. The shares of Common
Stock presently outstanding are, and the shares of Common Stock to be sold
pursuant to this offering will be, upon issuance, fully paid and
nonassessable.
Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors of the Company, out of funds
legally available therefor. The Company has not paid any cash dividends on
its Common Stock, and it is unlikely that any such dividends will be declared
in the foreseeable future.
TRANSFER AGENT
Corporate Stock Transfer, Inc., 370 - 17th Street, Suite 2350, Denver,
Colorado 80202, serves as the transfer agent for the Company.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders for each fiscal year with
an annual report containing financial statements audited by its independent
certified public accountants. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate.
OUTSTANDING RIGHTS TO ACQUIRE COMMON STOCK
In addition to the options outstanding under the Company's 1997 Stock
Option Plan described under "MANAGEMENT -- STOCK OPTION PLAN", the Company has
outstanding other rights to acquire shares of the Company's Common Stock.
The Company has outstanding $125,000 in unsecured convertible 10% Notes
held by three investors. The Notes are convertible into shares of the
Company's Common Stock at the rate of $1.00 per share.
In May 1998, the Company entered into an agreement with Automated Health
Technologies, Inc. ("AHT") which, under certain circumstances, would require
the Company to issue 1,000,000 shares of its Common Stock to acquire the
remaining shares of AHT. {See "BUSINESS -- ACQUISITION OF MINORITY INTEREST
IN AUTOMATED HEALTH TECHNOLOGIES, INC.")
32
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<PAGE>
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$.01 par value. The Preferred Stock may be issued in series from time to time
with such designation, rights, preferences and limitations as the Board of
Directors of the Company may determine by resolution. The rights, preferences
and limitations of separate series of Preferred Stock may differ with respect
to such matters as may be determined by the Board of Directors, including,
without limitation, the rate of dividends, method and nature of payment of
dividends, terms of redemption, amounts payable on liquidation, sinking fund
provisions (if any), conversion rights (if any), and voting rights. The
potential exists, therefore, that preferred stock might be issued which would
grant dividend preferences and liquidation preferences to preferred
shareholders over common shareholders. Unless the nature of a particular
transaction and applicable statutes require such approval, the Board of
Directors has the authority to issue these shares without shareholder
approval. The issuance of Preferred Stock may have the affect of delaying or
preventing a change in control of the Company without any further action by
shareholders. There are presently no shares of Preferred Stock outstanding.
PLAN OF DISTRIBUTION
The 3,100,00 Shares offered hereby may be offered and sold from time to
time by the Selling Shareholders, or by pledgees, donees, transferees or other
successors in interest. Such offers and sales may be made from time to time
in the over-the-counter market, or otherwise, at prices and on terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Shares may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account; (c) an exchange distribution in accordance with the rules of such
exchanges; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) privately negotiated transactions; and (f) a
combination of any such methods of sale. In effecting sales, brokers or
dealers engaged by the Selling Shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or
discounts from Selling Shareholders or from the purchasers in amounts to be
negotiated immediately prior to the sale. The Selling Shareholders may also
sell such shares in accordance with Rule 144 under the 1933 Act.
The Selling Shareholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the 1933 Act. There can be
no assurance that the Selling Shareholders will sell any or all of the shares
of Common Stock offered hereunder.
All proceeds from such sales will be the property of the Selling
Shareholders who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees. The Selling Shareholders are
also sharing the costs of the registration of the Shares.
33
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<PAGE>
LEGAL MATTERS
The legality of the securities of the Company offered will be passed on
for the Company by Krys Boyle Freedman & Sawyer, P.C., 600 17th Street, Suite
2700 South Tower, Denver, Colorado 80202.
EXPERTS
The financial statements of the Company included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Schmidt, Raines, Trieste, Dickenson & Adams, P.L., Certified Public
Accountants, and are included herein in reliance on the authority of such firm
as experts in accounting and auditing in giving such reports.
The financial statements of the Company included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Millward & Co., CPA's, and are included herein in reliance on the authority of
such firm as experts in accounting and auditing in giving such reports.
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the securities offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to
the Company and the securities offered hereby, reference is made to such
Registration Statement, exhibits and schedules. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal offices in Washington, D.C., and copies
of all or any part thereof may be obtained from the Commission upon the
payment of certain fees prescribed by the Commission. The Registration
Statement has been filed electronically through the Commission's Electronic
Data Gathering, Analysis and Retrieval System and may be obtained through the
Commission's Web site (http://www.sec.gov).
No person is authorized to give any information or to make any
representation other than those contained in this Prospectus, and if given or
made such information or representation must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities
offered by this Prospectus or an offer to sell or a solicitation of an offer
to buy the securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
34
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheet as of June 30, 1998 (unaudited)
and December 31, 1997. . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the six months
ended June 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . F-3
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . F-4
Notes to Financial Statements (unaudited). . . . . . . . . . . . F-5
Independent Auditors' Report . . . . . . . . . . . . . . . . . . F-6 - F-7
Consolidated Balance Sheets as of March 31, 1997 . . . . . . . . F-8
Consolidated Statements of Operations for the period from
June 6, 1995 (date of inception) through December 31, 1997
and for the years ended December 31, 1997 and 1996 . . . . . . . F-9
Consolidated Statements of Stockholders' Equity for the
period from June 6, 1995 (date of inception) through
December 31, 1997 and for the years ended December 31,
1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Cash Flows for the period from
June 6, 1995 (date of inception) through December 31, 1997
and for the years ended December 31, 1997 and 1996 . . . . . . . F-11
Notes to Financial Statements. . . . . . . . . . . . . . . . . . F-12
F-1
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
6/30/98 12/31/97
--------- ---------
ASSETS
CURRENT ASSETS
Cash $ 742,797 $ 41,743
Accounts Receivable (Net Of Allowance
For Uncollectible Accounts Of $2,321
For 1998) 36 3,882
Inventory 147,536 141,565
Prepaid Expenses 19,561 -
---------- ---------
Total Current Assets 909,930 187,190
Property, Plant and Equipment, at cost
(Net of accumulated depreciation) 155,540 87,451
Patents 93,624 66,861
Deposits 300 6,692
---------- ---------
Total Assets $1,159,394 $ 348,194
========== =========
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 76,428 $ 75,074
Current Portion of Notes Payable 61,044 61,044
Customer Deposits 59,682 70,093
---------- ---------
Total Current Liabilities 197,154 206,211
---------- ---------
LONG-TERM DEBT
Notes Payable, Net of Current Portion 378,778 288,932
---------- ---------
STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001,
Authorized 100,000,000 Shares, Issued
and Outstanding 10,600,000 Shares on
6/30/98 and 7,500,000 on 12/31/97 1,060 750
Additional Paid-In Capital In Excess
of Par 1,657,888 658,197
Deficit Accumulated During the Development
Stage (1,075,486) (805,896)
---------- ---------
Total Stockholders' (Deficit) Equity 583,462 (146,949)
---------- ---------
Total Liabilities and Stockholders' Equity $1,159,394 $ 348,194
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
6/30/98 6/30/97
---------- ----------
REVENUES - NET $ 202,891 $ 37,459
COST OF GOODS SOLD 78,638 13,937
---------- ----------
GROSS PROFIT 124,253 23,522
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRA-
TIVE EXPENSES 359,591 241,412
DEPRECIATION AND AMORTIZATION
EXPENSE 13,102 6,648
---------- ----------
TOTAL OPERATING EXPENSES 372,693 248,060
OPERATING LOSS (248,440) (224,538)
INTEREST EXPENSE (21,147) (4,679)
---------- ----------
NET (LOSS) (269,587) (229,217)
NET (LOSS) PER SHARE (0.03) (0.03)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,000,000 7,500,000
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
6/30/98 6/30/97
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (269,587) $ (229,217)
Adjustment to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 13,102 6,648
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable 3,846 (7,601)
(Increase) Decrease in Inventory (5,971) 1,786
(Increase) in Prepaid Expense (19,561) (155)
Increase (Decrease) in Accounts Payable 1,354 30,285
Increase (Decrease) in Other Current
Liabilities (10,411) 8,853
Increase in Customer Deposits (6,392) 30,939
---------- ----------
Net Cash (Used In) Provided By Operating
Activities (293,620) (158,462)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets (68,409) (448)
Patent Costs (26,763) (18,390)
---------- ----------
Net Cash Provided By (Used In) Investing
Activities (95,172) (18,838)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement of Stock 1,000,000 -
Notes Payable 89,846 133,733
---------- ----------
Net Cash Provided by Financing Activities 1,089,846 133,733
---------- ----------
Net (Decrease) Increase in Cash 701,054 (43,567)
Cash - Beginning of Period 41,743 54,086
---------- ----------
Cash - End of Period $ 742,797 $ 10,519
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Simplex
Medical Systems, Inc. (the "Company") and its wholly-owned subsidiaries,
Simplex Medical Systems, Inc.(a Florida corporation) and Analyte Diagnostics,
Inc., have been prepared in accordance with the instructions and requirements
of Form 10-QSB and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, such financial statements reflect
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the results of operations and financial position for the
interim periods presented. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the full year.
These financial statements should be read in conjunction with the Company's
annual report on Form 10-KSB.
These financial statements give effect to the March 5, 1997 reverse
acquisition whereby Music Tones Ltd. (name subsequently changed to Simplex
Medical Systems, Inc.) acquired all of the outstanding common stock of Simplex
Medical Systems, Inc. as if the transaction occurred on September 15, 1995.
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
experienced losses aggregating $1,075,486 and has been dependent upon loans
from stockholders and other third parties and proceeds from the sale of stock
in order to satisfy operations to date. Management believes that funds
generated from operations will provide the Company with sufficient cash flow
resources to fund the operations of the Company. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to
continue as a going concern.
NOTE 3 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of June 30, 1998, the Company has
generated net operating loss carryforwards totalling $(1,075,486) which are
available to offset future taxable income, if any, through the year 2010. As
utilization of such an operating loss for tax purposes is not assured, the
deferred tax asset has been fully reserved through the recording of 100%
valuation allowance.
The components of the net deferred tax asset are as follows at June 30, 1998:
Deferred Tax Assets:
Net Operating Loss Carryforward (1,075,486)
Valuation Allowance (1,075,486)
F-5
<PAGE>
<PAGE>
SCHMIDT, RAINES, TRIESTE, DICKENSON & ADAMS, P.L.
Certified Public Accountants and Consultants to Business
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
Simplex Medical Systems, Inc. and Subsidiary
Hallandale, Florida
We have audited the accompanying consolidated balance sheets of Simplex
Medical Systems, Inc. and Subsidiary (a development stage company) as of
December 31, 1997, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The consolidated financial
statements of Simplex Medical Systems, Inc. and Subsidiary as of December 31,
1996 were audited by other auditors whose report dated May 16, 1997 included
an explanatory paragraph describing conditions that raised substantial doubt
about the Company's ability to continue as a going concern.
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 December 31, 1997 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Simplex Medical Systems, Inc. and Subsidiary as of December 31,
1997 and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the
consolidated financial statements, the Company incurred a net loss of $309,944
during the year ended December 31, 1997, and, as of that date, had a negative
net worth of $146,949. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
regarding these matters are described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Schmidt & Co.
SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P. L.
Boca Raton, Florida
March 26, 1998
F-6
<PAGE>
<PAGE>
MILLWARD & CO., CPAs
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Simplex Medical Systems, Inc. and Subsidiary
Hallandale, Florida
We have audited the accompanying consolidated balance sheets of Simplex
Medical Systems, Inc. and Subsidiary as of December 31, 1996, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the year ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Simplex
Medical Systems, Inc. and Subsidiary as of December 31, 1996 and the results
of its operations and its cash flows for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Simplex Medical Systems, Inc. and Subsidiary will continue as a going
concern. As more fully described in Note 2, the Company has incurred
operating losses and the accompanying consolidated balance sheet reflects an
accumulated deficit of $495,952. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
/s/ Millward & Co.
Millward & Co. CPAs
Fort Lauderdale, Florida
May 16, 1997
F-7
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
--------- ---------
ASSETS
Current assets:
Cash $ 41,743 $ 53,849
Accounts receivable, net of allowance for
uncollectible accounts of $2,321 for
1997 and 1996 3,882 3,416
Inventory 141,565 140,827
--------- ---------
Total current assets 187,190 198,092
--------- ---------
Equipment, less accumulated depreciation
1997 $51,897; 1996 $25,804 87,451 111,316
--------- ---------
Other assets:
Patents and trademarks, less accumulated
amortization 1997 and 1996 $504 66,861 18,508
Deposits 6,692 5,580
--------- ---------
73,553 24,088
--------- ---------
$ 348,194 $ 333,496
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 75,074 $ 24,062
Current portion of notes payable 61,044 2,654
Customer and other deposits 70,093 138,799
--------- ---------
Total current liabilities 206,211 165,515
--------- ---------
Notes payable, net of current portion 288,932 4,986
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.0001 par value, 100,000,000
shares authorized, 7,500,000 and 3,453,000
shares issued and outstanding at December 31,
1997 and 1996, respectively 750 345
Preferred stock, $.0001 par value, 10,000,000
shares authorized, no shares issued or
outstanding -0- -0-
Additional paid-in capital 658,197 658,602
Deficit accumulated during the development stage (805,896) (495,952)
--------- ---------
(146,949) 162,995
--------- ---------
$ 348,194 $ 333,496
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
June 6, 1995
(date of inception)
through
December 31, 1997 1997 1996
----------------- --------- ---------
Revenues, net $ 119,431 $ 71,461 $ 25,840
Cost of goods sold 83,298 48,121 25,269
---------- --------- ---------
Gross profit 36,133 23,340 571
Operating expenses:
Selling, general and
administrative expenses 961,084 485,086 403,049
Depreciation and amortization
expense 52,401 26,093 26,229
---------- --------- ---------
Total operating expenses 1,013,485 511,179 429,278
---------- --------- ---------
Net loss from operations (977,352) (487,839) (428,707)
Other income (expense):
Forfeiture of customer deposits 167,360 167,360 -0-
License fees 30,000 30,000 -0-
Other income 576 40 536
Interest expense (26,480) (19,505) (6,469)
---------- --------- ---------
Total other income (expense) 171,456 177,895 (5,933)
---------- --------- ---------
Net loss before income taxes (805,896) (309,944) (434,640)
Income taxes -0- -0- -0-
---------- --------- ---------
Net loss $ (805,896) $(309,944) $(434,640)
=========== ========= =========
Loss per common share $ (0.05) $ (0.15)
========= =========
Weighted average number of shares 6,790,389 2,866,651
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Total
Stock-
holders'
Common Stock Paid-in Accumulated Equity
Issued Amount Capital Deficit (Deficit)
----------- ------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Analyte Diagnostics, Inc.
Common stock issued on
July 29, 1995 24,750,000 $2,475 $ -0- $ -0- $ 2,475
1 for 200 reverse stock
split October 31, 1995 (24,626,250) (2,462) -0- -0- (2,462)
Merger on October 31, 1995
of Analyte Diagnostics,
Inc. into Simplex Medical
Systems, Inc. (123,750) (13) -0- -0- (13)
Simplex Medical Systems, Inc. and
Subsidiary
Issuance of one share
Simplex Medical Systems,
Inc. $.0001 common stock
for each two shares of
Analyte Diagnostics, Inc.
common stock on October
31, 1995 61,875 6 -0- -0- 6
Shares issued for cash at
par on October 31, 1995 1,053,625 105 -0- -0- 105
Cancellation of stock on
October 31, 1995 (239,375) (24) -0- -0- (24)
Net loss -0- -0- -0- (61,312) (61,312)
----------- ----- ------- --------- ---------
Balance, December 31, 1995 876,125 87 -0- (61,312) (61,225)
Shares issued for cash at
par in February 1996 16,475 2 -0- -0- 2
Shares issued for equipment
in February 1996 214,375 21 53,198 -0- 53,219
Issuance of shares for
private placement on
June 7, 1996 619,525 62 605,577 -0- 605,639
Shares issued for 2 for 1
stock split on September
25, 1996 1,726,500 173 (173) -0- -0-
Net loss -0- -0- -0- (434,640) (434,640)
----------- ----- -------- --------- ---------
Balance, December 31, 1996 3,453,000 345 658,602 (495,952) 162,995
Issue of shares in merger
with Music Tones on
March 5, 1997 4,047,000 405 (405) -0- -0-
Net loss -0- -0- -0- (309,944) (309,944)
----------- ------ -------- --------- ---------
Balance, December 31, 1997 7,500,000 $ 750 $658,197 $(805,896) $(146,949)
=========== ====== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
June 6, 1995
(date of inception)
through
December 31, 1997 1997 1996
OPERATING ACTIVITIES ------------------ --------- ---------
Net loss $ (805,896) $(309,944) $(434,640)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 52,401 26,093 26,229
(Increase) decrease in:
Accounts receivable (3,882) (466) (2,608)
Inventory (141,565) (738) (131,741)
Deposits (6,692) (1,112) (2,188)
Increase (decrease) in:
Accounts payable and accrued
expenses 75,074 51,012 (15,706)
Customer and other deposits 70,093 (68,706) 28,365
---------- --------- ---------
Net cash used in operating activities (760,467) (303,861) (532,289)
---------- --------- ---------
INVESTING ACTIVITIES
Proceeds from the sale of equipment 290 290 -0-
Acquisition of fixed assets and patents (207,003) (50,871)(101,084)
---------- --------- ---------
Net cash provided by (used in)
Investing activities (206,713) (50,581)(101,084)
---------- --------- ---------
FINANCING ACTIVITIES
Proceeds from private placement 658,947 -0- 605,641
Payments on notes payble (8,154) (2,654) (5,500)
Proceeds from notes payable 358,130 344,990 7,640
---------- --------- --------
Net cash provided by financing
activities 1,008,923 342,336 607,781
---------- --------- -------
Net increase (decrease) in cash 41,743 (12,106) (25,592)
Cash - beginning of period -0- 53,849 79,441
---------- --------- -------
Cash - end of period $ 41,743 $ 41,743 $53,849
========== ========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Simplex Medical Systems, Inc. has been in the development stage since its
inception on June 6, 1995. Since inception, the Company has been engaged in
the development, acquisition, marketing and manufacture of medical diagnostic
products, biological products for blood banking, bulk pharmaceuticals, and
specialty chemicals, as well as seeking regulatory clearance, patent
protection, and raising capital to fund operations.
The Company has patented and proprietary technology in the fields of: point
of use medical and veterinary diagnostics; dental therapeutic devices;
pharmaceutical products; and consumer products. The Company utilizes its own
manufacturing facilities for the production of proprietary or quality
sensitive materials and contracts out the other products and final packaging
to third parties. The Company currently has products approved in several
foreign countries and is actively marketing its products in those areas.
Within the United States, the Company has received FDA registration on one of
its major products and anticipates approval on its second major product during
1998.
The financial statements include the accounts of the Company's subsidiary,
Analyte Diagnostics, Inc., from the date of its inception, June 6, 1995.
Analyte Diagnostics, Inc. was a predecessor corporation to Simplex Medical
Systems, Inc. which was formed on September 15, 1995. The two companies were
merged into Simplex Medical Systems, Inc., on October 31, 1995, with all
account balances recorded at cost. At the time, the Company had a 1 to 200
reverse stock split. Subsequently, the Company had a 2 for 1 stock split.
All share references give effect to the post split plans.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Simplex Medical
Systems, Inc., and its wholly owned subsidiary, Analyte Diagnostics, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
INVENTORY
Inventory consists of finished goods as of December 31, 1997 and 1996 and is
stated at the lower of cost (first-in, first-out method) or market.
EQUIPMENT
Equipment is stated at cost and is depreciated using the straight-line method
over the estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are charged against operations as incurred.
F-12
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
PATENTS AND TRADEMARKS
The cost of patents and trademarks acquired are being amortized on a straight-
line basis over their estimated useful lives, ranging from 17 to 40 years,
beginning when the trademarks and patents are approved.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations when incurred and are
included in operating expenses. The amounts charged to operations for the
year ended December 31, 1997 totaled $103,324.
REVENUE RECOGNITION
Revenue from sales is recognized upon shipment of goods to the customer.
License fee revenue is recognized upon receipt.
Revenue is recognized from the forfeiture of customer deposits based upon the
individual terms contained in the International Distribution agreements with
each customer. These deposits are non-refundable and are considered forfeited
when the customer fails to perform certain requirements as described in their
contract.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and For Long-Lived
Assets to be Disposed Of" ("SFAS 121") in 1996. SFAS 121 establishes
accounting standards for recording the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. The adoption of SFAS 121 did not have a material impact on
the Company's financial position or results of its operations.
F-13
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STOCK BASED COMPENSATION
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" in
1996. SFAS 123 allows either the adoption of a fair value method of
accounting for stock-based compensation plans or continuation of accounting
under Accounting Principles Board ("APB") Opinion No. 25 Accounting for Stock
Issued to Employees, and related interpretations with supplemental
disclosures. The Company has chosen to account for all stock based
arrangements under which employees receive shares of the Company's stock under
APB 25 and make the related disclosures under SFAS 123. Since the method of
accounting prescribed under SFAS 123 is not to be applied to options granted
prior to January 1, 1995, there is no resulting pro forma compensation cost to
be disclosed.
EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share", in 1997. SFAS 128
establishes accounting standards for the computation, presentation, and
disclosure of earnings per share information for entities with publicly held
common stock or potential common stock.
CAPITAL STRUCTURE
The Company adopted SFAS No. 129, "Disclosure of Information about Capital
Structure", in 1997. SFAS 129 establishes disclosure requirements within the
financial statements of the pertinent rights and privileges of the various
securities outstanding.
RECENTLY ISSUED ACCOUNTING STANDARDS
COMPREHENSIVE INCOME
The Financial Accounting Standards Board recently issued SFAS No. 130,
"Comprehensive Income: Financial Statement Presentation". SFAS 130
establishes accounting standards for reporting and presenting comprehensive
income and its components in a set of financial statements. For the purpose
of this standard, comprehensive income is defined as the change in equity of a
company arising from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period except
those resulting from investments by and distributions to owners. This
standard is applicable to financial statements with fiscal years beginning
after December 15, 1997. The adoption of SFAS 130 is not expected to have a
material impact on the Company's financial position or results of its
operations.
F-14
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SEGMENT REPORTING
The Financial Accounting Standards Board recently issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". This
standard requires that public companies report certain information about
operating segments, products and services, the geographic areas in which they
operate, and their major customers. This standard is applicable to financial
statements with fiscal years beginning after December 15, 1997. The adoption
of SFAS 131 is not expected to have a material impact on the Company's
financial position or results of its operations.
NET LOSS PER SHARE
Net loss per share is computed on the basis of the weighted average number of
shares actually outstanding during the years ended December 31, 1997 and 1996.
Options to purchase 490,000 shares of Common Stock and bonds convertible into
50,000 shares of Common Stock were not included in computing net loss per
share because the effect of such inclusion would be to decrease the reported
net loss per share.
INCOME TAXES
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes". Deferred income taxes are determined based upon the difference
between the financial statement carrying amount and the tax basis of assets
and liabilities using tax rates expected to be in effect in the years in which
the differences are expected to reverse.
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
experienced losses aggregating $805,896 and has been dependent upon loans from
stockholders and other third parties in order to satisfy operations to date.
As described in Note 15, "Subsequent Events", the Company has signed a letter
of intent with Robertson & Partners, LLC ("Robertson") and Automated Health
Technologies, Inc. ("AHT") in which the Company will purchase 19% of AHT
common stock and issue a five year put option on the purchase of the remaining
81% of AHT's common stock. Furthermore, the chairman of AHT will become the
Chairman and Chief Executive Officer of the Company. In addition, the letter
of intent calls for the sale of 20% of the Company's stock to investors being
sought by Robertson for $1,000,000.
F-15
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE (CONTINUED)
Management believes that the funds raised through the sale of stock and income
generated from the sale of several recently developed products will provide
the Company with sufficient cash flow resources to fund the operations of the
Company. Furthermore, management believes that the expertise gained through
the employment of AHT's chairman will provide the Company with the non-
financial resources necessary to efficiently and effectively operate the
Company.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result from the
possible inability of the Company to continue as a going concern.
NOTE 3 - BUSINESS ACQUISITION AND MERGER
On March 5, 1997, the shareholders of the Company received 3,453,000 shares of
the outstanding common stock of Music Tones, Ltd. ("MTL"), a publicly traded
inactive company, in exchange for the same number of the Company's Common
Stock in a reverse acquisition whereby the Company was deemed to be the
acquirer. As of the date of the transaction, MTL had 36,000,000 shares of
common stock issued and outstanding. Pursuant to the terms of the merger, MTL
canceled 31,953,000 shares of its common stock which reduced its issued and
outstanding shares to 4,047,000. After the closing, the Company's
shareholders owned approximately 46.04% of the then issued and outstanding
shares of MTL. This transaction has been accounted for as a pooling of
interests. The combined and separate results of MTL and the Company as of the
date of the merger have not been presented and the consolidated financial
statements for the periods presented have not been restated to include the
accounts of MTL because management believes they are immaterial.
NOTE 4 - EQUIPMENT
Useful Life
(in Years) 1997 1996
----------- -------- --------
Computer equipment 5 $ 11,215 $ 11,215
Office furniture and equipment 5-7 6,922 4,512
Shop equipment 5-7 80,291 80,579
Computer software 3 1,246 1,140
Molds 5 39,674 39,674
-------- --------
139,348 137,120
Less: accumulated depreciation (51,897) (25,804)
-------- --------
$ 87,451 $111,316
======== ========
Depreciation expense totaled $26,093 and $25,704 for the years ended December
31, 1997, and 1996, respectively.
F-16
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - NOTES PAYABLE
During the year ended December 31, 1997, the Company entered into several
short term notes payable with a shareholder totaling $294,990, bearing
interest at 10% per annum. These notes were subsequently assigned to another
shareholder. As of December 31, 1997, $284,990 of these notes payable had
expired terms. On April 2, 1998, the Company entered into an agreement with
the shareholder to extend the terms of the notes for a three year period with
interest at 10% per annum. These notes shall be amortized over the three year
period with payments on principal to be made only if the Company records
pre-tax earnings in excess of the principal amount due. If an additional
extension of time is necessary, this agreement grants an extension until such
a time as pre-tax profits are sufficient to amortize the loans over the three
year period. Accordingly, a portion of these notes payable has been
classified as long-term debt as of December 31, 1997.
Notes payable as of December 31, 1997 and 1996 consisted of the following:
1997 1996
Note payable, vendor, due in monthly payments -------- --------
of $318, including interest which is calcu-
ated at 18% per annum, final payment due July,
1999; collateralized by equipment with a net
book value of $7,714 as of December 31, 1997. $ 4,986 $ 7,640
Note payable, shareholder, interest payable
at 10% per annum; payable as described above. 294,990 -0-
Convertible note payable, individual,
interest payable at 10% per annum on
December 18, 1998 and upon maturity on
June 18, 1999; convertible into common
stock at $1.00 per share (See Note 13). 50,000 -0-
-------- -------
349,976 7,640
Less: current maturities 61,044 2,654
-------- -------
$288,932 $ 4,986
======== =======
Aggregate annual maturities of the notes payable at December 31, 1997 are as
follows:
During the year ending December 31, 1998 $ 61,044
- ---------------------------------- 1999 146,905
2000 104,733
2001 37,294
--------
$349,976
========
F-17
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - NOTES PAYABLE (CONTINUED)
Interest expense totaled $19,505 and $6,469 during the years ended December
31, 1997 and 1996, respectively.
NOTE 6 - CUSTOMER AND OTHER DEPOSITS
Included in customer and other deposits at December 31, 1997 is $16,100
received from an individual as a deposit on stock to be issued.
NOTE 7 - LEASES
The Company is currently renting office and warehouse space in Hallandale,
Florida pursuant to two lease agreements which expire in August and September
1998. See Note 15, "Subsequent Events", for disclosure of new lease
arrangement.
Rent expense for the years ended December 31, 1997 and December 31, 1996
amounted to $27,791 and $27,418, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
A director and shareholder loaned the Company a total of $294,990 at various
times during the year ended December 31, 1997 that were subsequently assigned
to another shareholder of the Company. These notes were outstanding as of
December 31, 1997 and are discussed in Note 5. Interest expense incurred in
connection with these loans totaled $17,057 during 1997.
NOTE 9 - SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
During the years ended December 31, 1997 and 1996 cash paid by the Company for
interest totaled $1,163 and $749, respectively.
In addition, equipment increased by $8,800 during the year ended December 31,
1996 due to the recording of a related note payable.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
NOTES PAYABLE
The carrying amount approximates fair value because the same terms and
interest rates could be obtained for similar maturities.
F-18
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
STOCK OPTIONS
It is not practicable to estimate the fair value of the Company's stock
options because they are subject to trading restrictions and lack quoted
market prices.
NOTE 11 - STOCK OPTIONS
In August 1997, the Board of Directors granted certain employees, directors
and consultants of the Company stock options pursuant to the Company s 1997
Stock Option Plan. A total of 2,000,000 shares of the Company s stock have
been reserved for the options to be granted under this plan. Eligible
participants include any employee, officer, director or consultant that the
Board of Directors, in its sole discretion, designates is eligible to
participate in this Plan. The option exercise price is stated on the option
grant and shall not be less than 100% of the fair market value of the shares
on the date of the grant or the par value, whichever is greater. Unless
otherwise stated on the option, each option is exercisable for ten years. As
of December 31, 1997, the options granted under this plan totaled 490,000
shares exercisable within ten years at a price of $1.58 per share.
The following summarizes the status of the Company s stock options for the
year ended December 31, 1997:
Weighted-Average
Shares Exercise Price
------- ----------------
Outstanding at January 1, 1997 - 0 -
Granted and exercisable 490,000 $1.58
Exercised - 0 -
Forfeited - 0 -
Outstanding at December 31, 1997 490,000 $1.58
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its stock options.
Accordingly, no compensation cost has been recognized in the accompanying
financial statements related to stock options. The weighted average fair
value of options granted during the year ended December 31, 1997 was $0.97,
which was computed using the Black-Scholes option pricing model with the
following assumptions: expected life of 3 years; expected volatility of 75%;
and a risk free interest rate of 6%. Had compensation cost for the Company's
stock options been determined based on the fair value at the grant dates
consistent with the method of FASB No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss and net loss per share for the year
ended December 31, 1997 would have been $785,244 and $0.12, respectively.
F-19
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 11 - STOCK OPTIONS (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the use of
highly subjective assumptions. Because the Company s stock options have
characteristics that are significantly different from traded options and
because changes in the valuation assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
NOTE 12 - INCOME TAXES
The Company has incurred tax operating losses and therefore has generated no
income tax liabilities. As of December 31, 1997, the Company has generated
net tax operating loss carryforwards totaling $805,896 which are available to
offset future taxable income, if any. These loss carryforwards expire
beginning in 2010. Due to limitations on the utilization of loss
carryforwards resulting from ownership changes and separate return limitations
and the uncertainty that the Company and its subsidiaries will be able to
utilize the net operating losses, a 100% valuation allowance has been recorded
against the deferred tax assets.
The following summarizes the components of the net deferred tax asset at
December 31, 1997 and 1996:
1997 1996
Deferred tax assets: -------- --------
Net operating loss carryforward $274,005 $147,778
Valuation allowance (274,005) (147,778)
-------- --------
Net deferred tax asset $ - 0 - $ - 0 -
======== ========
NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIT)
PRIVATE PLACEMENT
During 1996, the Company completed a private placement of 619,525 shares of
Common Stock for $1 per share and received net proceeds of $605,639.
SHARES USED FOR EQUIPMENT
In February 1996, the Company issued 214,375 shares of its Common Stock to a
director of the company in exchange for his 100% interest in a private company
which was not active. This company manufactured specialty chemicals for the
pharmaceutical and agricultural industries. The Company received primarily
laboratory equipment as a result of this acquisition. The transaction has
been recorded at the fair value of assets acquired.
F-20
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
CONVERTIBLE NOTES PAYABLE
On December 18, 1997 the Company issued an unsecured convertible note payable
to an individual. This note bears interest at 10% per annum and matures on
June 18, 1999. Upon issuance and at any time on or prior to the maturity
date, any unpaid principal and accrued interest is convertible into fully paid
and nonassessable shares of $0.0001 par value Common Stock at $1.00 per share.
NOTE 14 - LEGAL PROCEEDINGS
The Company has been named as one of six co-defendants in a lawsuit filed by
the Company's principal scientist's previous employer, Americare Transtech,
Inc. Americare Transtech, Inc. alleges damages for violation of Florida's
Trade Secret Act with regard to the rights to the patent of the Company's
saliva sample collection system. The Company has aggressively defended its
position in the case and believes that the litigation lacks merit.
NOTE 15 - SUBSEQUENT EVENTS
LETTER OF INTENT
On February 20, 1998, the Company signed a letter of intent with Robertson &
Partners, LLC ("Robertson") and Automated Health Technologies, Inc. ("AHT").
According to this letter of intent, the Company has agreed to buy 19% of AHT
Common Stock for 500,000 shares of the Company's Common Stock and give AHT
shareholders a 5 year put option on an additional 1,000,000 shares of the
Company's Common Stock for the remaining 81% of AHT's common stock. In
addition, the Company has agreed to issue 20% of its stock to investors being
sought by Robertson in exchange for $1,000,000 to be raised during 1998. The
Company received $200,000 of this additional capital in March and April 1998.
Robertson's fee for raising this additional capital is 100,000 shares of the
Company's Common Stock.
LETTER OF INTENT FOR JOINT VENTURE
On February 5, 1998, the Company signed a letter of intent for joint venture
with S.S. White Technologies, Inc. in which the two companies will work
together to introduce and market one of the Company's major products for
industrial application.
F-21
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)
NOTES PAYABLE
On January 21, 1998, the Company executed two unsecured convertible 10% note
agreements totaling $75,000. These notes mature on July 21, 1999 with
interest payable on January 21 and July 21, 1999. These notes are convertible
into shares of the Company s Common Stock at a price of $1.00 per share.
LEASE
On February 11, 1998, the Company entered into a lease agreement for office
and warehouse space at a new location. This five year lease begins on April
1, 1998 and requires monthly rental payments of $4,000 plus tax. The Company
has the option at the end of the lease term to renew the lease for an
additional five years. This lease replaces and cancels the Company's existing
lease agreements which expire in August and September, 1998.
F-22
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, Director or Officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, is as follows:
(a) The Company has the power under the Colorado Business Corporation
Act to indemnify any person who was or is a party or is threatened to be made
a party to any action, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a Director,
Officer, employee, fiduciary, or agent of the Company or was serving at its
request in a similar capacity for another entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection therewith if he acted in good faith
and in a manner he reasonably believed to be in the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In case of an action
brought by or in the right of the Company such persons are similarly entitled
to indemnification if they acted in good faith and in a manner reasonably
believed to be in the best interests of the Company but no indemnification
shall be made if such person was adjudged to be liable to the Company for
negligence or misconduct in the performance of his duty to the Company unless
and to the extent the court in which such action or suit was brought
determines upon application that despite the adjudication of liability, in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification. In such event, indemnification is limited to
reasonable expenses. Such indemnification is not deemed exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, Bylaws, agreement, vote of shareholders or disinterested
directors, or otherwise.
(b) The Articles of Incorporation and Bylaws of the Company generally
require indemnification of Officers and Directors to the fullest extent
allowed by law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by
the Selling Shareholders, are as follows:
SEC Filing Fee ................................ $ 875.24
Printing Expenses ............................. 1,000.00
Accounting Fees and Expenses .................. 2,500.00
Legal Fees and Expenses ....................... 25,000.00
Blue Sky Fees and Expenses .................... 1,000.00
Miscellaneous ................................. 624.76
----------
Total .................................... $31,000.00
II-1
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<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During its past three years, the Registrant issued securities which were
not registered under the Securities Act of 1933, as amended (the "Act"), as
follows.
Effective March 20, 1996, the Company effected a 2,000 for 1 forward
split of the outstanding Common Stock. All numbers of shares stated below
give retroactive effect to this stock split.
On March 20, 1996, the Company issued to each of Mesdames Colleen E.
Schmidt, the daughter-in-law of Mr. Paul J. Schmidt and who was then a
director of the Company, and Sandra S. Steinberg, the mother of Daniel C.
Steinberg, who was then President and a director of the Company, 15,000,000
shares of the Company's Common Stock (a total of 30,000,000 shares of Common
Stock), in consideration, in each case, for the sum of $5,000 in cash (a total
of $10,000 in cash). These shares collateralized two non-interest bearing
promissory notes in the principal amount of $2,500 each (an aggregate face
amount of $5,000), due and payable on May 31, 1996, of which each of Messrs.
Schmidt and Steinberg were the makers and the Company was the holder. These
promissory notes were paid during 1996.
On March 5, 1997, the Company completed the acquisition of 100% of the
outstanding common stock of Simplex Medical Systems, Inc. ("Simplex-Florida")
in exchange for 3,453,000 shares of the Company's Common Stock. The shares
were exchanged on the basis of one share of the Company's Common Stock for one
share of Simplex-Florida common stock. The stock issuances were made to the
29 shareholders of Simplex-Florida pursuant to an Agreement ("Agreement")
between the Company and Simplex-Florida.
During the period from March 1998 through June 1998, the Company sold
1,600,000 shares of its Common Stock to Robertson & Partners L.L.L. for
$600,000 in cash, and 1,000,000 shares of Common Stock to Software &
Healthcare Technology Fund LLC for $400,000 in cash. Both of these investors
are accredited investors.
During May 1998, the Company issued 500,000 shares to Automated Health
Technologies ("AHT") in exchange for a 19% interest in AHT. The shares were
issued on the closing of a Share Exchange Agreement which was negotiated
between the two companies.
The sales described above were made in reliance on the exemption from
registration offered by Section 4(2) of the Securities Act of 1933. The
Company had reasonable grounds to believe that these persons (1) were
acquiring the shares for investment and not with a view to distribution, and
(2) had such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of their investment and
were able to bear those risks. Such persons had access to pertinent
information enabling them to ask informed questions. An appropriate
restrictive legend is noted on the certificates representing such shares, and
stop-transfer instructions have been noted in the Company's transfer records.
II-2
<PAGE>
<PAGE>
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
3.1 Articles of Incorporation, Incorporated by reference to Exhibits
as amended 2.1, 2.2 and 2.3 to the Registrant's
Form 10-SB Registration Statement
filed on April 4, 1996
3.2 Bylaws Incorporated by reference to Exhibit
2.4 to Registrant's Form 10-SB Regis-
tration Statement filed on April 4,
1997
3.3 Articles of Amendment to Filed herewith electronically
Articles of Incorporation
dated March 28, 1997
3.4 Articles of Amendment to Filed herewith electronically
Articles of Incorporation
dated August 20, 1998
5 Opinion of Krys Boyle Filed herewith electronically
Freedman & Sawyer, P.C.
regarding the legality
of the securities being
registered
10.1 1997 Stock Option Plan Filed herewith electronically
10.2 Share Exchange Agreement Filed herewith electronically
with Automated Health
Technologies, Inc.
10.3 Employment Agreement with Filed herewith electronically
Colin N. Jones
10.4 Employment Agreement with Filed herewith electronically
Nicholas Levandoski
10.5 Employment Agreement with Filed herewith electronically
Henry Schur
10.6 Stockholder Agreement with Filed herewith electronically
Software & Healthcare
Technology Fund, L.L.C.,
et al.
10.7 Business Lease with Filed herewith electronically
Wedgewood Properties FL,
Inc.
10.8 Distribution Agreement with Filed herewith electronically
Sybron Dental Specialties,
Inc., as amended
II-3
<PAGE>
<PAGE>
21 Subsidiaries of the Filed herewith electronically
Registrant
23.1 Consent of Krys Boyle Contained in Exhibit 5
Freedman & Sawyer, P.C.
23.2 Consent of Schmidt, Raines, Filed herewith electronically
Trieste, Dickenson & Adams,
P.L.
23.3 Consent of Millward & Co. Filed herewith electronically
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned small business issuer will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2, and authorized this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Hallandale, State of Florida, on the 10th day
of November 1998.
SMLX TECHNOLOGIES, INC.
By:/s/ Colin N. Jones
Colin N. Jones, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Colin N. Jones President (Chief Executive November 10, 1998
Colin N. Jones Officer) and Director
/s/ Henry B. Schur Vice President - Operations November 10, 1998
Henry B. Schur and Director
/s/ Nicholas G. Levandoski Vice President - Research November 10, 1998
Nicholas G. Levandoski and Develpment, Secretary,
Treasurer (Chief Finan-
cial and Accounting Officer)
and Director
/s/ Joel Marcus Director November 10, 1998
Joel Marcus
/s/ Kenneth H. Robertson Director November 10, 1998
Kenneth H. Robertson
_______________________ Director
Gerald M. Wochna
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
MUSIC TONES LTD.
CHANGING ITS NAME TO
SIMPLEX MEDICAL SYSTEMS, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is MUSIC TONES LTD.
SECOND: The following amendment was adopted on March 5, 1997 by the Board of
Directors, and on March 28, 1997 by a vote of the Shareholders of the
Corporation, in the manner prescribed by the Colorado Business Corporation
Act. The number of shares voted for the amendment was sufficient for
approval.
The FIRST Articles shall be amended to read as follows:
The name of the Corporation shall be SIMPLEX MEDICAL SYSTEMS, INC.
THIRD: The manner, if not set forth in such amendments, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendments shall be effected, is as follows: Not applicable.
DATED: March 28, 1997
MUSIC TONES LTD.
(Changing its name to
SIMPLEX MEDICAL SYSTEMS, INC.)
By: /s/ Nicholas G. Levandoski
Nicholas G. Levandoski,
Vice President
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SIMPLEX MEDICAL SYSTEMS, INC.
CHANGING ITS NAME TO
SMLX TECHNOLOGIES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is SIMPLEX MEDICAL SYSTEMS, INC.
SECOND: The following amendment was adopted on July 10, 1998, by the
Board of Directors, and on August 20, 1998, by a vote of the Shareholders of
the Corporation, in the manner prescribed by the Colorado Business Corporation
Act. The number of shares voted for the amendment was sufficient for
approval.
The FIRST Article shall be amended to read as follows:
The name of the Corporation shall be SMLX TECHNOLOGIES, INC.
THIRD: The manner, if not set forth in such amendments, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendments shall be effected, is as follows: Not applicable.
DATED: August 20, 1998
SIMPLEX MEDICAL SYSTEMS, INC.
(Changing its name to
SMLX TECHNOLOGIES, INC.)
By: /s/ Colin N. Jones
Colin N. Jones, President
OPINION OF KRYS BOYLE FREEDMAN & SAWYER, P.C.
KRYS BOYLE FREEDMAN & SAWYER, P.C.
ATTORNEYS AT LAW
Dominion Plaza, Suite 2700 South Tower
600 Seventeenth Street
Denver, Colorado 80202
Telephone Facsimile
(303) 893-2300 (303) 893-2882
November 10, 1998
SMLX Technologies, Inc.
376 Ansin Boulevard
Hallandale, Florida 33009
Gentlemen:
We have acted as counsel to SMLX Technology, Inc., a Colorado corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form SB-2
(the "Registration Statement"), pursuant to which the Company is registering
under the Securities Act of 1933, as amended, a total of 3,100,000 shares (the
"Shares") of its Common Stock, $.0001 par value (the "Common Stock") being
offered for resale by selling shareholders. This opinion is being rendered in
connection with the filing of the Registration Statement. All capitalized
terms used herein and not otherwise defined shall have the respective meanings
given to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Articles
of Incorporation and Bylaws, both as currently in effect; such other records
of the corporate proceedings of the Company and certificates of the Company's
officers as we have deemed relevant; and the Registration Statement and the
exhibits thereto.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing, and subject to the limitations set forth below,
we are of the opinion that the 3,100,000 Shares being offered for resale have
been duly and validly authorized by the Company and have been duly and validly
issued and are fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We hereby further consent to the reference to us
under the caption "Legal Matters" in the prospectus included in the
Registation Statement.
Very truly yours,
KRYS BOYLE FREEDMAN & SAWYER, P.C.
By: /s/ Jon D. Sawyer
Jon D. Sawyer
SIMPLEX MEDICAL SYSTEMS, INC.
1997 STOCK OPTION PLAN
2,000,000 Shares
This Stock Option Plan was adopted this 27th day of August 1997, by
Simplex Medical Systems, Inc. (formerly "Music Tones Ltd."), a Colorado
corporation, upon the following terms and conditions:
1. Definitions. Except as otherwise expressly provided in this Plan,
the following capitalized terms shall have the respective meanings hereafter
ascribed to them:
(a) "Board" shall mean the Board of Directors of the Corporation;
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended;
(c) "Consultant" shall mean a person who provides services to the
Corporation as an independent contractor;
(d) "Corporation" means Simplex Medical Systems, Inc. and each and
all of any present and future subsidiaries;
(e) "Date of Grant" shall mean, for each participant in the Plan,
the date on which the Board approves the specific grant of stock options to
that participant;
(f) "Employee" shall be an employee of the Corporation or any
subsidiary of the Corporation;
(g) "Grantee" shall mean the recipient of an Incentive Stock Option
or a Non-statutory Option under the Plan;
(h) "Incentive Stock Option" shall refer to a stock option which
qualifies under Section 422 of the Code.
(i) "Non-statutory Option" shall mean an option which is not an
Incentive Stock Option.
(j) "Shares" shall mean the Corporation's common stock, no par
value;
(k) "Shareholders" shall mean owners of record of any Shares; and
2. Purpose. The purpose of this Stock Option Plan (the "Plan") is two-
fold. First, the Plan will further the interests of the Corporation and its
shareholders by providing incentives in the form of stock options to employees
who contribute materially to the success and profitability of the Corporation.
Such stock options will be granted to recognize and reward outstanding
individual performances and contributions and will give selected employees an
interest in the Corporation parallel to that of the shareholders, thus
enhancing their proprietary interest in the Corporation's continued success
and progress. This program also will enable the Corporation to attract and
retain experienced employees. Second, the Plan will provide the Corporation
flexibility and the means to reward directors and consultants who render
valuable contributions to the Corporation.
<PAGE>
<PAGE>
3. Administration. This Plan will be administered by the Board. The
Board has the exclusive power to select the participants in this Plan, fix the
awards to each participant, and make all other determinations necessary or
advisable under the Plan, to determine whether the performance of an eligible
employee warrants an award under this Plan, and to determine the amount and
duration of the award. The Board has full and exclusive power to construe and
interpret this Plan, to prescribe, amend and rescind rules and regulations
relating to this Plan, and to take all actions necessary or advisable for this
Plan's administration. The Board shall have full power and authority to
determine, and at the time such option is granted shall clearly set forth,
whether the option shall be an Incentive Stock Option or a Non-statutory
Option. Any such determination made by the Board will be final and binding
on all persons. A member of the Board will not be liable for performing any
act or making any determination required by or pursuant to the Plan, if such
act or determination is made in good faith. The Board has the authority to
set up a committee of directors to administer the Plan and to delegate
whichever of the above powers it determines.
4. Participants. Any employee, officer, director or consultant that the
Board, in its sole discretion, designates is eligible to participate in this
Plan. However, only key employees of the Corporation shall be eligible to
receive grants of Incentive Stock Options. The Board's designation of a
person as a participant in any year does not require the Board to designate
that person to receive an award under this Plan in any other year or, if so
designated, to receive the same award as any other participant in any year.
The Board may consider such factors as it deems pertinent in selecting
participants and in determining the amount of their respective awards,
including, but without being limited to: (a) the financial condition of the
Corporation; (b) expected profits for the current or future years; (c) the
contributions of a prospective participant to the profitability and success of
the Corporation; and (d) the adequacy of the prospective participant's other
compensation. The Board, in its discretion, may grant benefits to a
participant under this Plan, even though stock, stock options, stock
appreciation rights or other benefits previously were granted to him under
this or another plan of the Corporation, whether or not the previously granted
benefits have been exercised, but the participant may hold such options only
on the terms and subject to the restrictions hereafter set forth. Subject to
the foregoing limitation, a person who has participated in another benefit
plan of the Corporation may also participate in this Plan.
5. Kinds of Benefits. Awards under this Plan, if any, will be granted
in options to acquire Shares as described below.
6. Options; Expiration; Limitations. Any Incentive Stock Option granted
under this Plan shall automatically expire ten years after the Date of Grant
or at such earlier time as may be described in Article 9 or directed by the
Board in the grant of the option. Notwithstanding the preceding sentence, no
Incentive Stock Option granted to a Shareholder who owns, as of the Date of
Grant, stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Corporation shall, in any event, be
exercisable after the expiration of five years from the Date of Grant. For
the purpose of determining under any provision of this Plan whether a
shareholder owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation, such Shareholder
shall be considered as owning the stock owned, directly or indirectly, by or
for his brothers and sisters (whether by the whole or half blood), spouse,
ancestors and lineal descendants, and stock owned, directly or indirectly, by
or for a corporation, partnership, estate or trust shall be considered as
2
<PAGE>
<PAGE>
being owned proportionately by or for its shareholders, partners or
beneficiaries.
Upon the exercise of an option, the Corporation shall deliver to the
participant certificates representing authorized but unissued Shares. The
cumulative total number of shares which may be subject to options issued and
outstanding pursuant to this Plan is limited to 2,000,000 shares. This amount
automatically will be adjusted in accordance with Article 21 of this Plan. If
an option is terminated, in whole or in part, for any reason other than its
exercise, the Board may reallocate the shares subject to that option (or to
the part thereof so terminated) to one or more other options to be granted
under this Plan.
7. Option Exercise Price. Each option shall state the option price,
which shall be not less than 100% of the fair market value of the Shares on
the Date of Grant or the par value thereof whichever is greater.
Notwithstanding the preceding sentence, in the case of a grant of an Incentive
Stock Option to an employee who, as of the Date of Grant, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or its Parent or Subsidiaries, the option
price shall not be less than 110% of the fair market value of the Shares on
the Date of Grant or the par value thereof, whichever is greater.
During such time as the Shares are not traded in any securities market,
the fair market value per share shall be determined by a good faith effort of
the Board, using its best efforts and judgment. During such time as the
Shares are traded in a securities market but not listed upon an established
stock exchange, the fair market value per share shall be the mean between
dealer "bid" and "ask" prices in the securities market in which it is traded
on the Date of Grant, as reported by the National Association of Securities
Dealers, Inc. If the Shares are listed upon an established stock exchange or
exchanges such fair market value shall be deemed to be the highest closing
price on such stock exchange or exchanges on the Date of Grant, or if no sale
of any Shares shall have been made on any stock exchange on that day, on the
next preceding day on which there was such a sale. Subject to the foregoing,
the Board shall have full authority and discretion in fixing the option price
and shall be fully protected in doing so.
8. Maximum Option Exercise. The aggregate fair market value (determined
as of the Date of Grant) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by a grantee during any calendar
year (under all such plans of the Corporation and its parent or subsidiary, if
any) shall not exceed $100,000. For purposes of this Article 8, the value of
stock acquired through the exercise of Non-statutory Options shall not be
included in the computation of the aggregate fair market value.
9. Exercise of Options.
(a) No stock option granted under this Plan may be exercised before
the Grantee's completion of such period of services as may be specified by the
Board on the Date of Grant. Furthermore, the timing of the exercise of any
option granted under this Plan may be subject to a vesting schedule based upon
years of service or an expiration schedule as may be specified by the Board on
the Date of Grant. Thereafter, or if no such period is specified subject to
the provisions of subsections (c), (d), (e), (f) and (g) of this Article 9,
the Grantee may exercise the option in full or in part at any time until
expiration of the option.
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A Grantee cannot exercise an Incentive Stock Option granted under
this Plan unless, at the time of exercise, he has been continuously employed
by the Corporation since the date the option was granted. The Board may
decide in each case to what extent bona fide leaves of absence for illness,
temporary disability, government or military service, or other reasons will
not be deemed to interrupt continuous employment.
(b) Unless an Option specifically provides to the contrary, all
options granted under this Plan shall immediately become exercisable in full
in the event of the consummation of any of the following transactions:
(i) A merger or acquisition in which the Corporation is not
the surviving entity;
(ii) The sale, transfer or other disposition of all or
substantially all of the assets of the Corporation; or
(iii) Any merger in which the Corporation is the surviving
entity but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is issued to holders different from those who held
the stock immediately prior to such merger.
(c) Except as provided in subsections (d), (e) and (f) of this
Article 9, a Grantee cannot exercise an Incentive Stock Option after he ceases
to be an employee of the Corporation, unless the Board, in its sole
discretion, grants the recipient an extension of time to exercise the
Incentive Stock Option after cessation of employment. The extension of time
of exercise that may be granted by the Board under this subsection (c) shall
not exceed three months after the date on which the Grantee ceases to be an
employee and in no case shall extend beyond the stated expiration date of the
option.
(d) If the employment of a Grantee is terminated by the Corporation
for a cause as defined in subsection (i) of this Article 9, all rights to any
stock option granted under this Plan shall terminate, including but not
limited to the ability to exercise such stock options.
(e) If a Grantee ceases to be an employee as a result of
retirement, he may exercise the Incentive Stock Option within three months
after the date on which he ceases to be an employee (but no later than the
stated expiration date of the option) to the extent that the Incentive Stock
Option was exercisable when he ceased to be an employee. An employee shall be
regarded as retired if he terminates employment after his sixty-fifth
birthday.
(f) If a Grantee ceases to be an employee because of disability
(within the meaning of Section 105(d)(4) of the Code), or if a Grantee dies,
and if at the time of the Grantee's disability or death he was entitled to
exercise an Incentive Stock Option granted under this Plan, the Incentive
Stock Option can be exercised within 12 months after his death or termination
of employment on account of disability (but no later than the stated
expiration date of the option), by the Grantee in the case of disability or,
in case of death, by his personal representative, estate or the person who
acquired by gift, bequest or inheritance his right to exercise the Incentive
Stock Option. Such options can be exercised only as to the number of shares
for which they could have been exercised at the time the Grantee died or
became disabled.
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(g) With respect to Non-statutory Options granted to Board members,
the Board may provide on the Date of the Grant that such options will expire a
specified number of days after such Board member ceases to be a member of the
Board. In the absence of any such provision, the option will expire on the
stated expiration date of the option.
(h) Any stock option granted under the Plan will terminate, as a
whole or in part, to the extent that, in accordance with this Article 9, it no
longer can be exercised.
(i) For purposes of this Article 9, "cause" shall mean the
following:
(1) Fraud or criminal misconduct;
(2) Gross negligence;
(3) Willful or continuing disregard for the safety or
soundness of the Corporation;
(4) Willful or continuing violation of the published rules of
the Corporation.
10. Exercise of Options.
10.1 Notice. Options may be exercised only by delivery to the
Corporation of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Board (which need not be the same for
each Grantee), stating the number of shares being purchased, the restrictions
imposed on the shares, if any, and such representations and agreements
regarding Grantee's investment intent and access to information, if any, as
may be required by the Corporation to comply with applicable securities laws,
together with payment in full of the exercise price for the number of Shares
being purchased.
10.2 Payment. Payment for the shares may be made in cash (by
check) or, where approved by the Board in its sole discretion and where
permitted by law: (a) by cancellation of indebtedness of the Corporation to
the Grantee; (b) by surrender of shares of common stock of the Corporation
having a Fair Market Value equal to the applicable exercise price of the
Option that have been owned by Grantee for more than six months (and which
have been paid for within the meaning of the Securities and Exchange
Commission ("SEC") Rule 144 and, if such shares were purchased from the
Corporation by use of a promissory note, such note has been fully paid with
respect to such shares), or were obtained by Grantee in the open public
market; (c) by waiver of compensation due or accrued to Grantee for services
rendered; (d) provided that a public market for the Corporation's stock
exists, through a "same day sale" commitment from Grantee and a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
Dealer") whereby Grantee irrevocably elects to exercise the Option and to sell
a portion of the shares so purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the exercise price directly to the Corporation; (e) provided that a
public market for the Corporation's stock exists, through a "margin"
commitment from Grantee and an NASD Dealer whereby Grantee irrevocably elects
to exercise the Option and to pledge the shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of the exercise price, and whereby the NASD Dealer irrevocably commits
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upon receipt of such shares to forward the exercise price directly to the
Corporation; or (f) by any combination of the foregoing.
11. Taxes; Compliance with Law; Approval of Regulatory Bodies. The
Corporation, if necessary or desirable, may pay or withhold the amount of any
tax attributable to any amount payable or shares deliverable under this Plan
and the Corporation may defer making payment on delivery until it is
indemnified to its satisfaction for that tax. Stock options are exercisable,
and shares can be delivered under this Plan, only in compliance with all ap
plicable federal and sate laws and regulations, including, without limitation,
state and federal securities laws, and the rules of all stock exchanges on
which the Corporation's shares are listed at any time. Any certificate issued
pursuant to options granted under this Plan shall bear such legends and
statements as the Board deems advisable to assure compliance with federal and
state laws and regulations. No option may be exercised, and shares may not be
issued under this Plan, until the Corporation has obtained the consent or
approval of every regulatory body, federal or state, having jurisdiction over
such matters as the Board deems advisable.
Specifically, in the event that the Corporation deems it necessary or
desirable to file a registration statement with the Securities and Exchange
Commission or any State Securities Commission, no option granted under the
Plan may be exercised, and shares may not be issued, until the Corporation has
obtained the consent or approval of such Commission.
In the case of the exercise of an option by a person or estate acquiring
by bequest or inheritance the right to exercise such option, the Board may
require reasonable evidence as to the ownership of the option and may require
such consents and releases of taxing authorities as the Board deems advisable.
12. Assignability. Each option granted under this Plan is not
transferable other than by will or the laws of descent and distribution. Each
option is exercisable during the life of the Grantee only by him.
13. Tenure. A participant's right, if any, to continue to serve the
Corporation as an officer, employee or otherwise, will not be enlarged or
otherwise affected by his designation as a participant under this Plan, and
such designation will not in any way restrict the right of the Corporation to
terminate at any time the employment or affiliation of any participant for
cause or otherwise.
14. Amendment and Termination of Plan. The Board may alter, amend or
terminate this Plan from time to time without approval of the shareholders.
However, without the approval of the shareholders, no amendment will be
effective that:
(a) materially increases the benefits accruing to participants
under the Plan;
(b) increases the cumulative number of shares that may be delivered
upon the exercise of options granted under the Plan or the aggregate fair
market value of options which a participant may exercise in any calendar year;
(c) materially modifies the eligibility requirements for
participation in the Plan; or
(d) amends the requirements of paragraphs (a)-(c) of this Article
14.
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Any amendment, whether with or without the approval of shareholders, that
alters the terms or provisions of an option granted before the amendment will
be effective only with the consent of the participant to whom the option was
granted or the holder currently entitled to exercise it, except for
adjustments expressly authorized by this Plan.
15. Expenses of Plan. The expenses of the Plan will be borne by the
Corporation.
16. Duration of Plan. Options may only be granted under this Plan
during the ten years immediately following the earlier of the adoption of the
Plan or its approval by the Shareholders. Options granted during that ten
year period will remain valid thereafter in accordance with their terms and
the provisions of this Plan.
17. Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions including, without limitation,
restrictions upon the exercise of the option, as the Board shall deem
advisable. Any such option agreements, which are intended to be "Incentive
Stock Options" shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary in order that such option will be
an "Incentive Stock Option" as defined in Section 422 of the Code.
18. Indemnification of the Board. In addition to such other rights of
indemnification as they may have as directors, the members of the Board shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such director is liable
for negligence or misconduct in the performance of his duties; provided that
within 60 days after the institution of any such action, suit or proceeding a
director shall in writing offer the Corporation the opportunity, at its own
expense, to handle and defend the same.
19. Application of Funds. The proceeds received by the Corporation from
the sale of stock pursuant to options granted under this Plan will be used for
general corporate purposes.
20. No Obligation to Exercise Option. The granting of an option shall
impose no obligation upon the Grantee to exercise such option.
21. Adjustment Upon Change of Shares. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other event affecting
shares of the Corporation occurs, then the number and class of shares to which
options are authorized to be granted under this Plan, the number and class of
shares then subject to options previously granted under this Plan, and the
price per share payable upon exercise of each option outstanding under this
Plan shall be equitably adjusted by the Board to reflect such changes.
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22. Number and Gender. Unless otherwise clearly indicated in this Plan,
words in the singular or plural shall include the plural and singular,
respectively, where they would so apply, and words in the masculine or neuter
gender shall include the feminine, masculine or neuter gender where
applicable.
23. Applicable Law. The validity, interpretation and enforcement of
this Plan are governed in all respects by the laws of Colorado.
24. Effective Date of Plan. This Plan shall not take effect until
adopted by the Board. This Plan shall terminate if it is not approved by the
holders of a majority of the outstanding shares of the capital stock of the
Corporation, which approval must occur within the period beginning twelve
months before and ending twelve months after the Plan is adopted by the Board.
SIMPLEX MEDICAL SYSTEMS, INC.
By: /s/ Nicholas G. Levandoski
President
I hereby certify that the foregoing Stock Option Plan was approved by the
Board of Directors of Simplex Medical Systems, Inc. the 27th day of August
1997.
By:/s/ Nicholas G. Levandoski
Nicholas G. Levandoski, Secretary
I hereby certify that the foregoing Stock Option Plan was approved by the
Shareholders of Simplex Medical Systems, Inc. the 20th day of August 1998.
By:/s/ Nicholas G. Levandoski
Nicholas G. Levandoski, Secretary
8
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") dated as of May 20, 1998
is by and between Automated Health Technologies, Inc., a Florida corporation
(the "AHT"), and Simplex Medical Systems, Inc., a Colorado corporation
("Simplex").
R E C I T A L S :
A. AHT desires to acquire 500,000 shares (the "Simplex Shares") of
authorized but unissued common stock, par value $.001 per share, of Simplex
("Simplex Common Stock") in exchange for 636,239 shares, subject to adjustment
as set forth herein (the "AHT Shares") of authorized but unissued common
stock, par value $.01 per share, of AHT ("AHT Common Stock"), and Simplex
desires to acquire the AHT Shares in exchange for the Simplex Shares.
B. It is the intention of the parties hereto that: (i) AHT acquire the
Simplex Shares in exchange solely for the AHT Shares and Simplex acquire the
AHT Shares in exchange solely for the Simplex Shares (collectively, the
"Exchange"); (ii) the Exchange shall qualify as a tax-free reorganization
under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended, and related sections thereunder; and (iii) the Exchange shall qualify
as a transaction in securities exempt from registration or qualification under
the Securities Act of 1933, as amended (the "Securities Act"), and under the
applicable securities laws of the respective states where AHT and Simplex are
incorporated.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, AHT and Simplex agree as
follows:
1. Exchange of Shares. AHT and Simplex agree that each will effect the
Exchange, pursuant to which the Simplex Shares will be exchanged for the AHT
Shares. Other than for the exchange of stock contemplated hereby, the parties
do not contemplate the exchange or payment of any other consideration,
regardless of form. The AHT Shares and Simplex Shares to be issued in
connection with the consummation of the Exchange will not be registered
pursuant to the Securities Act or under the applicable securities laws of the
respective states where AHT and Simplex are incorporated.
2. Representations and Warranties of AHT. AHT represents and warrants
that, except as set forth on AHT's disclosure schedule attached hereto (the
"AHT Disclosure Schedule"):
(a) Receipt of Corporate Information. All requested documents,
records and books pertaining to Simplex have been delivered to AHT, and all of
AHT's questions and requests for information of Simplex have been answered to
the satisfaction of AHT.
(b) Risks. AHT acknowledges and understands that the acquisition of
the Simplex Shares involves a high degree of risk in that (i) AHT may not be
able to liquidate the investment in the event of an emergency; (ii)
transferability is extremely limited; and (iii) in the event of a disposition,
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AHT could sustain a complete loss of its entire investment. AHT is
sufficiently experienced in financial and business matters to be capable of
evaluating the merits and risks of an investment in Simplex; has evaluated
such merits and risks, including risks particular to its situation; and AHT
has determined that the investment in Simplex is suitable for it.
(c) Investment Intent. The Simplex Shares are being acquired by AHT
for its own account and for investment purposes.
(d) Compliance with Federal and State Securities Laws. AHT
understands that the Simplex Shares have not been registered under the
Securities Act. AHT understands that the Simplex Shares must be held
indefinitely unless the sale or other transfer thereof is subsequently
registered under the Securities Act or an exemption from such registration is
available. AHT understands that its right to transfer the Simplex Shares will
be subject to certain restrictions, which include restrictions against
transfer under the Securities Act and applicable state securities laws. In
addition to such restrictions, AHT realizes that it may not be able to sell or
dispose of the Simplex Shares as there may be no public or other market for
the Simplex Shares. AHT understands that certificates evidencing the Simplex
Shares shall bear a legend substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT
TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
(e) Corporate Organization. AHT is duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
full corporate power, authority and legal right to own its properties and to
conduct the businesses in which it is now engaged. AHT is duly licensed or
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction where the ownership or lease of its assets or
the operation of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, operations, property or financial or other condition of AHT taken as
a whole (an "AHT Material Adverse Effect"). Except as set forth on the AHT
Disclosure Schedule or as contemplated by this Agreement, AHT does not have
any subsidiaries and does not own any equity interest in any other business
entity. All of the capital stock of the subsidiaries of AHT shown on the AHT
Disclosure Schedule is owned of record and beneficially by AHT.
(f) Authority. AHT has the corporate power and authority to execute
and deliver this Agreement and to perform all of its covenants and agreements
hereunder. The execution and delivery of this Agreement by AHT, the
performance by AHT of its covenants and agreements hereunder and the
consummation by AHT of the transactions contemplated hereby have been duly
authorized by all necessary corporate action.
(g) Enforceability. This Agreement has been duly executed and
delivered and constitutes the valid and legally binding obligation of AHT,
enforceable against AHT in accordance with its terms except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
the principles governing the availability of specific performance, injunctive
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relief and other equitable remedies (regardless of whether such enforceability
is considered in equity or at law), including requirements of reasonableness
and good faith in the exercise of rights and remedies thereunder; (ii)
applicable laws and court decisions which may limit or render unenforceable
certain terms and provisions contained therein, but which do not substantially
interfere with the practical realization of the benefits thereof, except for
the economic consequences of any procedural delay which may be imposed by,
relate to or result from such laws and court decisions; and (iii) the
limitations on the enforceability of the securities indemnification provisions
set forth herein by reason of matters of public policy.
(h) Noncontravention. Neither the execution and delivery of this
Agreement by AHT, nor the consummation of the transactions contemplated
hereby, nor the performance by AHT of its covenants and agreements hereunder
(i) violates any provision of the Articles of Incorporation or By-Laws of AHT;
(ii) violates any existing law, statute, ordinance, regulation, or any order,
judgment or decree of any court or governmental agency to which AHT is a party
or by which any of its assets is bound; or (iii) conflicts with or will result
in any breach of any of the terms of or constitute a default under or result
in the termination of or the creation of any lien pursuant to the terms of any
indenture, mortgage, real property lease, securities purchase agreement,
credit or loan agreement or other material agreement to which AHT is a party
or by which AHT or any of its assets is bound, to the extent such violation
thereof, conflict therewith, breach thereof, default thereunder or termination
thereof would have an AHT Material Adverse Effect.
(i) Capitalization. The authorized capital stock of AHT consists of
(i) 5,000,000 shares of preferred stock, $.001 par value per share ("AHT
Preferred Stock"), of which 993,750 shares are issued and outstanding; and
(ii) 95,000,000 shares of AHT Common Stock, of which, prior to the Exchange,
1,718,640 shares are issued and outstanding. The AHT Disclosure Schedule sets
forth a list of all options, warrants or other securities exercisable for,
convertible into or exchangeable for AHT Preferred Stock or AHT Common Stock
or other subscription, commitments or agreements for AHT to issue AHT
Preferred Stock or AHT Common Stock.
(j) Approvals. Except as may be required under federal and state
securities laws (which have been or, in the case of compliance required on a
post-sale basis, will be complied with), the execution, delivery and
performance of this Agreement by AHT does not require (i) the consent, waiver,
approval, license or authorization of or any filing with any person or any
governmental authority; or (ii) the approval or authorization of the
shareholders of AHT. The issuance of the AHT Shares pursuant to this Agreement
is not subject to the registration or prospectus delivery requirements of
Section 5 of the Securities Act.
(k) Legal Proceedings. There are no (i) actions, suits, claims,
investigations or legal, or administrative or arbitration proceedings pending
or, to the best knowledge of AHT, threatened against or affecting AHT, whether
at law or in equity, or before or by any governmental authority; (ii)
judgments, decrees, injunctions or orders of any governmental authority or
arbitrator against AHT which, in any case, could have an AHT Material Adverse
Effect.
(l) Financial Statements. The unaudited consolidated financial
statements of AHT as of December 31, 1997 and for the year then ended (the
"AHT Financial Statements") included in the AHT Disclosure Schedule were
prepared in accordance with generally accepted accounting principles applied
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on a consistent basis during the periods involved (except as may have been
indicated in the notes thereto or to the extent footnotes thereto have been
omitted) and fairly present (subject to normal audit adjustments) the
financial position of the Company at the dates thereof and the consolidated
results of the operations and statement of changes in financial position for
the periods then ended.
(m) Absence of Undisclosed Liabilities. Except as disclosed in the
AHT Financial Statements or as incurred in the ordinary course of business
subsequent to December 31, 1997, as of the date hereof (i) AHT has no material
liability of any nature (matured or unmatured, fixed or contingent) that was
not provided for or disclosed in the AHT Financial Statements, and (ii) to the
best knowledge of AHT, all liability reserves established by AHT set forth in
the AHT Financial Statements were adequate in all material respects for the
purposes indicated therein.
(n) No Change. Since December 31, 1997, except as contemplated by
this Agreement, there has not been (i) any material change in the condition
(financial or otherwise), operations, results of operations, assets,
liabilities, business or prospects of AHT taken as a whole; (ii) any material
liability or obligation (contingent or otherwise) incurred by AHT, other than
current liabilities (or obligations) or capital leases incurred in the
ordinary of business; (iii) any asset or property of AHT made subject to a
lien of any kind, except (a) liens for taxes not yet due or which are being
contested in good faith and by appropriate proceedings provided adequate
reserves with respect thereto are maintained on AHT's books in accordance with
generally accepted principles; (b) landlords', carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like liens arising in the
ordinary course of business which are not overdue for a period of more than 60
days or which are being contested in good faith and by appropriate
proceedings; (c) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (d) deposits to
secure the performance of contracts, bids, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature; (e)
easements, rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of business; and liens which, in the aggregate, are not
material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct
of AHT's business; (iv) any waiver of any material valuable right of AHT, or
the cancellation of any material debt or claim held by AHT; (v) any payment of
dividends on, or other distributions with respect to, or any direct or
indirect redemption or acquisition of, any shares of AHT Common Stock, or any
agreement or commitment therefor; (vi) any mortgage, pledge, sale, assignment
or transfer of any tangible or intangible assets of AHT, except, with respect
to tangible assets, in the ordinary course of business; (vii) any loan by AHT
to any officer, director, employee or shareholder of AHT, or any agreement or
commitment therefor; (viii) any material damage, destruction or loss (whether
or not covered by insurance) which does or may adversely affect the condition
(financial or otherwise), operations, results of assets, property, business or
prospects of AHT; or (ix) any change in the accounting methods or practices
followed by AHT.
(o) Taxes. AHT has accurately prepared and timely filed or has had
accurately prepared and timely filed on its behalf all tax returns which, to
its knowledge, are required to be filed by it, and has paid all taxes shown to
be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it
or any of its property by any nation or government, any state or other
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political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (other than those the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with generally accepted accounting principles
have been provided on the books); and, to its knowledge, no tax liens have
been filed nor claims being asserted with respect to any such taxes, fees or
other charges.
(p) Related Party Transactions. No current principal shareholder or
current or former director, officer or employee of AHT nor any "affiliate" (as
defined in the rules and regulations promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), of any such person, is
currently, or since January 1, 1996 has been, directly or indirectly through
its affiliation with any other person or entity, a party to any transaction
(other than as an employee, consultant or shareholder) with AHT, as the case
may be, providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring cash payments from or to any
such person.
(q) Disclosure. The representations or warranties made by AHT in
this Agreement or in any other document or certificate furnished in connection
herewith did not contain at the time made or, if set forth herein, does not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they are made, not misleading in any material
respect. There is no fact known to AHT that has an AHT Material Adverse Effect
or, other than general economic conditions in the industry in which the
Company operates, that the Company reasonably believes will in the future have
an AHT Material Adverse Effect, which has not been set forth in this Agreement
or in the AHT Disclosure Schedule.
3. Representations and Warranties of Simplex. Simplex represents and
warrants that, except as set forth on Simplex's disclosure schedule attached
hereto (the "Simplex Disclosure Schedule") or in Simplex's Annual Report on
Form 10-KSB for the year ended December 31, 1997 (the "Simplex SEC Report"):
(a) Receipt of Corporate Information. All requested documents,
records and books pertaining to AHT have been delivered to Simplex, and all of
Simplex's questions and requests for information of Simplex have been answered
to the satisfaction of Simplex.
(b) Risks. Simplex acknowledges and understands that the acquisition
of the AHT Shares involves a high degree of risk in that (i) Simplex may not
be able to liquidate the investment in the event of an emergency; (ii)
transferability is extremely limited; and (iii) in the event of a disposition,
Simplex could sustain a complete loss of its entire investment. Simplex is
sufficiently experienced in financial and business matters to be capable of
evaluating the merits and risks of an investment in AHT; has evaluated such
merits and risks, including risks particular to its situation; and Simplex has
determined that the investment in Simplex is suitable for it.
(c) Investment Intent. The AHT Shares are being acquired by Simplex
for its own account and for investment purposes.
(d) Compliance with Federal and State Securities Laws. Simplex
understands that the AHT Shares have not been registered under the Securities
Act. Simplex understands that the AHT Shares must be held indefinitely unless
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the sale or other transfer thereof is subsequently registered under the
Securities Act or an exemption from such registration is available. Simplex
understands that its right to transfer the AHT Shares will be subject to
certain restrictions, which include restrictions against transfer under the
Securities Act and applicable state securities laws. In addition to such
restrictions, Simplex realizes that it may not be able to sell or dispose of
the AHT Shares as there may be no public or other market for the AHT Shares.
Simplex understands that certificates evidencing the AHT Shares shall bear a
legend substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR PLEDGED UNLESS REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE LAW OR PURSUANT
TO AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
(e) Corporate Organization. Simplex is duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has full corporate power, authority and legal right to own its properties
and to conduct the businesses in which it is now engaged. Simplex is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction where the ownership or lease of its assets
or the operation of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, operations, property or financial or other condition of Simplex
taken as a whole (a "Simplex Material Adverse Effect"). Except as set forth on
the Simplex Disclosure Schedule or in the Simplex SEC Report or as
contemplated by this Agreement, Simplex does not have any subsidiaries and
does not own any equity interest in any other business entity. All of the
capital stock of the subsidiaries of Simplex shown on the Simplex Disclosure
Schedule is owned of record and beneficially by Simplex.
(f) Authority. Simplex has the corporate power and authority to
execute and deliver this Agreement and to perform all of its covenants and
agreements hereunder. The execution and delivery of this Agreement by Simplex,
the performance by Simplex of its covenants and agreements hereunder and the
consummation by Simplex of the transactions contemplated hereby have been duly
authorized by all necessary corporate action.
(g) Enforceability. This Agreement has been duly executed and
delivered and constitutes the valid and legally binding obligation of Simplex,
enforceable against Simplex in accordance with its terms except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by
the principles governing the availability of specific performance, injunctive
relief and other equitable remedies (regardless of whether such enforceability
is considered in equity or at law), including requirements of reasonableness
and good faith in the exercise of rights and remedies thereunder; (ii)
applicable laws and court decisions which may limit or render unenforceable
certain terms and provisions contained therein, but which do not substantially
interfere with the practical realization of the benefits thereof, except for
the economic consequences of any procedural delay which may be imposed by,
relate to or result from such laws and court decisions; and (iii) the
limitations on the enforceability of the securities indemnification provisions
set forth herein by reason of matters of public policy.
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(h) Noncontravention. Neither the execution and delivery of this
Agreement by Simplex, nor the consummation of the transactions contemplated
hereby, nor the performance by Simplex of its covenants and agreements
hereunder (i) violates any provision of the Articles or Certificate of
Incorporation or By-Laws of Simplex; (ii) violates any existing law, statute,
ordinance, regulation, or any order, judgment or decree of any court or
governmental agency to which Simplex is a party or by which any of its assets
is bound; or (iii) conflicts with or will result in any breach of any of the
terms of or constitute a default under or result in the termination of or the
creation of any lien pursuant to the terms of any indenture, mortgage, real
property lease, securities purchase agreement, credit or loan agreement or
other material agreement to which Simplex is a party or by which Simplex or
any of its assets is bound, to the extent such violation thereof, conflict
therewith, breach thereof, default thereunder or termination thereof would
have a Simplex Material Adverse Effect.
(i) Capitalization. The authorized capital stock of Simplex consists
of (i) 10,000,000 shares of preferred stock, $.001 par value per share
("Simplex Preferred Stock"), of which no shares are issued and outstanding;
and (ii) 100,000,000 shares of Simplex Common Stock, of which, prior to the
Exchange, 7,500,000 shares are issued and outstanding. The Simplex Disclosure
Schedule sets forth a list of all options, warrants or other securities
exercisable for, convertible into or exchangeable for Simplex Preferred Stock
or Simplex Common Stock or other subscription, commitments or agreements for
Simplex to issue Simplex Preferred Stock or Simplex Common Stock.
(j) Approvals. Except as may be required under federal and state
securities laws (which have been or, in the case of compliance required on a
post-sale basis, will be complied with), the execution, delivery and
performance of this Agreement by Simplex does not require (i) the consent,
waiver, approval, license or authorization of or any filing with any person or
any governmental authority; or (ii) the approval or authorization of the
shareholders of Simplex. The issuance of the Simplex Shares pursuant to this
Agreement is not subject to the registration or prospectus delivery
requirements of Section 5 of the Securities Act.
(k) Legal Proceedings. Except as set forth in the Simplex Disclosure
Schedule or in the Simplex SEC Report, there are no (i) actions, suds, claims,
investigations or legal, or administrative or arbitration proceedings pending
or, to the best knowledge of Simplex, threatened against or affecting Simplex,
whether at law or in equity, or before or by any governmental authority; (ii)
judgments, decrees, injunctions or orders of any governmental authority or
arbitrator against Simplex which, in any case, could have a Simplex Material
Adverse Effect.
(l) SEC Filings, Etc. Simplex has heretofore delivered to AHT
correct and complete copies of the Simplex SEC Report. The Simplex SEC Report
is true and correct in all material respects at the time filed with respect to
the periods covered thereby; and such report, as amended, supplemented, or
updated by subsequent filings, is true and correct as of the date so amended,
supplemented or updated in all material respects, does not contain any
misstatement of a material facts and does not omit to state a material fact or
any fact required to be stated therein or necessary to make the statements
contained therein not materially misleading with respect to the periods
covered thereby; and all amendments or supplements thereto required to be
filed under the federal securities laws have been so filed. The consolidated
financial statements of Simplex included in the Simplex SEC Report (the
"Simplex Financial Statements") complied, when filed, with the then-applicable
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accounting requirements and the published rules and regulations of the
Securities and Exchange Commission (the "SEC") with respect thereto, were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may have been
indicated in the notes thereto) or, and fairly presented the financial
position of Simplex at the dates thereof and the consolidated results of the
operations and statement of changes in financial position for the periods then
ended. Simplex has filed all documents and agreements that were required to be
filed as exhibits to the Simplex SEC Report and all such documents and
agreements when filed were correct and complete in all material respects.
Simplex is in compliance in all material respects with the Exchange Act and
the rules and regulations of the SEC thereunder.
(m) Absence of Undisclosed Liabilities. Except as disclosed in the
Simplex Financial Statements or as incurred in the ordinary course of business
subsequent to December 31, 1997, as of the date hereof (i) Simplex has no
material liability of any nature (matured or unmatured, fixed or contingent)
that was not provided for or disclosed in the Simplex Financial Statements,
and (ii) to the best knowledge of Simplex, all liability reserves established
by Simplex set forth in the Simplex Financial Statements were adequate in all
material respects for the purposes indicated therein.
(n) No Change. Since December 31, 1997 there has not been (i) any
material change in the condition (financial or otherwise), operations, results
of operations, assets, liabilities, business or prospects of Simplex taken as
a whole; (ii) any material liability or obligation (contingent or otherwise)
incurred by Simplex, other than current liabilities (or obligations) or
capital leases incurred in the ordinary of business; (iii) any asset or
property of Simplex made subject to a lien of any kind, except (a) liens for
taxes not yet due or which are being contested in good faith and by
appropriate proceedings provided adequate reserves with respect thereto are
maintained on Simplex's books in accordance with generally accepted
principles; (b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like liens arising in the ordinary course
of business which are not overdue for a period of more than 60 days or which
are being contested in good faith and by appropriate proceedings; (c) pledges
or deposits in connection with worker's compensation, unemployment insurance
and other social security legislation; (d) deposits to secure the performance
of contracts, bids, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature; (e) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business; and (f) liens which, in the aggregate, are not
material in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct
of Simplex's business; (iv) any waiver of any material valuable right of
Simplex, or the cancellation of any material debt or claim held by Simplex;
(v) any payment of dividends on, or other distributions with respect to, or
any direct or indirect redemption or acquisition of, any shares of Simplex
Common Stock, or any agreement or commitment therefor; (vi) any mortgage,
pledge, sale, assignment or transfer of any tangible or intangible assets of
Simplex, except, with respect to tangible assets, in the ordinary course of
business; (vii) any loan by Simplex to any officer, director, employee or
shareholder of Simplex, or any agreement or commitment therefor; (viii) any
material damage, destruction or loss (whether or not covered by insurance)
which does or may adversely affect the condition (financial or otherwise),
operations, results of assets, property, business or prospects of Simplex; or
(ix) any changes in the accounting methods or practices followed by Simplex.
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(o) Taxes. Simplex has accurately prepared and timely filed or has
had accurately prepared and timely filed on its behalf all tax returns which,
to its knowledge, are required to be filed by it, and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it
or any of its property by any nation or government, any state or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (other than those the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with generally accepted accounting principles
have been provided on the books); and, to its knowledge, no tax liens have
been filed nor claims being asserted with respect to any such taxes, fees or
other charges.
(p) Related Party Transactions. No current principal shareholder or
current or former director, officer or employee of Simplex nor any "affiliate"
(as defined in the rules and regulations promulgated under the Exchange Act)
of any such person, is currently, or since January l, 1996 has been, directly
or indirectly through its affiliation with any other person or entity, a party
to any transaction (other than as an employee, consultant or shareholder) with
Simplex, as the case may be, providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring cash payments
from or to any such person.
(q) Disclosure. The representations or warranties made by Simplex in
this Agreement or in any other document or certificate furnished in connection
herewith did not contain at the time made or, if set forth herein, does not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they are made, not misleading in any material
respect. There is no fact known to Simplex that has an Simplex Material
Adverse Effect or, other than general economic conditions in the industry in
which the Company operates, that the Company reasonably believes will in the
future have an Simplex Material Adverse Effect, which has not been set forth
in this Agreement or in the Simplex Disclosure Schedule.
4. Put Option.
(a) During the period commencing on the date of this Agreement and
ending five years thereafter (the "Exercise Period"), AHT shall have the right
(the "Put") to require Simplex to exchange (the "Additional Exchange") all of
the then outstanding shares of AHT Common Stock on a fully diluted basis other
than shares of AHT Common Stock held by Simplex), for 1,000,000 shares of
Simplex Common Stock, subject to adjustment as described below (the
"Additional Simplex Common Stock"). Exercise of the Put is dependent upon AHT
having at the time of exercise, a net worth (calculated in accordance with
generally accepted accounting principles) of at least $200,000, no debt other
than trade payables in an amount not to exceed $25,000 and positive cash flow
for the portion of AHT's current fiscal year during which the Put is exercised
(the "Put Conditions"). The Put may be exercised only by AHT delivering to
Simplex during the Exercise Period a written notice of exercise, which notice
shall state AHT's desire to exercise the Put and certify AHT's compliance with
the Put Conditions. Notwithstanding the foregoing, in the event that during
the Exercise Period AHT shall consummate the sale (whether by means of merger,
stock sale, asset sale or otherwise) of the business of its Rx Automation
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Incorporated subsidiary (the "Sale") then for a period of six months after the
consummation of the Sale, AHT may exercise the Put without complying with the
Put Conditions, provided, however, AHT shall escrow $1,000,000 from the
proceeds of the Sale to be paid to Simplex upon consummation of the Additional
Exchange.
(b) Promptly following exercise of the Put, Simplex and AHT shall
proceed in good faith to negotiate a merger or other exchange agreement
necessary to effect the Additional Exchange and the parties shall use their
best efforts and take such other action as may be necessary to consummate the
Additional Exchange, including, without limitation (l) making and causing to
be declared effective all necessary filings with the SEC, including a
registration statement on Form S-4 or other applicable form, (2) securing
approval of AHT's shareholders (Simplex agrees to vote all shares of AHT
Common Stock it then holds in favor of the Additional Exchange), and (3)
listing the Additional Simplex Common Stock for issuance on markets which it
then trades.
(c) If Simplex shall at any time after the date hereof (1) issue any
Simplex Common Stock or securities convertible into Simplex Common Stock
("Convertible Securities"), or any rights to purchase Simplex Common Stock or
Convertible Securities, as a dividend upon Simplex Common Stock, (2) issue any
Simplex Common Stock, in subdivision of outstanding Simplex Common Stock by
reclassification or otherwise, (3) combine outstanding Simplex Common Stock,
by reclassification or otherwise, or (4) declare a dividend or distribution
upon the Simplex Common Stock payable otherwise than out of earnings or earned
surplus and otherwise than in Simplex Common Stock, rights or Convertible
Securities, then the number of Simplex Common Stock exercisable upon exercise
of the Put shall be adjusted proportionately.
(d) In case of any reorganization of Simplex after the date hereof
or in case after such date Simplex shall consolidate with or merge into
another corporation or convey all or substantially all of its assets to
another corporation, then, and in each such case, the shareholders of AHT
(other than Simplex) shall be entitled to receive, upon consummation of the
Additional Exchange, the securities or property to which such persons would
have been entitled upon consummation of the reorganization, consolidation or
merger if the Additional Exchange was consummated immediately prior thereto.
5. Registration Rights.
(a) Demand Registration Rights. (i) Simplex will, at any time
during the 18 month period commencing six months after the Closing (as
hereinafter defined), upon the written request (the "Request") of AHT prepare
and file as promptly as is reasonably possible, upon being furnished with the
requisite information for such purpose, use its best efforts to make effective
a registration statement covering the distribution of the Simplex Shares to
the shareholders of AHT or their resale into the public market.
(ii) Simplex shall not be obligated to effect, or to take any
action to effect, any registration pursuant to Section 5(a):
(1) After Simplex has effected two registrations pursuant
to Section 5(i) and such registrations have been declared effective by the
SEC; or
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(2) If SEC rules and regulations require Simplex to conduct
a special audit (not including an audit covering the end of Simplex's fiscal
year) in order to effect such registration.
(b) Piggy Back Registration Rights. In addition, if at any time
during the two-year period commencing six months after the Closing, Simplex
shall prepare and file one or more registration statements under the
Securities Act, with respect to a public offering of equity or debt securities
of Simplex, or of any such securities of Simplex held by its security holders,
Simplex will include in any such registration statement such information as is
required, and such number of Simplex Shares held by AHT as may be requested by
it, to permit a public offering of the Simplex Shares so requested; provided,
however, that if, in the written opinion of Simplex's managing underwriter, if
any, for such offering, the inclusion of the shares requested to be registered
by AHT, when added to the securities being registered by Simplex or the
selling security holder(s), would exceed the maximum amount of Simplex's
securities that can be marketed without otherwise materially and adversely
affecting the entire offering, then Simplex may exclude from such offering
that portion of the Simplex Shares requested to be so registered by AHT, so
that the total number of securities to be registered is within the maximum
number of shares that, in the opinion of the managing underwriter, may be
marketed without otherwise materially and adversely affecting the entire
offering, provided that Simplex shall be required to include in the offering
and in the following order: first, the pro rata number of securities requested
by AHT along with all other holders of securities requesting registration
pursuant to registration rights which were granted on or prior to the date of
this Agreement and are described in Simplex's Registration Statement; and,
second, the pro rata number of securities requested by all other holders of
securities requesting registration pursuant to other registration rights. In
the event of such a proposed registration, Simplex shall furnish AHT with not
less than 30 days' written notice prior to the proposed date of filing of such
registration statement.
(c) Obligations of Simplex. In connection with the filing of a
registration statement pursuant to this Section 5, Simplex shall:
(i) Prepare and file with the SEC a registration statement
covering the Simplex Shares (the "Registration Statement") and any necessary
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement and take such other reasonable action as may be
necessary to have the Registration Statement be declared effective by the SEC
and keep the Registration Statement effective until the earlier of the (A)
public sale of all the Simplex Shares or (B) the Simplex Shares becoming
capable of full and complete public sale without registration under the
Securities Act and to comply with the provisions of the Securities Act and the
Exchange Act, and the rules and regulations thereunder, with respect to the
disposition of the Simplex Shares;
(ii) Notify AHT, after becoming aware thereof, (A) when the
Registration Statement or the prospectus included therein or any prospectus
amendment or supplement or post-effective amendment has been filed and, with
respect to the Registration Statement or any post-effective amendment, when
the same has become effective or (B) of any request by the SEC for amendment
of or supplement to the Registration Statement or related prospectus or for
additional information;
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(iii) Furnish promptly to AHT such reasonable number of copies
of a prospectus, and all amendments and supplements thereto, in conformity
with the requirements of the Securities Act, and such other documents as AHT
may reasonably request in order to facilitate their disposition of the Simplex
Shares;
(iv) Use its best efforts to register and qualify the Simplex
Shares under the securities or Blue Sky laws of such states as shall be
reasonably requested by AHT, and prepare and file in those states such
amendments (including post-effective amendments) and supplements and to take
such other actions as may be necessary to maintain such registration and
qualification in effect at all times during the period Simplex is required to
maintain the Registration Statement effective, and to take all other actions
necessary or advisable to enable the disposition of such securities in such
states, provided that Simplex shall not be required in connection therewith or
as a condition thereto to subject itself to taxation, to qualify to do
business or to file a general consent to service of process in any such
states; and
(v) Notify AHT, at any time when a prospectus relating to the
Simplex Shares is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Simplex shall promptly amend or
supplement the Registration Statement to correct any such untrue statement or
omission, and provide AHT with an amended or supplemented prospectus with
respect to the Simplex Shares that corrects such untrue statement or opinion.
(d) AHT's Obligations. It shall be a condition precedent to the
obligations of Simplex to AHT to take any action pursuant to this Section 5
that AHT shall furnish to Simplex such information regarding AHT, the Simplex
Shares and other shares of Simplex Common Stock held by AHT and the intended
method of disposition of such securities as shall be reasonably required to
effect the registration of the Simplex Shares and shall execute such
documents in connection with such registration as Simplex may reasonably
request.
(e) Expenses of Registration. All expenses incurred by Simplex in
complying with this section, including, without limitation, registration and
filing fees, fees and expenses of complying with state securities and Blue Sky
laws, printing expenses, and fees and disbursements of Simplex's counsel and
accountants, shall be paid by Simplex; provided, however, that all fees and
expenses of counsel to AHT and all selling commissions applicable to the
disposition of the Simplex Shares shall not be borne by Simplex but shall be
borne by AHT.
(f) Indemnification.
(i) Simplex will indemnify and hold harmless AHT, the directors
and officers of AHT, if any, and each person, if any, who controls AHT within
the meaning of the Securities Act or the Exchange Act (each a "AHT Indemnified
Party" and collectively, the "AHT Indemnified Parties"), against any losses,
claims, damages, expenses or liabilities (joint or several) to which any of
them may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, expenses or liabilities
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(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (A) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (B) the
omission or alleged omission to state therein information required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or (C) any violation
or alleged violation by Simplex of the Securities Act, the Exchange Act or any
state securities or Blue Sky law; and Simplex will reimburse each AHT
Indemnified Party, promptly as such expenses are incurred, for any legal or
other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the indemnity agreement contained in this
section shall not apply to amounts paid in settlement of any such loss, claim,
damage, expense, liability, action or proceeding if such settlement is
effected without the consent of Simplex, which consent shall not be
unreasonably withheld, nor shall Simplex be liable in any such case for any
such loss, claim, damage, expense, liability, action or proceeding to the
extend that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in the Registration Statement by AHT.
(ii) AHT will indemnify and hold harmless Simplex, each of its
directors, each of its officers who has signed the Registration Statement, and
each person, if any, who controls Simplex within the meaning of the Securities
Act or the Exchange Act (collectively, the "Simplex Indemnified Parties")
against any losses, claims, damages, expenses or liabilities (joint or
several) to which any of them may become subject, under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, expenses or liabilities (or actions in respect thereof) arise
out of or are based upon: (A) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto and (B) the omission or alleged omission to state
therein information required to be stated therein, or necessary to make the
statements therein not misleading, in each case to the extent (and only to the
extent) that such losses, claims, damages, expenses or liabilities are caused
by statements made in the Registration Statement in reliance upon and in
strict conformity with written information furnished by AHT expressly for use
therein; and AHT will reimburse any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
the indemnity agreement contained in this section shall not apply to amounts;
paid in settlement or any such loss, claim, damage, expense, liability, action
or proceeding if such settlement is effected without the consent of AHT, which
consent shall not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this section,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying and indemnified
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parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel for the
indemnified party, representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this section only to the extent
prejudicial to its ability to defend such action, but the omission so to
deliver written notice to the indemnifying party shall not relieve it of any
liability that is may have to any indemnified party otherwise than under this
section. The indemnification required by this section shall be made by
periodic payments of the amount thereof during the course of the
investigation, or defense, promptly as such expense, loss, damage or liability
is incurred.
(iv) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, or is otherwise unavailable to or
insufficient to hold harmless an indemnified party, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for-which
it would otherwise be liable under this section, provided that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(g) Rule 144 Compliance. With a view to making available to AHT the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit AHT to sell the
Simplex Shares to the public without registration ("Rule 144"), Simplex agrees
to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
(ii) file with the SEC in a timely manner all reports and other
documents required of Simplex under the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act"); and
(iii) furnish to AHT so long as AHT owns the Shares, promptly
upon request, (i) a written statement by Simplex that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of Simplex and such
other reports and documents so filed by Simplex, and (iii) such other
information as may be reasonably requested to permit AHT to sell the Simplex
Shares pursuant to Rule 144 without registration, unless such information is
generally publicly available.
6. Additional Covenants.
(a) Simplex Covenants. Simplex Covenants and agrees that if prior
to expiration or exercise of the Put should AHT (i) make a distribution of the
500,000 Simplex Shares issued at the Closing to AHT's shareholders, or (ii)
sell the 500,000 Simplex Shares issued at the Closing and distribute all or a
portion of the after-tax proceeds thereof in cash to AHT's shareholders,
Simplex shall not be counted as a shareholder for purposes of such
distribution and shall not be entitled to receive any Simplex Shares or cash
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distribution as the case may be. Simplex further covenants and agrees that
should AHT exercise the Put Option after consummating the Sale, as provided in
Section 4(a), Simplex shall not be counted as a shareholder and shall not be
entitled to receive any cash distribution to shareholders from the proceeds of
the Sale, except as provided in said Section 4(a).
(b) AHT Covenant. For so long as Simplex owns 50% of the original
19% AHT Shares, Simplex shall have the right to designate one nominee to AHT's
Board of Directors reasonably satisfactory to AHT, and AHT shall use its best
efforts to cause such designee to be elected to AHT's Board of Directors.
7. Closing Date; Deliveries by the Parties. The exchange of the shares
shall be closed contemporaneously with the execution of this Agreement (the
"Closing"). At the Closing;
(a) Documents to be Delivered by Simplex. On the Closing, Simplex
will deliver, or cause to be delivered, to AHT the following:
(i) stock certificates for the Simplex Shares being issued to
AHT in connection with the Closing;
(ii) the Stockholders' Agreement for Simplex executed by
Simplex; and
(iii) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement or that may be reasonably requested in furtherance of the provisions
of this Agreement.
(b) Documents to be Delivered by AHT. AHT will deliver or cause to
be delivered to Simplex:
(i) stock certificates representing the AHT Shares being issued
to the Simplex in connection with the Closing;
(ii) the Stockholders' Agreement for Simplex executed by AHT;
and
(iii) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement, or that may be reasonably requested in furtherance of the
provisions of this Agreement.
8. Post-Closing Adjustment. Simplex and AHT hereby acknowledge that the
number of AHT Shares issued at the Closing is based upon AHT having 993,750
shares of AHT Preferred Stock and 1,718,640 shares of AHT Common Stock being
issued and outstanding as of the date of this Agreement. Simplex and AHT also
acknowledge that AHT is currently offering holders of AHT Preferred Stock to
convert AHT Preferred Stock into AHT Common Stock and holders of AHT Notes and
Warrants to exchange such Notes and Warrants for AHT Common Stock (such
conversion of AHT Preferred Stock and exchange of Notes and Warrants being
collectively, the "Exchange Offer"). Simplex and AHT further acknowledge that
the Exchange Offer is scheduled to expire on June 15, 1998, subject to
extension, in the discretion of AHT's Board of Directors. AHT agrees that upon
expiration of the Exchange Offer, it shall promptly issue to Simplex such
additional number of shares of AHT Common Stock (the "Additional Shares") so
that the shares of AHT Common Stock issued at the Closing, when combined with
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the Additional Shares, shall cause Simplex to hold 19% of the total shares of
AHT Preferred Stock and AHT ;Common Stock outstanding after expiration of the
Exchange Offer. All references herein, to the AHT Shares shall include both
the AHT Common Stock issued at the Closing and the Additional Shares, as
applicable.
9. Indemnification.
(a) Indemnification by AHT. AHT hereby indemnifies and holds
harmless Simplex and Simplex's directors, officers, employees, and agents in
respect of any and all losses, claims, demands, judgments, expenses, or
liabilities, including all attorneys' fees and court costs in any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before an arbitrator ("Adverse Consequence") suffered
by Simplex in connection with each and all of the following:
(i) Any material misrepresentation or material breach of any
representation or warranty made by AHT in this Agreement, the AHT Disclosure
Schedule or other document attached hereto or delivered to Simplex by AHT in
connection with the transactions contemplated hereby.
(ii) The breach of any covenant, agreement, or obligation of AHT
contained in this Agreement or the AHT Disclosure Schedule hereto or any other
instrument specifically contemplated by this Agreement.
(iii) Any misrepresentation contained in any statement in
writing or certificate furnished by AHT pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement, which results
in an AHT Material Adverse Effect.
(iv) Any material, misrepresentation in or material omission
from any list, the AHT Disclosure Schedule, any certificate or any other
instrument required to be furnished or specifically contemplated to have been
furnished pursuant to this Agreement to Simplex or its authorized
representatives.
(c) Indemnification by Simplex. Simplex hereby indemnifies and holds
harmless AHT in respect of any and all Adverse Consequences incurred by AHT in
connection with each and all of the following:
(i) Any material misrepresentation or material breach of any
representation or warranty made by Simplex in this Agreement or the Simplex
Disclosure Schedule or other document attached hereto or delivered to AHT by
Simplex in connection with the transactions contemplated hereby.
(ii) The breach of any covenant, agreement, or obligation of
Simplex contained in this Agreement or the Simplex Disclosure Schedule or any
other instrument specifically contemplated by this Agreement.
(iii) Any material misrepresentation contained in any statement
in writing or certificate furnished by an officer of Simplex pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
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(iv) Any material misrepresentation in or material omission from
any list, the Simplex Disclosure Schedule, any certificate or any other
instrument required to be furnished or specifically contemplated to have been
furnished pursuant to this Agreement to Simplex or its authorized
representatives.
(c) Procedure for Indemnification. Whenever any claim shall arise
for indemnification hereunder, the party seeking indemnification
("Indemnitee") shall promptly notify the other party ("Indemnitor") of the
claim and, when known, the facts constituting the basis for such claim. If any
claim for indemnification hereunder results from or is in connection with any
claim or Adverse Consequence by a person who is not a party to this Agreement
("Third Party Claim"), such notice shall also specify, if known, the amount or
an estimate of the amount of the liability arising therefrom. The Indemnitee
shall give the Indemnitor prompt notice of any such claim and the Indemnitor
shall undertake the defense thereof by representatives of its own choosing,
reasonably satisfactory to the Indemnitee, at the expense of the Indemnitor.
The Indemnitee shall have the right to participate in any such defense of a
Third Party Claim with advisory counsel of its own choosing, at its own
expense. If the Indemnitor, within a reasonable time after notice of any such
Third Party Claim, fails to defend, the Indemnitee or any Affiliate of the
Indemnitee shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim on behalf of, and for the account of, the
Indemnitor, at the expense and risk of the Indemnitor. The Indemnitor shall
not, without the Indemnitee's written consent, settle or compromise any such
Third Party Claim or consent to entry of any judgment that does not include,
as an unconditional term thereof, the giving by the claimant or the plaintiff
to Indemnitee and/or Indemnitee's Affiliate or Affiliates, as the case may be,
an unconditional release from all liability in respect of such Third Party
Claim. The Indemnitee shall not pay any claim covered by this right to
indemnification prior to giving the Indemnitor the notice of such claim
required by this Section 6 and the opportunity provided hereinafter, handle
the claim itself.
(d) Payment. All indemnification hereunder shall be effected upon
demand by payment of cash or delivery of a cashier's check in the amount of
the indemnification liability.
(e) Survival. The indemnities contained herein shall survive the
Closing and any investigation made with respect thereto for a period
commencing on the date hereof and ending 18 months from the date of this
Agreement; provided, however, that such indemnities shall survive as to any
claim or demand made prior to such 18 months until such claim or demand is
fully paid or otherwise resolved by the parties hereto in writing or by a
court of competent jurisdiction.
10. Notices. All notices, reports and other communications to AHT or
Simplex hereunder shall be in writing, shall refer specifically to this
Agreement and shall be hand delivered or sent by facsimile transmission with
receipt confirmed or by registered mail or certified mail, return receipt
requested, postage prepaid, in each case to the respective persons and
addresses specified below (or to such other persons or addresses as may be
specified in writing to the other party):
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If to AHT, to: Automated Health Technologies, Inc.
1025 Park of Commerce Boulevard
Delray Beach, Florida 33445
Attn: President
Fax No.: (407) 274-4829
If to Simplex, to: Simplex Medical Systems, Inc.
430 Ansin Boulevard, Suite G
Hallandale, Florida 33009
Attn: Chairman
Fax No.: (954) 455-9008
Any notice or communication given in conformity with this Section
shall be deemed to be effective when received by the addressee if delivered by
hand or overnight courier or by facsimile (with confirmed receipt), and three
days after mailing, if mailed.
11. No Implied Waivers; Rights Cumulative. No failure on the part of
any of the parties to this Agreement to exercise and no delay in exercising
any right, power, remedy or privilege under this Agreement or provided by
statute or at law or in equity or otherwise, including, without limitation,
the right or power to terminate this Agreement, shall impair, prejudice or
constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach of this Agreement or as an acquiescence
therein, nor shall any single or partial exercise of any such right, power,
remedy or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, remedy or privilege.
12. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, each
party will execute such additional instruments and take such action as may be
reasonably requested by any other party to conform or perfect title to any
property transferred hereunder or otherwise to carry out the intent and
purposes of this Agreement.
(b) Costs and Expenses. Each party hereto agrees to pay its or his
own costs and expenses incurred in negotiating this Agreement and consummating
the transactions described herein.
(c) Entire Agreement. This Agreement, including all schedules and
exhibits thereto, constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof. It supersedes all prior
negotiations, letters and understandings relating to the subject matter
hereof.
(d) Amendment. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by all
parties hereto.
(e) Assignment. This Agreement may not be assigned by any party
hereto without the prior written consent of the other party.
(f) Choice of Law. This Agreement will be interpreted, construed
and enforced in accordance with the laws of the State of Florida, without
giving effect to the application of the principles pertaining to conflicts of
laws.
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(g) Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
(i) Effect of Waiver. The failure of any party at any time or times
to require performance of any provision of this Agreement will in no manner
affect the right to enforce the same. The waiver by any party of any breach of
any provision of this Agreement will not be construed to be a waiver by any
such party of any succeeding breach of that provision or a waiver by such
party of any breach of any other provision.
(j) Construction. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the
parties hereto, but rather in accordance with the fair meaning thereof.
(k) Severability. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(l) Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial
and appellate levels, expenses and costs. Any suit, action or proceeding with
respect to this Agreement shall be brought in the courts of the State of
Florida or in the U.S. District Court for the Southern District of Florida.
The parties hereto hereby accept the exclusive jurisdiction of those courts
for the purpose of any such suit, action or proceeding.
(m) Specific Performance. The parties hereto acknowledge and agree
that any party's remedy at law for a breach or threatened breach of any of the
provisions of this Agreement would be inadequate and such breach or threatened
breach shall be per se deemed as causing irreparable harm to such party.
Therefore, in the event of such breach or threatened breach, the parties
hereto agree that, in addition to any available remedy at law, including but
not limited to monetary damages, an aggrieved party, without posting any bond,
shall be entitled to obtain, and the offending party agrees not to oppose the
aggrieved party's request for, equitable relief in the form of specific
enforcement, a temporary restraining order, a temporary or permanent
injunction, or any other equitable remedy that may then be available to the
aggrieved party.
(n) Binding Nature. This Agreement will be binding upon and will
inure to the benefit of any heir or heirs, successor or successors of the
parties hereto.
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(o) No Third-Party Beneficiaries. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is
the intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
(p) Counterparts. This Agreement may be executed in one or more
counterparts each of which will be deemed an original and all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto through their duly authorized
officers have executed this Agreement as of the date first written above.
AHT:
AUTOMATED HEALTH TECHNOLOGIES
INC., a Florida corporation
By: /s/ Robert D. Lohman
Name: Robert D. Lohman
Title: President
SIMPLEX:
SIMPLEX MEDICAL SYSTEMS, INC., a
Colorado corporation
By: /s/ Colin N. Jones
Name: Colin N. Jones
Title: Chairman and CEO
20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this first day of July 1998 by and between Simplex Medical Systems, Inc., a
Colorado corporation ("Employer"), and Colin Jones ("Employee").
R E C I T A T I O N S
A. Employer is a corporation engaged in the business of the research,
development and manufacture of medical devices.
B. Employee is an experienced business executive and manager.
C. Employer desires to obtain the services of Employee Colin Jones as
its President and CEO.
D. Employee is willing to provide such services to Employer pursuant to
the terms and conditions set forth herein.
O P E R A T I V E P R O V I S I O N S
IN CONSIDERATION of the foregoing recitations, the covenants of the
parties set forth hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged hereby, the parties to this
Agreement, intending legally to be bound, agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and Employee
hereby agrees to serve as President and CEO and in such other executive
positions as are from time to time designated by the Board of Directors of
Employer or the President of the company, upon the conditions, covenants and
terms hereinafter set forth.
2. DUTIES. Employee agrees to perform such duties and render such
services to Employer, consistent with the capacities stated above and
Employee's position and experience, as shall be prescribed from time to time
by the Board of Directors of Employer or the president of the company. In
general, Employee shall be responsible and shall have authority for executive
management and supervision of all aspects of the new businesses development of
Employer. Employee further agrees that during the term of this Agreement he
shall serve Employer faithfully, diligently and to the best of his ability and
shall devote his best efforts, attention, energy and skill to the performance
of his duties hereunder by promoting and furthering the interests of Employer.
3. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall be for a period of two (2) years from the date of this
Agreement (the "Commencement Date"), and terminating on the second anniversary
of the Commencement Date.
4. COMPENSATAION AND BENEFITS. As compensation for the services to be
rendered hereunder by Employee, Employer agrees to pay the following
compensation and provide the following benefits to Employee:
(a) Employee shall be paid a base salary (the "Base Salary") in the
initial amount of eighty thousand dollars ($80,000.00) per year, which shall
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payable in equal installments not less often than twice per month upon such
normal payroll schedule as Employer shall establish from time to time.
(b) Employee's Base Salary shall be reviewed annually by Employer's
Board of Directors (the "Board") during the 30-day period immediately prior to
each anniversary of the Commencement Date. The Base Salary shall not be
subject to reduction at any time.
(c) A bonus ("Bonus Pool") for Jones, Schur and Levandoski for
employee performance during the years 1998, 1999 and 2000 is set up by the
Board of Directors. In addition to base compensation set out above the three
employees will share in a bonus of 12% -1998, 10% - 1999, 8% - 2000 of the
audited pre-tax profit or a minimum of $40,000 assuming the corporate
achievements as outlined below are met.
Year Achievement P/(L) Estimated Pool
1998 ($ 300,000) $ 40,000
1999 $1,200,000 $120,000
2000 $2,900,000 $232,000
(d) Employee shall also receive in the form of benefits under this
section the following:
(i) reimbursement for any and all reasonable travel and other
expenses incurred in connection with Employee's services on behalf of
Employer, or any of its subsidiaries or affiliates. When Employee travels out
of town on the business of Employer, Employer shall provide for airfare and
accommodations according to existing company policy;
(ii) not less than three (3) weeks paid vacation per contract
year, which may be increased in accordance with the Employer's normal
policies;
(iii) participation in all other normal executive compensation
and benefit programs of Employer, including, without limitation, bonuses,
401(k) plans, pension or SEP plans and medial, dental and disability
insurance.
5. Waiver of Liability. Employer hereby waives any and all claims,
costs, expenses, liabilities obligations and damages suffered by Employer as a
direct or indirect result of any acts or failures to act of Employee, except
with respect to acts or failures to act constituting gross negligence, bad
faith or intentional misconduct.
6. Indemnification: Insurance. Employer shall indemnify and hold
harmless Employee from any and all claims, costs, expenses, liabilities,
obligations and damages suffered by Employee as a direct or indirect result
of, arising from or relating to Employee's employment pursuant to this
Agreement, to the greatest extent permitted by applicable law. Employer shall
advance expenses for Employee's defense of any and all claims and lawsuits
brought against Employee as a direct or indirect result of, arising from or
relating to Employee's employment pursuant to this Agreement, to the greatest
extent permitted by applicable law.
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7. Termination and Buy-Out.
(a) By Employer. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employer for any reason whatsoever,
other than for a material breach of this Agreement by Employee or gross
negligence, bad faith or intentional misconduct, including but not limited to
disability, during the lifetime of Employee and prior to expiration of the
term of Employee's employment hereunder; then:
(i) during the remainder of the term of Employee's employment
under this Agreement for a period not to exceed one year, Employer shall pay
to Employee (or to Employee's Designated Beneficiary following Employee's
death during such period) a lump sum payment in cash equal to the remaining
Base Salary due Employees under this Agreement as set forth in Section 4(a)
above; and
(ii) in addition to the foregoing, Employer shall pay to
Employee, or his assignees, a lump sum payment in cash equal to one(1) time
the annual Base Salary of Employee under this Agreement at the time of
termination; and
(iii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such termination, for eighteen
months thereafter; provided, however, that if Employee should enter into
employment with a competitor of Employer, Employee's participation in such
non-cash benefit plans would cease. Thereafter, any and all retirement
pension, 401K and health benefits which have been paid in or have accrued or
vested in Employee's favor pursuant to Section 4 above shall be payable
directly to Employee, or to a roll-over plan of Employee's choosing, as may be
determined by Employee at his discretion; and
(iv) Employer agrees to provide Employee ten (10) days written
notice for any termination arising under this section.
(b) By Employee. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employee during the lifetime of
Employee and prior to expiration of the term of Employee's employment
hereunder for any reason other than a material breach of this Agreement by
Employer, Employer shall pay to Employee (or to Employee's Designated
Beneficiary following Employee's death during such period) the Base Salary set
forth in Section 4(a) of this Agreement owed to the Employee at the time of
his resignation and any and all accrued benefits that may be obligated for by
the Employer. Employer shall provide to Employee (but not after Employee's
death during such period) all of the benefits provided for in Section 4 of
this Agreement owed to Employee at the time of his resignation. Any
termination of Employee's employment pursuant to this Agreement by Employee as
a result or arising out of a material breach of any of Employer's obligations
under this Agreement shall be treated for all purposes as a termination by
Employer of Employee's employment pursuant to this Agreement.
(c) Non-Compete Agreement. Upon termination of this Agreement by
the Employee or by the Employer for cause, Employee agrees not to compete with
the Employer pursuant to the terms and conditions of that certain Non-Compete
Agreement attached hereto and incorporated herein as Exhibit "A".
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8. Employee's Rights Under a Change in Control.
(a) In order to protect Employee against the possible consequences
of the acquisition of control of Employer, Employer agrees that if (1) control
of Employer is acquired by another entity and(2) Employee is terminated from
employment with the Employer, or the combined entity for whatever reasons
(other than discharge for gross negligence, intentional misconduct or ad
faith, death of total and permanent disability)within six months after the
acquisition of control;
(i) Employee shall be entitled to receive within five (5)
business days of Employee leaving, a lump sum payment in cash in the amount of
one (1) time the annual Base Salary of Employee under this Agreement at the
time of Employee's leaving, termination or departure, together with a lump sum
payment in cash equal to the remaining Base Salary due Employee under Section
4(a) of this Agreement;
(ii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such acquisition of control, for
twenty-four (24) months thereafter; provided, however, that if Employee should
enter into employment with a competitor of Employer, Employee's participation
in such non-cash benefit plans would cease.
(iii) All benefits paid under this Section shall be considered
severance pay in consideration for past services rendered, and pay in
consideration of his continued service from the date of this Agreement and his
entitlement thereto shall not be governed by any duty to mitigate his damages
by seeking further employment nor offset by any compensation which he may
receive from future employment.
(iv) As used herein the term control shall mean (a) the
ownership (whether directly, indirectly, beneficially or of record) of shares
in excess of 30% of the outstanding shares of Common Stock of the Employer by
a person or group of persons (including, without limitation, a corporation,
trust, partnership, joint venture, individual or other entity), or
9. Rights and Liabilities Upon Termination. Upon the termination of
Employee's employment under this Agreement, no further rights, obligations or
liabilities shall accrue thereafter in favor of or against any party to this
Agreement, except Employee's right to demand and Employer's respective
obliga6ions to pay full compensation and provide full benefits due Employee,
his heirs or assigns.
10. Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof and supersedes
any and all prior and contemporaneous negotiations and agreements, whether
oral or written relating to the subject matter hereof. This Agreement may be
amended only by a written instrument executed by both parties.
11. Benefits: Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. Employee's Designated Beneficiary is
an intentional third party beneficiary of this Agreement and shall have the
right to bring legal action to enforce all rights of such party provided for
in his Agreement.
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12. Assignment. Neither party shall assign this Agreement or any of its
rights, obligations, benefits or burdens under this Agreement without the
written consent of the other party.
13. Governing Law. This Agreement shall be governed by the local laws
of the State of Florida, without regard to that State's rules regarding choice
of law.
14. Venue. The parties to this Agreement hereby agree that the exclusive
venue for all actions arising from or related to this Agreement shall lie in
Palm Beach County, Florida, and waive any claim or defense that they may have
that such venue is an inconvenient forum.
15. Attorney's Fees and Costs. The prevailing party in any suit, action
or proceeding brought to enforce any term of this Agreement shall be entitled
to recover from the non-prevailing party reasonable attorneys' fees and costs,
including appellate attorneys' fees and costs.
16. Severability of Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
seeable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions f this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid, and enforceable.
17. Waiver. T he waiver by either party hereto of the other party's
prompt and complete performance or breach or violation of any provision of
this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation, and the failure by either party hereto to
exercise any right or remedy that he or it may possess shall not operate nor
be construed as the waiver of such right or remedy by such party or as a bar
to the exercise of such right and remedy by such party upon the occurrence of
any subsequent breach or violation.
18. Notices. All notices, requests and demands required or permitted to
be given hereunder shall be in writing and shall be deemed properly given
immediately upon obtaining written acknowledgment or personal delivery, or
five (95) days following dispatch by certified or registered prepaid United
States mail, return receipt requested, or on the next business day following
dispatch by a reputable and generally recognized overnight courier's next
business day delivery service, to the following addresses (which may be
changed by written notice given to the other party):
If to Employer;
Simplex Medical Systems, Inc
376 Ansin Boulevard
Hallandale, FL 33009
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If to Employee:
Colin Jones
19. Gender and Number. Wherever the context so shall require, all words
herein in the male gender shall be deemed to include the female or neuter
gender, all singular words shall include the plural and all plural words shall
include the singular.
20. Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of any or all of the provisions of this Agreement.
21. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and date first above written.
EMPLOYER
SIMPLEX MEDICAL SYSTEMS, INC.
/s/ Joel Marcus
Joel Marcus
Compensation Committee
/s/ Kenneth H. Robertson
Kenneth H. Robertson
Compensation Committee
EMPLOYEE
/s/ Colin Jones
Colin Jones
6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this first day of July 1998 by and between Simplex Medical Systems, Inc., a
Colorado corporation ("Employer"), and Nicholas Levandoski ("Employee").
R E C I T A T I O N S
A. Employer is a corporation engaged in the business of the research,
development and manufacture of medical devices.
B. Employee is an experienced business executive and manager.
C. Employer desires to obtain the services of Employee Nicholas
Levandoski as its Vice President.
D. Employee is willing to provide such services to Employer pursuant to
the terms and conditions set forth herein.
O P E R A T I V E P R O V I S I O N S
IN CONSIDERATION of the foregoing recitations, the covenants of the
parties set forth hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged hereby, the parties to this
Agreement, intending legally to be bound, agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and Employee
hereby agrees to serve as Vice President and in such other executive positions
as are from time to time designated by the Board of Directors of Employer or
the President of the company, upon the conditions, covenants and terms
hereinafter set forth.
2. DUTIES. Employee agrees to perform such duties and render such
services to Employer, consistent with the capacities stated above and
Employee's position and experience, as shall be prescribed from time to time
by the Board of Directors of Employer or the president of the company. In
general, Employee shall be responsible and shall have authority for executive
management and supervision of all aspects of the new businesses development of
Employer. Employee further agrees that during the term of this Agreement he
shall serve Employer faithfully, diligently and to the best of his ability and
shall devote his best efforts, attention, energy and skill to the performance
of his duties hereunder by promoting and furthering the interests of Employer.
3. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall be for a period of two (2) years from the date of this
Agreement (the "Commencement Date"), and terminating on the second anniversary
of the Commencement Date.
4. COMPENSATAION AND BENEFITS. As compensation for the services to be
rendered hereunder by Employee, Employer agrees to pay the following
compensation and provide the following benefits to Employee:
(a) Employee shall be paid a base salary (the "Base Salary") in the
initial amount of eighty thousand dollars ($80,000.00) per year, which shall
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<PAGE>
be payable in equal installments not less often than twice per month upon such
normal payroll schedule as Employer shall establish from time to time.
(b) Employee's Base Salary shall be reviewed annually by Employer's
Board of Directors (the "Board") during the 30-day period immediately prior to
each anniversary of the Commencement Date. The Base Salary shall not be
subject to reduction at any time.
(c) A bonus ("Bonus Pool") for Jones, Schur and Levandoski for
employee performance during the years 1998, 1999 and 2000 is set up by the
Board of Directors. In addition to base compensation set out above the three
employees will share in a bonus of 12% -1998, 10% - 1999, 8% - 2000 of the
audited pre-tax profit or a minimum of $40,000 assuming the corporate
achievements as outlined below are met.
Year Achievement P/(L) Estimated Pool
1998 ($ 300,000) $ 40,000
1999 $1,200,000 $120,000
2000 $2,900,000 $232,000
(d) Employee shall also receive in the form of benefits under this
section the following:
(i) reimbursement for any and all reasonable travel and other
expenses incurred in connection with Employee's services on behalf of
Employer, or any of its subsidiaries or affiliates. When Employee travels out
of town on the business of Employer, Employer shall provide for airfare and
accommodations according to existing company policy;
(ii) not less than three (3) weeks paid vacation per contract
year, which may be increased in accordance with the Employer's normal
policies;
(iii) participation in all other normal executive compensation
and benefit programs of Employer, including, without limitation, bonuses,
401(k) plans, pension or SEP plans and medial, dental and disability
insurance.
5. Waiver of Liability. Employer hereby waives any and all claims,
costs, expenses, liabilities obligations and damages suffered by Employer as a
direct or indirect result of any acts or failures to act of Employee, except
with respect to acts or failures to act constituting gross negligence, bad
faith or intentional misconduct.
6. Indemnification: Insurance. Employer shall indemnify and hold
harmless Employee from any and all claims, costs, expenses, liabilities,
obligations and damages suffered by Employee as a direct or indirect result
of, arising from or relating to Employee's employment pursuant to this
Agreement, to the greatest extent permitted by applicable law. Employer shall
advance expenses for Employee's defense of any and all claims and lawsuits
brought against Employee as a direct or indirect result of, arising from or
relating to Employee's employment pursuant to this Agreement, to the greatest
extent permitted by applicable law.
2
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7. Termination and Buy-Out.
(a) By Employer. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employer for any reason whatsoever,
other than for a material breach of this Agreement by Employee or gross
negligence, bad faith or intentional misconduct, including but not limited to
disability, during the lifetime of Employee and prior to expiration of the
term of Employee's employment hereunder; then:
(i) during the remainder of the term of Employee's employment
under this Agreement for a period not to exceed one year, Employer shall pay
to Employee (or to Employee's Designated Beneficiary following Employee's
death during such period) a lump sum payment in cash equal to the remaining
Base Salary due Employees under this Agreement as set forth in Section 4(a)
above; and
(ii) in addition to the foregoing, Employer shall pay to
Employee, or his assignees, a lump sum payment in cash equal to one(1) time
the annual Base Salary of Employee under this Agreement at the time of
termination; and
(iii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such termination, for eighteen
months thereafter; provided, however, that if Employee should enter into
employment with a competitor of Employer, Employee's participation in such
non-cash benefit plans would cease. Thereafter, any and all retirement
pension, 401K and health benefits which have been paid in or have accrued or
vested in Employee's favor pursuant to Section 4 above shall be payable
directly to Employee, or to a roll-over plan of Employee's choosing, as may be
determined by Employee at his discretion; and
(iv) Employer agrees to provide Employee ten (10) days written
notice for any termination arising under this section.
(b) By Employee. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employee during the lifetime of
Employee and prior to expiration of the term of Employee's employment
hereunder for any reason other than a material breach of this Agreement by
Employer, Employer shall pay to Employee (or to Employee's Designated
Beneficiary following Employee's death during such period) the Base Salary set
forth in Section 4(a) of this Agreement owed to the Employee at the time of
his resignation and any and all accrued benefits that may be obligated for by
the Employer. Employer shall provide to Employee (but not after Employee's
death during such period) all of the benefits provided for in Section 4 of
this Agreement owed to Employee at the time of his resignation. Any
termination of Employee's employment pursuant to this Agreement by Employee as
a result or arising out of a material breach of any of Employer's obligations
under this Agreement shall be treated for all purposes as a termination by
Employer of Employee's employment pursuant to this Agreement.
(c) Non-Compete Agreement. Upon termination of this Agreement by
the Employee or by the Employer for cause, Employee agrees not to compete with
the Employer pursuant to the terms and conditions of that certain Non-Compete
Agreement attached hereto and incorporated herein as Exhibit "A".
3
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8. Employee's Rights Under a Change in Control.
(a) In order to protect Employee against the possible consequences
of the acquisition of control of Employer, Employer agrees that if (1) control
of Employer is acquired by another entity and(2) Employee is terminated from
employment with the Employer, or the combined entity for whatever reasons
(other than discharge for gross negligence, intentional misconduct or ad
faith, death of total and permanent disability)within six months after the
acquisition of control;
(i) Employee shall be entitled to receive within five (5)
business days of Employee leaving, a lump sum payment in cash in the amount of
one (1) time the annual Base Salary of Employee under this Agreement at the
time of Employee's leaving, termination or departure, together with a lump sum
payment in cash equal to the remaining Base Salary due Employee under Section
4(a) of this Agreement;
(ii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such acquisition of control, for
twenty-four (24) months thereafter; provided, however, that if Employee should
enter into employment with a competitor of Employer, Employee's participation
in such non-cash benefit plans would cease.
(iii) All benefits paid under this Section shall be considered
severance pay in consideration for past services rendered, and pay in
consideration of his continued service from the date of this Agreement and his
entitlement thereto shall not be governed by any duty to mitigate his damages
by seeking further employment nor offset by any compensation which he may
receive from future employment.
(iv) As used herein the term control shall mean (a) the
ownership (whether directly, indirectly, beneficially or of record) of shares
in excess of 30% of the outstanding shares of Common Stock of the Employer by
a person or group of persons (including, without limitation, a corporation,
trust, partnership, joint venture, individual or other entity), or
9. Rights and Liabilities Upon Termination. Upon the termination of
Employee's employment under this Agreement, no further rights, obligations or
liabilities shall accrue thereafter in favor of or against any party to this
Agreement, except Employee's right to demand and Employer's respective
obliga6ions to pay full compensation and provide full benefits due Employee,
his heirs or assigns.
10. Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof and supersedes
any and all prior and contemporaneous negotiations and agreements, whether
oral or written relating to the subject matter hereof. This Agreement may be
amended only by a written instrument executed by both parties.
11. Benefits: Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. Employee's Designated Beneficiary is
an intentional third party beneficiary of this Agreement and shall have the
right to bring legal action to enforce all rights of such party provided for
in his Agreement.
4
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12. Assignment. Neither party shall assign this Agreement or any of its
rights, obligations, benefits or burdens under this Agreement without the
written consent of the other party.
13. Governing Law. This Agreement shall be governed by the local laws
of the State of Florida, without regard to that State's rules regarding choice
of law.
14. Venue. The parties to this Agreement hereby agree that the exclusive
venue for all actions arising from or related to this Agreement shall lie in
Palm Beach County, Florida, and waive any claim or defense that they may have
that such venue is an inconvenient forum.
15. Attorney's Fees and Costs. The prevailing party in any suit, action
or proceeding brought to enforce any term of this Agreement shall be entitled
to recover from the non-prevailing party reasonable attorneys' fees and costs,
including appellate attorneys' fees and costs.
16. Severability of Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
seeable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions f this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid, and enforceable.
17. Waiver. The waiver by either party hereto of the other party's
prompt and complete performance or breach or violation of any provision of
this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation, and the failure by either party hereto to
exercise any right or remedy that he or it may possess shall not operate nor
be construed as the waiver of such right or remedy by such party or as a bar
to the exercise of such right and remedy by such party upon the occurrence of
any subsequent breach or violation.
18. Notices. All notices, requests and demands required or permitted to
be given hereunder shall be in writing and shall be deemed properly given
immediately upon obtaining written acknowledgment or personal delivery, or
five (95) days following dispatch by certified or registered prepaid United
States mail, return receipt requested, or on the next business day following
dispatch by a reputable and generally recognized overnight courier's next
business day delivery service, to the following addresses (which may be
changed by written notice given to the other party):
If to Employer;
Simplex Medical Systems, Inc
376 Ansin Boulevard
Hallandale, FL 33009
If to Employee:
Nicholas Levandoski
5
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<PAGE>
19. Gender and Number. Wherever the context so shall require, all words
herein in the male gender shall be deemed to include the female or neuter
gender, all singular words shall include the plural and all plural words shall
include the singular.
20. Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of any or all of the provisions of this Agreement.
21. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and date first above written.
EMPLOYER
SIMPLEX MEDICAL SYSTEMS, INC.
/s/ Joel Marcus
Joel Marcus
Compensation Committee
/s/ Kenneth H. Robertson
Kenneth H. Robertson
Compensation Committee
EMPLOYEE
/s/ Nicholas Levandoski
Nicholas Levandoski
6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this first day of July 1998 by and between Simplex Medical Systems, Inc., a
Colorado corporation ("Employer"), and Henry Schur ("Employee").
R E C I T A T I O N S
A. Employer is a corporation engaged in the business of the research,
development and manufacture of medical devices.
B. Employee is an experienced business executive and manager.
C. Employer desires to obtain the services of Employee Henry Schur as
its Vice President.
D. Employee is willing to provide such services to Employer pursuant to
the terms and conditions set forth herein.
O P E R A T I V E P R O V I S I O N S
IN CONSIDERATION of the foregoing recitations, the covenants of the
parties set forth hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged hereby, the parties to this
Agreement, intending legally to be bound, agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and Employee
hereby agrees to serve as Vice President and in such other executive positions
as are from time to time designated by the Board of Directors of Employer or
the President of the company, upon the conditions, covenants and terms
hereinafter set forth.
2. DUTIES. Employee agrees to perform such duties and render such
services to Employer, consistent with the capacities stated above and
Employee's position and experience, as shall be prescribed from time to time
by the Board of Directors of Employer or the president of the company. In
general, Employee shall be responsible and shall have authority for executive
management and supervision of all aspects of the new businesses development of
Employer. Employee further agrees that during the term of this Agreement he
shall serve Employer faithfully, diligently and to the best of his ability and
shall devote his best efforts, attention, energy and skill to the performance
of his duties hereunder by promoting and furthering the interests of Employer.
3. TERM OF EMPLOYMENT. The term of Employee's employment under this
Agreement shall be for a period of two (2) years from the date of this
Agreement (the "Commencement Date"), and terminating on the second anniversary
of the Commencement Date.
4. COMPENSATAION AND BENEFITS. As compensation for the services to be
rendered hereunder by Employee, Employer agrees to pay the following
compensation and provide the following benefits to Employee:
(a) Employee shall be paid a base salary (the "Base Salary") in the
initial amount of eighty thousand dollars ($80,000.00) per year, which shall
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<PAGE>
be payable in equal installments not less often than twice per month upon such
normal payroll schedule as Employer shall establish from time to time.
(b) Employee's Base Salary shall be reviewed annually by Employer's
Board of Directors (the "Board") during the 30-day period immediately prior to
each anniversary of the Commencement Date. The Base Salary shall not be
subject to reduction at any time.
(c) A bonus ("Bonus Pool") for Jones, Schur and Levandoski for
employee performance during the years 1998, 1999 and 2000 is set up by the
Board of Directors. In addition to base compensation set out above the three
employees will share in a bonus of 12% -1998, 10% - 1999, 8% - 2000 of the
audited pre-tax profit or a minimum of $40,000 assuming the corporate
achievements as outlined below are met.
Year Achievement P/(L) Estimated Pool
1998 ($ 300,000) $ 40,000
1999 $1,200,000 $120,000
2000 $2,900,000 $232,000
(d) Employee shall also receive in the form of benefits under this
section the following:
(i) reimbursement for any and all reasonable travel and other
expenses incurred in connection with Employee's services on behalf of
Employer, or any of its subsidiaries or affiliates. When Employee travels out
of town on the business of Employer, Employer shall provide for airfare and
accommodations according to existing company policy;
(ii) not less than three (3) weeks paid vacation per contract
year, which may be increased in accordance with the Employer's normal
policies;
(iii) participation in all other normal executive compensation
and benefit programs of Employer, including, without limitation, bonuses,
401(k) plans, pension or SEP plans and medial, dental and disability
insurance.
5. Waiver of Liability. Employer hereby waives any and all claims,
costs, expenses, liabilities obligations and damages suffered by Employer as a
direct or indirect result of any acts or failures to act of Employee, except
with respect to acts or failures to act constituting gross negligence, bad
faith or intentional misconduct.
6. Indemnification: Insurance. Employer shall indemnify and hold
harmless Employee from any and all claims, costs, expenses, liabilities,
obligations and damages suffered by Employee as a direct or indirect result
of, arising from or relating to Employee's employment pursuant to this
Agreement, to the greatest extent permitted by applicable law. Employer shall
advance expenses for Employee's defense of any and all claims and lawsuits
brought against Employee as a direct or indirect result of, arising from or
relating to Employee's employment pursuant to this Agreement, to the greatest
extent permitted by applicable law.
2
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7. Termination and Buy-Out.
(a) By Employer. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employer for any reason whatsoever,
other than for a material breach of this Agreement by Employee or gross
negligence, bad faith or intentional misconduct, including but not limited to
disability, during the lifetime of Employee and prior to expiration of the
term of Employee's employment hereunder; then:
(i) during the remainder of the term of Employee's employment
under this Agreement for a period not to exceed one year, Employer shall pay
to Employee (or to Employee's Designated Beneficiary following Employee's
death during such period) a lump sum payment in cash equal to the remaining
Base Salary due Employees under this Agreement as set forth in Section 4(a)
above; and
(ii) in addition to the foregoing, Employer shall pay to
Employee, or his assignees, a lump sum payment in cash equal to one(1) time
the annual Base Salary of Employee under this Agreement at the time of
termination; and
(iii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such termination, for eighteen
months thereafter; provided, however, that if Employee should enter into
employment with a competitor of Employer, Employee's participation in such
non-cash benefit plans would cease. Thereafter, any and all retirement
pension, 401K and health benefits which have been paid in or have accrued or
vested in Employee's favor pursuant to Section 4 above shall be payable
directly to Employee, or to a roll-over plan of Employee's choosing, as may be
determined by Employee at his discretion; and
(iv) Employer agrees to provide Employee ten (10) days written
notice for any termination arising under this section.
(b) By Employee. In the event that Employee's employment pursuant
to this Agreement shall be terminated by Employee during the lifetime of
Employee and prior to expiration of the term of Employee's employment
hereunder for any reason other than a material breach of this Agreement by
Employer, Employer shall pay to Employee (or to Employee's Designated
Beneficiary following Employee's death during such period) the Base Salary set
forth in Section 4(a) of this Agreement owed to the Employee at the time of
his resignation and any and all accrued benefits that may be obligated for by
the Employer. Employer shall provide to Employee (but not after Employee's
death during such period) all of the benefits provided for in Section 4 of
this Agreement owed to Employee at the time of his resignation. Any
termination of Employee's employment pursuant to this Agreement by Employee as
a result or arising out of a material breach of any of Employer's obligations
under this Agreement shall be treated for all purposes as a termination by
Employer of Employee's employment pursuant to this Agreement.
(c) Non-Compete Agreement. Upon termination of this Agreement by
the Employee or by the Employer for cause, Employee agrees not to compete with
the Employer pursuant to the terms and conditions of that certain Non-Compete
Agreement attached hereto and incorporated herein as Exhibit "A".
3
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<PAGE>
8. Employee's Rights Under a Change in Control.
(a) In order to protect Employee against the possible consequences
of the acquisition of control of Employer, Employer agrees that if (1) control
of Employer is acquired by another entity and(2) Employee is terminated from
employment with the Employer, or the combined entity for whatever reasons
(other than discharge for gross negligence, intentional misconduct or ad
faith, death of total and permanent disability)within six months after the
acquisition of control;
(i) Employee shall be entitled to receive within five (5)
business days of Employee leaving, a lump sum payment in cash in the amount of
one (1) time the annual Base Salary of Employee under this Agreement at the
time of Employee's leaving, termination or departure, together with a lump sum
payment in cash equal to the remaining Base Salary due Employee under Section
4(a) of this Agreement;
(ii) to the extent Employee is eligible, he shall continue to
be covered by all non-cash benefit plans of Employer except for the retirement
plans or retirement programs in which Employee participates or any successor
plans or programs in effect on the date of such acquisition of control, for
twenty-four (24) months thereafter; provided, however, that if Employee should
enter into employment with a competitor of Employer, Employee's participation
in such non-cash benefit plans would cease.
(iii) All benefits paid under this Section shall be considered
severance pay in consideration for past services rendered, and pay in
consideration of his continued service from the date of this Agreement and his
entitlement thereto shall not be governed by any duty to mitigate his damages
by seeking further employment nor offset by any compensation which he may
receive from future employment.
(iv) As used herein the term control shall mean (a) the
ownership (whether directly, indirectly, beneficially or of record) of shares
in excess of 30% of the outstanding shares of Common Stock of the Employer by
a person or group of persons (including, without limitation, a corporation,
trust, partnership, joint venture, individual or other entity), or
9. Rights and Liabilities Upon Termination. Upon the termination of
Employee's employment under this Agreement, no further rights, obligations or
liabilities shall accrue thereafter in favor of or against any party to this
Agreement, except Employee's right to demand and Employer's respective
obliga6ions to pay full compensation and provide full benefits due Employee,
his heirs or assigns.
10. Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof and supersedes
any and all prior and contemporaneous negotiations and agreements, whether
oral or written relating to the subject matter hereof. This Agreement may be
amended only by a written instrument executed by both parties.
11. Benefits: Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. Employee's Designated Beneficiary is
an intentional third party beneficiary of this Agreement and shall have the
right to bring legal action to enforce all rights of such party provided for
in his Agreement.
4
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12. Assignment. Neither party shall assign this Agreement or any of its
rights, obligations, benefits or burdens under this Agreement without the
written consent of the other party.
13. Governing Law. This Agreement shall be governed by the local laws
of the State of Florida, without regard to that State's rules regarding choice
of law.
14. Venue. The parties to this Agreement hereby agree that the exclusive
venue for all actions arising from or related to this Agreement shall lie in
Palm Beach County, Florida, and waive any claim or defense that they may have
that such venue is an inconvenient forum.
15. Attorney's Fees and Costs. The prevailing party in any suit, action
or proceeding brought to enforce any term of this Agreement shall be entitled
to recover from the non-prevailing party reasonable attorneys' fees and costs,
including appellate attorneys' fees and costs.
16. Severability of Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
seeable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions f this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid, and enforceable.
17. Waiver. The waiver by either party hereto of the other party's
prompt and complete performance or breach or violation of any provision of
this Agreement shall not operate nor be construed as a waiver of any
subsequent breach or violation, and the failure by either party hereto to
exercise any right or remedy that he or it may possess shall not operate nor
be construed as the waiver of such right or remedy by such party or as a bar
to the exercise of such right and remedy by such party upon the occurrence of
any subsequent breach or violation.
18. Notices. All notices, requests and demands required or permitted to
be given hereunder shall be in writing and shall be deemed properly given
immediately upon obtaining written acknowledgment or personal delivery, or
five (95) days following dispatch by certified or registered prepaid United
States mail, return receipt requested, or on the next business day following
dispatch by a reputable and generally recognized overnight courier's next
business day delivery service, to the following addresses (which may be
changed by written notice given to the other party):
If to Employer:
Simplex Medical Systems, Inc
376 Ansin Boulevard
Hallandale, FL 33009
If to Employee:
Henry Schur
5
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19. Gender and Number. Wherever the context so shall require, all words
herein in the male gender shall be deemed to include the female or neuter
gender, all singular words shall include the plural and all plural words shall
include the singular.
20. Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of any or all of the provisions of this Agreement.
21. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and date first above written.
EMPLOYER
SIMPLEX MEDICAL SYSTEMS, INC.
/s/ Joel Marcus
Joel Marcus
Compensation Committee
/s/ Kenneth H. Robertson
Kenneth H. Robertson
Compensation Committee
EMPLOYEE
/s/ Henry Schur
Henry Schur
6
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT ("AGREEMENT"), made and entered into as of
this 15th day of May, 1998, by and among each of the persons set forth on the
signature page hereto (each a "STOCKHOLDER" and collectively the
"STOCKHOLDERS") and Simplex Medical Systems. Inc., a Colorado corporation (the
"CORPORATION").
R E C I T A L S
A. The Stockholders own approximately __% of the issued and outstanding
common stock, $.0001 par value, of the Corporation (the "COMMON STOCK"); and
B. The Stockholders desire to provide for, among other things, the
manner in which they will vote their shares of Common Stock, the approval of
certain significant operating decisions, and for the imposition of certain
restrictions upon the disposition of shares of Common Stock held by the
Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and provisions
herein set forth, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
CORPORATE STRUCTURE AND OPERATION
1.1 BOARD OF DIRECTORS.
(a) BOARD SIZE. The Board of Directors of the Corporation shall at
all times consist of seven (7) directors, unless otherwise agreed to in
writing by Software and R&P.
(b) ELECTION OF DIRECTORS. At all meetings (and written actions in
lieu of meetings) of stockholders of the Corporation at which directors are to
be elected, each Stockholder shall vote all of such Stockholder's shares of
Common Stock to elect as directors of the Corporation the persons nominated in
accordance with the following provisions:
(i) Software & Healthcare Technology Fund, L.L.C., an
Illinois limited liability company ("SOFTWARE") and Robertson & Partners,
L.L.C., an Illinois limited liability company ("R&P") shall have the right to
nominate two persons (each, a "SOFTWARE DIRECTOR"), who initially shall be
Kenneth Robertson and Gerald Wochna.
(ii) Automated Health Technologies, Inc., a Florida
corporation ("AHT") shall have the right to nominate one person (an "AHT
DIRECTOR") who initially shall be Colin Jones.
(c) SELECTION OF NOMINEES. AHT and R&P shall notify the Corporation
of its nominees not less than forty-five (45) days prior to the Corporation's
annual meeting, and not less than forty-five (45) days prior to any special
meeting at which directors are to be elected. The Corporation agrees to
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<PAGE>
include the AHT nominee and the Software nominee in management's slate of
nominees to be elected to the Board of Directors and to recommend to the
stockholders of the Corporation the election of such persons.
(d) REMOVAL. Each Stockholder agrees to vote such Stockholder's
shares of Common Stock to remove a Software Director or a AHT Director upon
request at any time by Software or AHT respectively, provided, that Software
or AHT, as the case may be, shall simultaneously designate a replacement to
fill any vacancy so created.
(e) VACANCIES. Each Stockholder agrees to vote such Stockholder's
shares of Common Stock to fill any vacancy on the Board of Directors caused by
the death, disability, resignation or removal of any Software Director with a
nominee selected by Software and with respect to any AHT Director, with a
nominee selected by AHT.
1.2 MANAGEMENT PROVISIONS. Without limiting the actions that may be
required, by applicable law or otherwise, to be approved by the Board of
Directors, the parties expressly agree that, unless approved by the Software
Directors, the Corporation may not take or agree to take, and no Stockholder
shall cause the Corporation to take or agree to take, any of the following
actions:
(i) wind-up, liquidate, dissolve or reorganize the
Corporation or adopt a plan or proposal contemplating any of the foregoing;
(ii) redeem shares of the Corporation's capital stock; or
(iii) merge, consolidate or combine the Corporation with any person or sell
substantially all of its assets.
1.3 COMMITTEES. The Board of Directors may establish and at all times
maintain any committee that it may deem is in the Corporation's best interest;
provided, that at least one-third (1/3) of the members of any such committee
are Software Directors. The Board of Directors shall establish a Compensation
Committee consisting of three independent directors, who initially shall be
Kenneth Robertson, Joel Marcus and a third person chosen by the Board of
Directors. The Compensation Committee shall have the authority to set and
approve the compensation arrangement for the executive officers of the
Corporation.
1.4 AGREEMENT TO VOTE SHARES. Each Stockholder shall vote all of his
shares of Common Stock (or such other securities of the Corporation which
entitle such Stockholder to vote on such matters, including, but not limited
to, shares of any other class of stock of the Corporation entitling them to
vote on any matter, or otherwise obtain proxies or other rights to vote
capital stock of the Corporation), execute and deliver such further documents,
take such further action and cause its designees on the Board of Directors to
vote in such a manner as may be necessary or desirable to carry out the
purposes and intent of this Agreement, including, without limitation, any
amendments to the Articles of Incorporation or By-Laws which are required by
law or prudent business practices in order to make the terms of this Agreement
effective and binding on the Corporation and all of its stockholders or
otherwise to effectuate any of the terms, conditions, provisions or purposes
hereof.
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ARTICLE II
RESTRICTIONS UPON AND OBLIGATIONS WITH
RESPECT TO DISPOSITION OF SHARES
2.1 CERTAIN DEFINITIONS. The term "CORPORATION SECURITIES" as used
herein shall mean any shares of capital stock of the Corporation at any time
owned or subscribed for by any party hereto, and any subscriptions, options,
warrants, calls, commitments, or rights of any kind whatsoever to purchase or
otherwise acquire any shares of capital stock of the Corporation.
2.2 GENERAL RESTRICTION. During the term of this Agreement, each
Stockholder covenants and agrees that such Stockholder will not, directly or
indirectly, voluntarily or involuntarily, sell, assign, transfer, pledge,
hypothecate, encumber or otherwise dispose (each, a "TRANSFER") of the
Corporation Securities at any time owned by such Stockholder, or any interest
therein, except for (i) Transfers to Permitted Transferees (as hereinafter
defined), or (ii) Transfers in accordance with the terms and conditions of the
provisions of this Article II. Any attempted Transfer not in accordance with
the terms and conditions of this Agreement shall be void and of no force or
effect.
2.3 TAG ALONG RIGHTS. If any Stockholder (each, a "Selling Stockholder")
has received a bona fide written offer (an "Offer") to purchase a majority of
its Corporation Securities in a private transaction from any person other than
a Permitted Transferee (the "PROPOSED TRANSFEREE"), and such Selling
Stockholder desires to accept such Offer, each Stockholder shall have the
right to elect to participate in the contemplated transaction. The Selling
Stockholder shall give the Corporation and each Stockholder written notice of
the Offer within three days of receipt of the Offer, and each Stockholder
shall have thirty (30) days from the date of receipt of such notice to notify
the Selling Shareholder of its election to participate. If any Stockholders
elect to participate in the proposed sale, such Stockholder shall have the
right to sell, at the same price and on the same terms as set forth on the
Offer, that number of shares of Corporation Securities equal to the product of
(i) the number of shares of Corporation Securities owned by it, and (ii) the
number obtained by dividing (A) the number of shares of Corporation Securities
to be sold to the Proposed Transferee pursuant to the Offer by (B) the
aggregate number of shares owned by the Selling Stockholder (the "TAG-ALONG
SHARES"). The Tag-Along Shares shall either (i) be purchased by the Proposed
Transferee in addition to the Selling Stockholder's shares, or (ii) be
purchased by the Proposed Transferee in lieu (and reduction) of the number of
shares being sold by the Selling Stockholder. The Selling Stockholder will use
his best efforts to obtain the agreement of the Proposed Transferee to the
participation of the electing Stockholders in such sale. The Selling
Stockholder will be prohibited from transferring any of his shares of
Corporation Securities to the Proposed Transferee if the Proposed Transferee
declines to allow the participation of the other Stockholders.
2.4 RESTRICTIVE LEGEND ON SECURITIES. Each stock certificate or
instrument representing any Corporation Securities shall be endorsed with the
following legend:
"The transfer and voting of the shares represented by
this Certificate is restricted under the terms of a
Stockholders' Agreement dated May 15, 1998 by and
among the Corporation and certain of its Stockholders,
a copy of which is available in the office of the
Corporation."
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2.5 PERMITTED TRANSFERS.
(a) Notwithstanding anything contained in Section 2.2 to the
contrary, a Stockholder may transfer any or all of his Corporation Securities
to a Permitted Transferee, as defined below, subject to the terms and
conditions contained in this Section 2.5.
(b) A "PERMITTED TRANSFEREE" of a Stockholder is hereby defined as
and construed to mean any one or more of the following:
(i) an executor(s), administrator(s) or conservator(s) of the
Stockholder;
(ii) a beneficiary of a deceased Stockholder's will or trust;
(iii) any other Stockholder;
(iv) a trustee or trustees of a trust or a beneficiary or
beneficiaries of a trust created by a Stockholder, but only if (A) the
beneficiary or beneficiaries of such trust are one or more of a group
consisting of the Stockholder, the spouse of the Stockholder and the
descendants and/or the adopted children of the Stockholder or the
Stockholder's parents, and (B) the trustee or other person exercising dominion
or control over such trust is a Stockholder or former Stockholder; and
(v) a Transferee of a Permitted Transferee if the transfer
would have been permissible under the provisions hereof if made by the
Stockholder who originally transferred the Corporation Securities to the
Permitted Transferee.
(c) All Permitted Transferees shall execute an appropriate
counterpart to this Agreement pursuant to which the Permitted Transferee
agrees to be bound by this Agreement. Until a Permitted Transferee shall
execute such a counterpart to this Agreement, the transfer and conveyance of
the Corporation Securities to such Permitted Transferee shall be void and of
no effect and he or she shall not be deemed a Stockholder hereunder and shall
have none of the rights and benefits of a Stockholder hereunder.
2.6 PERMITTED SALES. Notwithstanding anything contained in Section 2.2
to the contrary, a Stockholder may Transfer during each calendar quarter
during the term hereof up to that number of his, her or its Corporation
Securities permitted under the quarterly volume limitations of Rule 144 of the
Securities Act of 1933, as amended, regardless of whether Rule 144 is
applicable to such Corporation Securities being transferred.
2.7 REQUIREMENTS FOR TRANSFER. No Corporation Securities shall be
transferred upon the books of the Corporation, nor shall any sale or transfer
or any other disposition thereof be effective, unless and until (a) all of the
terms and conditions of this Agreement and applicable law have been first
complied with and, with respect to compliance with applicable law, the
Corporation has been provided with an opinion of counsel in form and substance
satisfactory to the Corporation's counsel, and (b) the transferees shall have
executed an agreement in form and substance satisfactory to counsel for the
Corporation to assume and become subject to all of the rights and obligations
hereunder of the party whose Corporation Securities it has acquired,
including, without limitation, the obligation to make payment for any unpaid
stock subscriptions and the obligations and restrictions under Article II
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hereof with respect to disposition of the Corporation Securities with the same
full force and effect as if originally a signatory hereto. This Section 2.7
shall not be applicable to transfers permitted under Section 2.6.
2.8 RIGHTS AND OBLIGATIONS OF TRANSFEROR. Following disposition of all
of its Corporation Securities in compliance with this Agreement, a party
hereto shall have no further rights or obligations hereunder.
2.9 PREEMPTIVE RIGHTS. The Corporation shall not authorize in one
transaction or a series of related transactions, the sale or other issuance of
any Corporation Securities without first offering to each Stockholder (who
are, as defined in the first paragraph of this Agreement, all persons or
entities who sign this Agreement), the right to subscribe for and purchase
his, her or its pro rata portion of such Corporation Securities for the same
purchase price and upon the same terms as the Corporation shall desire to
issue and sell such Corporation Securities; provided, however, that preemptive
rights hereunder shall not apply to Corporation Securities issued to any
director, officer or employee of the Corporation in connection with the
compensation of such individual pursuant to an established employee benefit or
other compensation plan, or in connection with the issuance of Corporation
Securities for services or assets (other than cash or notes). To the extent
that any Stockholder elects not to acquire his, her or its portion of such
Corporation Securities pursuant to the foregoing sentence, the Corporation
shall have the right to issue and sell such Corporation Securities to any
person or entity (including another Stockholder); provided, however, that (i)
the terms and conditions of the issuance and sale of such Corporation
Securities shall be substantially similar to those initially offered to the
Stockholders pursuant to the foregoing sentence and (ii) the per share
purchase price of such Corporation Securities shall not be less than the per
share purchase price initially offered to the Stockholders. The offer to each
Stockholder under this Section 2.8 shall be effected by delivery of written
notice thereof by the Corporation to each of the Stockholders and such offer
shall remain open for twenty (20) days after delivery of such notice. Notice
of any Stockholder's intention to accept the offer made pursuant to this
Section 2.8 shall be made in writing to the Corporation accepting such offer
prior to the end of the twenty (20) day period of such offer. Failure of any
Stockholder to timely accept such offer shall be deemed to be a rejection of
such offer. No offer needs to be made to any Stockholder if such offer would
result in a violation of any local, state or federal law or regulation.
2.10 PIGGY-BACK REGISTRATION RIGHTS. If the Corporation proposes to file
a registration statement effecting an underwritten public offering of any of
Corporation's capital stock under the Securities Act of 1933, as amended (the
"Act") on its behalf or any of its stockholders, then the Corporation shall in
each case give written notice of such proposed filing to Software and R&P at
least twenty (20) days before the anticipated filing date, and subject to
underwriter approval, such notice shall offer Software and R&P the opportunity
to register such number of Corporation Securities as they may request. The
Corporation Securities to be included in such offering (the "INCLUDED SHARES")
shall be offered on the same terms and conditions as any similar securities of
the Corporation included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters of such offering delivers an opinion to
Software and R&P that the total number of Included Shares which they or the
Corporation and any other persons intend to be included in such offering is so
large as to materially and adversely affect the success of such offering
(including, without limitation, the price at which such Corporation Securities
may be sold) then: (a) the Corporation may reduce the total amount of
Corporation Securities to be included in such offering to the amount
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recommended by such managing underwriter (the "RECOMMENDED AMOUNT"); and (b)
the amount of Corporation Securities to be offered for the account of each
person selling shares in the offering shall be reduced pro rata on the basis
of the amount of Corporation Securities requested to be included in such
offering with respect to such person, to the extent necessary to reduce the
total amount of Corporation Securities to be included in such offering to the
Recommended Amount.
ARTICLE III
GENERAL PROVISIONS
3.1 TERM OF THIS AGREEMENT. The provisions set forth in Sections 1.2,
1.3, and 1.4 and Sections 2.2 through 2.9 shall terminate on the later of (i)
May 15, 2000 or (ii) on the ninetieth (9Oth) consecutive day that the bid
price for a share of Common Stock (as reported on all national securities
exchanges reported through the automated quotation system of a registered
securities association) is greater than $4.00. The balance of this Agreement
shall terminate on May 15, 2005. No termination of any part of this Agreement,
by lapse of time or otherwise shall affect any rights or obligations created
by exercise of any option to purchase or sell the Corporation Securities in
accordance with any of the provisions of Article II hereof.
3.2 Remedies. Each of the parties to this Agreement acknowledges that
(a) the rights of the Stockholders concerning the restrictions on the transfer
of the Corporation Securities, and in the management and affairs of the
Corporation are unique, and (b) any failure of any Stockholder to perform any
of such party's obligations under this Agreement will cause irreparable harm
for which any remedies at law would be inadequate. Accordingly, each of the
parties agrees that, in the event of any actual or threatened or attempted
failure of any party to perform any of its obligations hereunder, each of the
other parties shall, in addition to all other remedies, be entitled to a
decree for specific performance of the provisions of this Agreement and to
temporary and permanent injunctions restraining such failure or commanding
performance of such obligations, without being required to show actual damage
or to furnish any bond or other security. In addition to any remedies a
Shareholder may have hereunder, if any Selling Stockholder breaches the
provisions of Section 2.3, such Selling Shareholder shall have the obligation
to purchase from the electing Stockholders that number of Tag-Along Shares
such Stockholders desire to sell.
3.3 NOTICES. All notices required or permitted hereunder shall be in
writing, signed by the party giving notice or an officer thereof, and shall be
deemed to have been given when delivered by personal delivery, by Federal
Express or similar courier service, by facsimile or three (3) days after
deposit in the United States mail, registered or certified, with postage
prepaid, addressed as follows:
(A) If to Software and R&P at:
Software & Healthcare Technology Fund, L.L.C.
1333 North Wabash
Chicago, Illinois 60611
Attn: Kenneth Robertson
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with a copy to:
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SHEFSKY & FROELICH LTD.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attn: Mitchell D. Goldsmith
Fax: (312) 527-4000
(B) If to a Stockholder, at his address as reflected on the
Corporation records.
(C) If to the Corporation, at:
430 Ansin Blvd. Suite G,
Hallandale, FL 33009
Attn: President
Fax: (954) 455-9008
or such other address as any party may designate for himself or itself by
notice given to the other parties from time to time in accordance with the
provisions hereof.
3.4 Legal Fees. In the event that any action is filed to enforce any of
the terms, covenants or provisions of this Agreement, the prevailing party in
such action shall be entitled to payment from the other party of all costs and
expenses, including reasonable attorney fees, court costs and ancillary
expenses incurred by such prevailing party in connection with such action.
3.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, successors and assigns.
3.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the United States and the
State of Illinois, notwithstanding any choice of law conflicts.
3.7 FURTHER ASSURANCES. Each party agrees to cooperate with the others,
and to execute and deliver, or cause to be executed and delivered, all such
other instruments, and to take all such other actions as it may be reasonably
required to take, from time to time, in order to effect the provisions and
purposes hereof.
3.8 COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall constitute an original, no other counterpart
needing to be produced and all of which, when taken together, shall constitute
but one and the same instrument.
3.9 HEADINGS. The headings of Articles and subdivisions herein are
merely for convenience of reference and shall not affect the interpretation of
any of the provisions hereof.
3.10 ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the parties with respect to the subject matter of this Agreement. Any
modification hereof may be made only by an instrument in writing signed by all
of the parties hereto.
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3.11 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be construed and interpreted in such a manner as to be effective and
valid under applicable law. If any provision of this Agreement or the
application thereof to any party or circumstance shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition without invalidating the remainder of such
provision or any other provision of this Agreement or the application of such
provision to other parties or circumstances.
3.12 WAIVERS. No delay on the part of any party in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any party or any remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
3.13 GENDER REFERENCES. Whenever appropriate, the singular form of a word
shall be interpreted in the plural and vice versa. All words and phrases shall
be construed as masculine, feminine or neuter gender, according to the
context.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
SIMPLEX MEDICAL SYSTEMS, INC.,
a Colorado corporation
By: /s/ Colin Jones
-----------------------------------
Colin Jones, President
By: /s/Dr. Nicholas Levandoski
-----------------------------------
Dr. Nicholas Levandoski,
By: /s/ Henry B. Schur
-----------------------------------
Henry B. Schur
SOFTWARE & HEALTHCARE
TECHNOLOGY FUND, L.L.C.,
an Illinois limited liability company
By: Robertson & Partners, L.L.C., its manager
By: /s/ Kenneth H. Robertson
-------------------------------
ROBERTSON & PARTNERS, L.L.C.,
an Illinois limited liability company
By: /s/ Kenneth H. Robertson
-----------------------------------
AUTOMATED HEALTH TECHNOLOGIES, INC.
By: /s/ Robert D. Lohman
-----------------------------------
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Jennifer J Schur Trust
By: /s/ Debra L. Ross
---------------------------------------
/s/ Joel Marcus
---------------------------------------
Joel Marcus
/s/ Debra L. Ross
---------------------------------------
Debra L. Ross
/s/ Debra L. Ross
---------------------------------------
Debra L. Ross as custodian for
Jennifer J. Schur
/s/ Roger Taft
---------------------------------------
Roger Taft
/s/ Stuart Taft
---------------------------------------
Stuart Taft
Joel Marcus Irrevocable Trust
By: /s/ Joel Marcus
---------------------------------------
Name: Joel Marcus
---------------------------------------
Its: Trustee
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EXHIBIT B
The following are the executive officers and directors of Automated
Health Technologies, Inc., and their titles. The business address of each
person is 1025 NW 17th Avenue, Delray Beach, Florida 33445.
NAME TITLE
---- -----
Robert Lohman President and Director
Gerald Wochna Director
Colin Jones Director
Sherman Jones Director
Edward Tulley Director
BUSINESS LEASE
THIS AGREEMENT, entered into this 11th day of February 1998 between
Wedgewood Properties Fl, Inc. hereinafter called the lessor, party of the
first part, and Simplex Medical Systems, Inc. of the County of Broward and
State of Florida hereinafter called the lessee or tenant, party of the second
part:
WITNESSETH, That the said lessor does this day lease unto said lessee,
and said lessee does hereby hire and take as tenant under said lessor Bay B,
C, D or Space 372-374-376 Ansin Blvd., situate in Hallandale, Florida, to be
used and occupied by the lessee as Office and Warehouse and for no other
purposes or uses whatsoever, for the term of Five (5) Years, beginning the 1st
day of April, 1998, and ending the 31st day of March, 2003, at and for the
agreed annual rental of $48,000.00 Plus Sales Tax Dollars, payable as follows:
$4000.00 Plus Sales Tax Per Month.
Landlord agrees to complete all spaces shown on the plan, which has
been delivered to Tenant and agrees to air condition the balance of the space
except for an area of approximately 500 sq.ft. in the north west corner of Bay
D and approximately 500 sq.ft. in the rear of bay B.
At the beginning of this Lease, all other Leases between the parties
and/or their subsidiaries are hereby cancelled. All previously paid Last Month
rent and Security shall be applied toward this Lease.
Tenant shall also have an option to renew this Lease for an
additional period of five (5) years. Notice to exercise said option shall be
given to the Landlord by Certified Mail at least 90 days prior to the
expiration of the first term of this Lease.
Tenant agrees to pay 2/3 of the cost of the water and sewer bill for
the building since it occupies 2/3 of the space.
Upon signing of this Lease, Tenant agrees to pay first month's rent
of $2756.00, Security of $4240.00 and Last Month's Rent of $5153.75 (per
attached) for a total of $13,891.44. Tenant has $5194.00 from previous Lease
which will be transferred to this Lease leaving a balance due of $8697.44.
All payments are to be made to the lessor on the first day of each and every
month, but no later than the fifth (5th) of the month, in advance without
demand at the office of Wedgewood Properties FL, Inc. 1049 N.W. 3rd Street,
Hallandale FL 33009 or at such other place and to such other person, as the
lessor may from time to time designate in writing.
The following express stipulations and conditions are made a part of this
lease and are hereby assented to by the lessee:
FIRST: The lessee shall not assign this lease, nor sub-let the premises,
or any part thereof nor use the same, or any part thereof, nor permit the
same, or any part thereof, to be used for any other purpose than as above
stipulated, nor make any alterations therein, and all additions thereto,
without the written consent of the lessor, and all additions, fixtures or
improvements which may be made by leesee, except movable office furniture,
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shall become the property of the lessor and remain upon the premises as a part
thereof, and be surrendered with the premises at the termination of this
lease.
SECOND: All personal property placed or moved in the premises above
described shall be at the risk of the lessee or owner thereof, and lessor
shall not be liable for any damage to said personal property, or to the lessee
arising from the bursting or leaking of water pipes, or from any act of
negligence of any co-tenant or occupants of the building or of any other
person whomsoever.
THIRD: That the tenant shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and City Government and of any and all their Departments and
Bureaus applicable to said premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the Southeastern Underwriters Association for
the prevention of fires, at its own cost and expense.
FOURTH: In the event the premises shall be destroyed or so damaged or
injured by fire or other casualty during the life of this agreement, whereby
the same shall be rendered untenantable, then the lessor shall have the right
to render said premises tenantable by repairs within ninety days therefrom. If
said premises are not rendered tenantable within said time, it shall be
optional with either party hereto to cancel this lease, and in the event of
such cancellation the rent shall be paid only to the date of such fire or
casualty. The cancellation herein mentioned shall be evidenced in writing.
FIFTH: The prompt payment of the rent for said premises upon the dates
named, and the faithful observance of the rules and regulations printed upon
this lease, and which are hereby made a part of this covenant, and of such
other and further rules or regulations as may be hereafter made by the lessor,
are the conditions upon which the lease is made and accepted and any failure
on the part of the lessee to comply with the terms of said lease, or any of
said rules and regulations now in existence, or which may be hereafter
prescribed by the lessor, shall at the option of the lessor, work a forfeiture
of this contract, and all of the rights of the lessee hereunder, and thereupon
the lessor, his agents or attorneys, shall have the right to enter said
premises, and remove all persons therefrom forcibly or otherwise, and the
lessee thereby expressly waives any and all notice required by law to
terminate tenancy and also waives any and all legal proceedings to recover
possession of said premises, and expressly agrees that in the event of a
violation of any of the terms of this lease or of said rules and regulations,
now in existence, or which may hereafter be made, said lessor, his agent or
attorneys, may immediately re-enter said premises and dispossess lessee
without legal notice or the institution of any legal proceedings whatsoever.
5.1 If the tenant is in default as defined in Article Fifth and if
the same is not cured by the Tenant immediately upon the notice, if required,
from Landlord as hereinabove provided, then the Landlord, in addition to all
rights and remedies granted under the laws of the State of Florida and this
lease, shall have any or all of the following additional rights:
5.1.1 To re-enter and remove all persons and property from the
Demised Premises, and any such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant, all
without service of notice or resort to legal process and without being deemed
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guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby.
5.1.2 Terminate the Lease and relet the Premises for account of the
Landlord or, within the sole discretion of Landlord, the Demised Premises may
be relet for the account of the Tenant. Landlord may relet the whole or any
part of the Premises for the remainder of such unexpired period of this Lease
or longer for any rental obtainable, giving such concessions of rent, and
making such usual or special repairs, alterations and doing such painting for
any new Tenant as it may in its sole discretion deem advisable. Tenant shall
remain liable for the rent and additional rent, if any, for the balance of the
Lease whether the Premises be relet or not and for all expenses of the
Landlord in re-entering, repossessing, altering, repairing, and re-renting the
Premises. Any suit brought by Landlord to enforce the collection of any
deficiency shall not prejudice Landlord's right to enforce the collection of
any further deficiency for a subsequent period.
5.1.3 If any part of the rent shall remain due and unpaid after the
same shall become due and payable, Landlord shall have the option of declaring
the balance of the entire rent for the entire rental term of this Lease to be
immediately due and payable, and Landlord may then proceed immediately to
collect all of the unpaid rent called for by this Lease by distress or
otherwise, or terminate this Lease should Tenant fail to pay the balance of
the entire rent for the entire rental term. For purposes of this Paragraph,
said balance means the entire rent for the balance of the rental term plus,
for each remaining year of the term of this Lease, and pro rata for any part
of a year, the yearly average of the Adjusted Rental to be paid by the Tenant
for the term of this Lease to the end of the Lease year next preceding the
date of default in the payment of rent by Tenant.
5.2 Tenant agrees to pay all costs and expenses of collection and
reasonable attorney's fees on any part of said rental that may be collected by
an attorney, suit, distress, or foreclosure; and further, in the event that
Tenant fails to promptly and fully perform and comply with each and every
condition and covenant hereunder and the matter is turned over to Landlord's
attorney, Tenant shall pay Landlord a reasonable attorney's fee plus costs,
where necessary, whether suit is instituted or not.
5.3 Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the Demised Premises, by reason of violation by Tenant of any of
the covenants or conditions of this Lease, or otherwise.
SIXTH: If the lessee shall abandon or vacate said premises before the end
of the term of this lease, or shall suffer the rent to be in arrears, the
lessor may, at his option, forthwith cancel this lease or he may enter said
premises as the agent of the lessee, by force or otherwise, without being
liable in any way therefor, and relet the premises with or without any
furniture that may be therein, as the agent of the lessee, at such price and
upon such terms and for such duration of time as the lessor may determine, and
receive the rent therefor, applying the same to the payment of the rent due by
these presents, and if the full rental herein provided shall not be realized
by lessor over and above the expenses to lessor in such re-letting, the said
lessee shall pay any deficiency, and if more than the full rental is realized
lessor will pay over to said lessee the excess of demand.
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SEVENTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other illumination, and for all water used on said premises,
and should said charges for rent, light or water herein provided for at any
time remain due and unpaid for the space of five days after the same shall
have become due, the lessor may at its option consider the said lessee tenant
at sufferance and immediately re-enter upon said premises and the entire rent
for the rental period then next ensuing shall at once be due and payable and
may forthwith be collected by distress or otherwise. All charges for water,
sewer and electricity shall be paid as additional rent.
EIGHTH: The said Lessee hereby pledges and assigns to the lessor all the
furniture, fixtures, goods and chattels of said lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved, and the lessee agrees that the said lien may be enforced by distress
foreclosure or otherwise at the election of the said lessor and does hereby
agree to pay attorney's fees of ten percent of the amount so collected or
found to be due, together with all costs and charges therefore incurred or
paid by the lessor.
NINTH: The lessor, or any of his agents, shall have the right to enter
said premises during all reasonable hours, to examine the same to make such
repairs, additions or alterations as my be deemed necessary for the safety,
comfort, or preservation thereof, or of said building, or to exhibit said
premises, and to put or keep upon the doors or windows thereof a notice "FOR
RENT" at any time within thirty (30) days before the expiration of this lease.
The right of entry shall likewise exist for the purpose of removing placards,
signs, fixtures, alterations, or additions, which do not conform to this
agreement, or to the rules and regulations of the building.
TENTH: Lessee hereby accepts the premises in the condition they are in at
the beginning of this lease and agrees to maintain said premises in the same
condition, order and repair as they are at the commencement of said term,
excepting only reasonable wear and tear arising from the use thereof under
this agreement, and to make good to said lessor immediately upon demand, any
damage to water apparatus, or electric lights or any fixture, appliances or
appurtenances of said premises, or of the building, caused by any act or
neglect of lessee, or of any person or persons in the employ or under the
control of the lessee.
ELEVENTH: It is expressly agreed and understood by and between the
parties to this agreement, that the landlord shall not be liable for any
damage or injury by water, which may be sustained by the said tenant or other
person or for any other damage or injury resulting from the carelessness,
negligence, or improper conduct on the part of any other tenant or agents, or
employees, or by reason of the breakage, leakage, or obstruction of the water,
sewer or soil pipes, or other leakage in or about the said building.
TWELFTH: If the lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the lessee, before the end of said
term the lessor is hereby irrevocably authorized at its option, to forthwith
cancel this lease, as for a default. Lessor may elect to accept rent from such
receiver, trustee, or other judicial officer during the term of their
occupancy in their fiduciary capacity without effecting lessor's rights as
contained in this contract, but no receiver, trustee or other judicial officer
shall ever have any right, title or interest in or to the above described
property by virtue of this contract.
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THIRTEENTH: This contract shall bind the lessor and its assigns or
successors, and the heirs, assigns, administrators, legal representatives,
executors or successors as the case may be, of the lessee.
FOURTEENTH: It is understood and agreed between the parties hereto that
time is of the essence of this contract and this applies to all terms and
conditions contained herein
FIFTEENTH: It is understood and agreed between the parties hereto that
written notice mailed or delivered to the premises leased hereunder shall
constitute sufficient notice to the lessee and written notice mailed or
delivered to the office of the lessor shall constitute sufficient notice to
the Lessor, to comply with the terms of this contract.
SIXTEENTH: The rights of the lessor under the foregoing shall be
cumulative, and failure on the part of the lessor to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights.
SEVENTEENTH: It is further understood and agreed between the parties
hereto that any charges against the lessor for services or for work done on
the premises by order of the lessee or otherwise accruing under this contract
shall be considered as rent due and shall be included in any lien for rent due
and unpaid.
EIGHTEENTH: It is hereby understood and agreed that any signs or awnings
to be used in connection with the premises leased hereunder shall be first
submitted to the lessor for written approval before installation of same.
Permits from the municipality must also be obtained.
NINETEENTH: At the time of the execution of this Lease, the Lessee shall
deposit the sum of $4240.00 as a security deposit and $5411.44 as last month's
rent, which deposit shall be held by Lessor as security for the faithful
performance by the Lessee of all of the terms, conditions, covenants, promise
and agreements of this Lease. At the end of the term of this Lease, assuming
that the Lessee has faithfully performed all of said Lease as contained in
said Lease and as provided for by applicable law, the Lessee shall be entitled
to the return of the security deposit or any remaining and outstanding
balance, no later than fifteen (15) days after the expiration of the Lease
term or within such longer period of time as may be required for the Lessee to
comply with the terms and conditions of this Lease relative to the return of
the leased premises as provided in Paragraph 12 herein above. The Lessor shall
not be required to pay any interest to Lessee upon said security deposit.
TWENTIETH: The Lessee shall not engage in any activities which cause
damage to the premises or otherwise utilize toxic substances or dangerous
chemicals which might be harmful either to the premises or to licenses or
invites upon said premises.
TWENTY-FIRST: The Lessee shall keep the exterior of the premises
including the parking area located in front of the leased premises, broom
cleaned and free of trash, debris, rubbish or merchandise except to the extent
that it is necessary to receive deliveries of merchandise, in which event the
Lessee shall make provisions for the storage of such merchandise within a
reasonable period of time. There shall be no outside storage except as
provided herein.
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TWENTY-SECOND: In the event that the Lessee's business activities result
in any damage or impairment to the drainage system of the leased premises or
the parking area immediately adjacent thereto, then it shall be the
responsibility of the Lessee to restore and repair such damage promptly and in
a satisfactory manner.
TWENTY-THIRD: Tenant shall acquire and pay for a liability insurance
policy covering Tenant to occupancy and use of their demised premises herein.
Same shall reflect liability coverage of not less than $300,000.00 combined
single limit. Tenant shall furnish Landlord with an endorsement showing the
Landlord as additional named insured on said insurance coverage no later than
seven days of the execution of this Lease.
TWENTY-FOURTH: All payments required under this Lease must be paid by
check drawn on a Florida Bank.
TWENTY-FIFTH: Rent is due on the FIRST (1st) of each and every month. All
payments not received on or before the 5th of the month will be subject to a
10% bookkeeping charge. In the event it becomes necessary for the Landlord to
serve the tenant with a 3-DAY NOTICE, there will be a charge of $50.00 for the
preparation and service of such 3-DAY NOTICE. Such charges shall be billed as
additional rent and shall be due with the next rent payment.
TWENTY-SIXTH: All checks returned by the bank and not paid as shown on
its face will be subject to a 5% penalty as provided for by Florida Law.
TWENTY-SEVENTH: Lessee shall also pay, as additional rent, upon receipt
of the bill therefore, its proportionate share of any increases in real estate
taxes, insurance, and assessments over and above the base year of 1997 against
the buildings in which the demised premises form a part, based upon the total
floor area occupied by Lessee. Tenant will also pay monthly 1/12 of the
increased amount due each year toward the following year's tax bill.
TWENTY-EIGHTH: The rent in this lease shall be increased at the end of
each lease year by 56.
TWENTY-NINTH: No holes may be put in the walls or exterior of this
building, including roof without express written permission of the Landlord.
THIRTIETH: All air conditioning, garage doors, and electric service,
wiring, etc., will be delivered in good working order, and maintained by the
TENANT and returned to the Landlord in the same condition.
THIRTY-FIRST: Tenant will maintain plate glass insurance, if the space
being rented has plate glass.
THIRTY-SECOND: Tenant shall provide adequate pest control for the type of
business being operated.
THIRTY-THIRD: SUBORDINATION, ESTOPPEL AND QUIET ENJOYMENT. This lease is
and shall be subject and subordinate in all respects to any and all mortgages
and other encumbrances now or hereafter places upon the land or building, or
both, of which the demised premises are a part; and the provision hereof shall
be self-operating.
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THIRTY-FOURTH: WAIVER OF JURY TRIAL. Lessor and lessee hereby knowingly,
irrevocably, voluntarily and intentionally waive any right to a trial by jury
in respect of any action, proceeding, defense or counterclaim based on this
lease agreement, or arising out of, under or in connection with this lease
agreement, or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of any party hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this
instrument for the purpose herein expressed, the day and year above written.
Signed, sealed and delivered in the Presence of:
Wedgewood Properties FL, Inc. Seal
/s/ Barbara Rodriguez By: /s/ Mark S. Krohn, President Seal
As to Lessor Lessor
Simplex Medical Systems, Inc. Seal
/s/ Barbara Rodriguez By: /s/ Henry B. Schur Seal
As to Lessee Lessee
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DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement"), is entered into as of the 5th
day of July 1997 by and among Simplex Medical Systems, Inc., a company
incorporated in Colorado, with offices at 430 Ansin Boulevard, Suite G,
Hallandale, Florida 33009, Simplex Medical Systems, Inc., a company
incorporated in Florida, with offices at 430 Ansin Boulevard, Suite G,
Hallandale, Florida 33009 (collectively "Simplex"), and Sybron Dental
Specialties, Inc., a company incorporated in Delaware, with offices at 1717
West Collins Avenue, Orange, California ("SDS").
RECITALS
Simplex is engaged in the development, manufacture and sale of medical
and dental products.
SDS is experienced in the distribution of medical and dental products.
SDS desires to be appointed as Simplex's exclusive distributor worldwide
of the Airbrator product developed by Simplex, and Simplex agrees to appoint
SDS as such distributor.
Simplex and SDS have reached an agreement regarding the terms of a
distributorship and desire to set forth the terms herein.
AGREEMENTS
In consideration of the mutual covenants and promises as set forth
herein, the receipt and sufficiency of which is hereby acknowledged, Simplex
and SDS hereby agree as follows:
1. Definitions.
1.1 "Airbrator(s)" means the Airbrator product developed by Simplex and
which is specifically identified in Appendix A attached hereto and
incorporated herein.
1.2 "New Product" means any product developed, conceived or invented by
Simplex after the date of this Agreement and which, in the reasonable judgment
of SDS, could be used, sold or marketed to or in the dental industry.
1.3 "Territory" means the entire world.
2. Grant of Distributorship.
2.1 Simplex hereby appoints and designates SDS as Simplex's exclusive
distributor of Airbrators in the Territory.
2.2 Within thirty (30) days of the date of this Agreement, SDS shall pay
Simplex a one-time distribution license fee in the amount of Thirty Thousand
Dollars ($30,000).
2.3 Simplex hereby grants SDS the right of first refusal to be appointed
as the exclusive distributor in the Territory for each New Product. Prior to
offering any other party a distributorship for any New Product, Simplex shall
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provide SDS with a written notice of such New Product and information
regarding the New Product, and SDS shall advise Simplex in writing within
sixty (60) days of receipt of such notice whether or not SDS accepts the
appointment as exclusive distributor of such New Product in the Territory. In
the event SDS timely accepts such appointment, SDS shall be the exclusive
distributor of such New Product in the Territory and the terms and conditions
of this Agreement shall apply to the distribution of such New Product; except
that the parties shall negotiate in good faith regarding the price to be paid
by SDS for such New Product and SDS shall have no obligation to pay a
distribution license fee pursuant to Section 2.2 above.
2.4 SDS shall have the right, in its sole discretion, to market, sell
and distribute the Airbrator under any trademark of SDS, in addition to or
instead of under the "Airbrator" trademark.
3. Purchase and Sale of Products.
3.1 SDS shall order Airbrators from Simplex and Simplex shall use
commercially reasonable efforts to supply and make shipment of Airbrators from
stock if available or on a mutually agreed scheduled basis in accordance with
SDS's purchase orders; provided, however that all orders are subject to the
terms and conditions of this Agreement. Any term or condition contained in any
purchase order, request or other form which is in conflict with or
inconsistent with this Agreement shall be null and void and shall have no
force or effect.
3.2 Provided that Simplex satisfies its obligations and commitments set
forth in Sections 5.1 and 5.3 below, commencing on October 1, 1998 and
continuing for a period of one year, and in each subsequent one year period
thereafter, SDS shall purchase from Simplex and Simplex shall sell to SDS at
least three (3) million Airbrators per year. In the event Simplex fails to
satisfy Sections 5.1 and 5.3, the parties agree to negotiate in good faith to
establish a new commencement date for the yearly min mum purchase requirement.
3.3 In the event SDS fails to purchase the yearly minimum number of
Airbrators as set forth in Section 3.2 above, Simplex, as its sole remedy for
SDS's failure, may convert the exclusive appointment pursuant to Section 2.1
to a non-exclusive appointment. The conversion of the exclusive appointment
shall not become effective unless Simplex provides written notice to SDS of
SDS's failure to meet its yearly minimum purchase obligations and SDS fails to
cure such default within sixty (60) days after the date of receipt of such
written notice from Simplex.
4. Obligations of SDS
4.1 SDS shall, at its own expense, use commercially reasonably efforts
to introduce, market and promote the sale of, and obtain orders for,
Airbrators in the Territory. In connection therewith, SDS shall, among other
things, actively seek new customers for the Airbrators in the Territory and
make regular sales calls to such customers
4.2 Provided that Simplex satisfies the obligations and commitments set
forth in Sections 5.1 and 5.3 below, SDS shall introduce the Airbrators to the
dental market by the end of February 1998. In the event Simplex fails to
satisfy Sections 5.1 and 5.3, the parties agree to negotiate in good faith to
establish a new date for introducing Airbrators to the dental market.
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4.3 SDS shall be responsible for all marketing costs, including but not
limited to the costs of catalogs, brochures and samples.
4.4 SDS shall, at its cost, be responsible for providing Simplex with
any photo ready artwork needed for printing packages and labels for
Airbrators. The costs of printing and affixing the labels shall be borne by
Simplex.
5. Obligations of Simplex
5.1 Simplex shall exercise commercially reasonable efforts to commence
the commercial production of the Airbrators at the earliest date practically
possible, but in no event later than December 31, 1997.
5.2 Simples shall within thirty (30) days communicate to SDS any
improvements or developments it makes to the Airbrator.
5.3 Simplex shall, as soon as possible but in no event later than
October 1, 1997, submit for approval from the Food & Drug Administration
("FDA") a 510k submission for hard tissue use for the Airbrator, and shall, at
its cost, provide any further documentation or information which is requested
by the FDA or which may be necessary to obtain or maintain any approval or
certification from the FDA.
5.4 Simplex represents that it has filed an application for letters
patent in the United States which includes one or more claims covering the
Airbrator, and Simplex shall, at its cost, prepare, file and prosecute an
application or applications for letters patent in the United States, Europe
and Japan, and such other countries as mutually agreed upon, all at the
expense of Simplex or at the expense of the party that deems such a filing
necessary in the absence of agreement.
5.5 At the request of SDS, Simplex shall, at its cost, make commercially
reasonable efforts to obtain and maintain any necessary approvals or
registrations in connection with the sale and distribution of Airbrators in
the Territory, including but not limited to the registration of the
"Airbrator" trademark within the United States, Europe and Japan and any other
mutually agreed upon jurisdictions in the Territory. In the absence of
agreement, those efforts shall be at the expense of the party deeming such
approvals or registrations necessary.
5.6 Simplex shall be responsible for the design, development, supply,
production and performance of the Airbrators based on characteristics
developed in conjunction with the FDA or other regulatory agencies.
5.7 Simplex shall, at its cost, be responsible for packaging and
labeling the Airbrators, provided, however, Simplex shall evaluate the
feasibility of allowing SDS to perform the packaging and light assembly of the
Airbrators. In the event SDS performs the packaging and/or light assembly of
Airbrators, Simplex shall determine the direct cost savings realized by
Simplex due to SDS performing such packaging and/or light assembly by
calculating the decrease in direct costs on a per Airbrator basis, and,
Simplex shall promptly provide SDS with such calculations.
6. Term and Termination.
6.1 This Agreement shall become effective as of the first date written
above and will continue in full force and effect until October 1, 2003 (the
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"Initial Term"). After the Initial Term, this Agreement shall automatically
renew for an additional term of five (5) years (the "Renewal Term"). After the
Initial Term and Renewal Term, the Agreement may be renewed only by mutual
written agreement of the parties.
6.2 In the event either party shall be in default of any of the terms,
obligations, conditions or undertakings of this Agreement and fails to cure
such default within sixty (60) days after receiving notice of such default,
the non-defaulting party, at its option, may by written notice to the
defaulting party terminate this Agreement in its entirety. The termination
shall be effective upon the receipt of the termination notice.
6.3 Either party may terminate this Agreement after providing thirty
(30) days written notice to the other party if (i) the other party becomes
insolvent, (ii) a petition in voluntary or involuntary bankruptcy is filed by
or against the other party, or (iii) the other party makes an assignment for
the benefit of creditors.
6.4 Upon termination or expiration of this Agreement, SDS shall
immediately discontinue use of the "Airbrator" trademark.
7. Price and Price Adjustments.
7.1 Simplex shall sell the Airbrators to SDS at the price of two dollars
U.S. (US $2.00) per Airbrator for Airbrators ordered prior to October 1, 1999.
After October 1, 1999, Simplex has the right to increase the price for
Airbrators by up to five percent (5%) once during each twelve (12) month
period to reflect the increase in direct costs of assembly, raw materials,
packaging or labeling of Airbrators. In addition, Simplex shall reduce the
price for Arbitrators from time to time to reflect the decrease in direct
costs of assembly, raw materials, packaging or labeling of Airbrators,
including but not limited to any decrease calculated pursuant to Section 5.7.
7.2 Simplex will provide SDS with at least ninety (90) days written
notice of any price increase. Price increases by Simplex will not apply to
Airbrators ordered and not shipped prior to the effective date of any such
price increase. Simplex will promptly notify SDS of any price decrease, which
shall be effective upon receipt of such notice.
7.3 In the event that the exclusive distributorship appointment is
converted to a non-exclusive distributorship appointment pursuant to Section
3.3 above, Simplex will sell the Airbrators to SDS at the most favorable price
extended to any other party.
8. Payment.
Simplex will invoice SDS for all Airbrators supplied under this Agreement
and SDS will pay all such invoices within thirty (30) days from the date of
shipment.
9. Shipment.
SDS shall pay all costs of shipping. Simplex will ship all accepted
orders for the Airbrators FOB Simplex's facility, at which time Simplex's
obligation to ship the Airbrators shall be fully and completely discharged,
and all ownership, legal title and risk of loss shall be transferred to SDS.
Unless instructed otherwise by SDS, all shipments shall be made by common
carrier.
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10. Right to Use Trademark
SDS acknowledges that Simplex owns or otherwise has a proprietary
interest in the "Airbrator" trademark. Simplex grants SDS the right to use the
"Airbrator" trademark in connection with the marketing, sale and distribution
of Airbrators in the Territory.
11. Warranty.
11.1 Simplex warrants and represents that:
(a) the Airbrators will be fit for the particular purpose for which
they are being distributed by SDS as defined in the submission(s) to the FDA
or other regulatory agencies;
(b) the Airbrators may be shipped, sold and used in a manner not
inconsistent with characteristics developed in conjunction with the FDA or
other regulatory agencies without violation of any law, ordinance, rule or
regulation of the United States;
(c) the Airbrators shall conform to the specifications for the
Airbrators as defined in the submission(s) to the FDA or other regulatory
agencies;
(d) the Airbrators shall be free from defects in materials and
workmanship, and shall be manufactured in accordance with good manufacturing
practices acceptable in the industry in the country of manufacture, and in
compliance with all applicable laws, rules and regulations in the country of
manufacture; and
(e) Simplex is the sole and exclusive owner of all intellectual
property rights and interests in and to the Airbrator, and has not assigned,
conveyed or transferred to any other person or entity any such rights and
interests in the Airbrator, or the right to distribute the Airbrator.
11.2 SDS may return Airbrators which are in breach of Simplex's warranty
set forth in Section 11.1 above. Simplex shall at its cost in a commercially
reasonable manner replace any such Airbrator and reimburse SDS for its
shipping expenses.
11.3 SDS shall retain all alleged defective Airbrators which are covered
by the warranty of Simplex and make them available for inspection by a
representative of Simplex. All defective Airbrators replaced under warranty
shall either be returned to Simplex or disposed of in accordance with the
instructions of Simplex. All commercially reasonable costs related to the
shipment and handling of such Airbrators shall be incurred by Simplex.
12. Insurance and Indemnification.
12.1 Simplex shall indemnify, defend and hold SDS harmless from and
against any and all claims, suits, liability, loss, costs, expenses, damages
(including attorneys' fees and expenses) caused by reason of any Airbrator
(whether or not defective) or any act or omission of Simplex, including but
not limited to, any damage or injury sustained by any person or to property,
any infringement of any patent rights or other rights of third parties, and
any violation of state, federal or local laws or regulations governing the
Airbrators and/or their sale or use in the country of manufacture. Nothing in
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this paragraph is intended to, nor shall it, relieve SDS from liability for
its own negligent act or omission.
12.2 In the event either Simplex or SDS receives notice of a claim or
lawsuit relating to the manufacture, use or sale of any Airbrators sold and
distributed hereunder, such party shall promptly notify the other party in
writing of such claim or lawsuit. Simplex shall defend the action at its own
expense and shall pay and discharge any judgment that may be rendered.
12.3 Both parties hereto shall maintain, each at its expense, products
liability insurance covering claims relating to its manufacture and sale of
the Airbrator. Such insurance shall provide limits of at least one million
dollars ($1,000,000) each occurrence for bodily injury, including death, and
property damage, shall name the other party as a named insured, and shall be
maintained during the Initial Term and all Renewal Terms of this Agreement,
and for five (5) years thereafter. Upon request by either party, the other
party shall provide copies of its certificate of insurance evidencing such
insurance coverage.
12.4 The covenants contained in this Section shall survive the
termination of this Agreement regardless of the cause of such termination.
13. Confidentiality.
The contents of this Agreement and any information furnished by either
party may not be disclosed by the receiving party to any third party, unless
approved in writing by the disclosing party, except as necessary to enforce
rights under this Agreement. Such information will not be used by the
receiving party for any purpose other than in connection with exercising its
rights and performing its obligations under this Agreement. The parties
acknowledge that the obligations of confidentiality shall not apply with
respect to information which (i) can be shown by written records to have been
known by the receiving party prior to disclosure; (ii) is or becomes publicly
known without the breach of this Agreement; or (iii) is furnished to the
receiving party from a third party who is not restricted from disclosing such
information. The covenants contained in this Section shall survive the
termination of this Agreement regardless of the cause of the termination.
14. Relationship of the Parties.
Nothing contained in this Agreement shall be construed to constitute
either party as an employee, agent, legal representative, partner or joint
representative of the other party, nor shall either party have any authority
to bind the other in any respect.
15. Assignment.
Neither party may assign any of its rights nor delegate any of its duties
or obligations under this Agreement without the prior written consent of the
other party, except an assignment to any entity which acquires all or
substantially all of the assets of the party seeking to assign this Agreement;
provided further that SDS may, without the consent of Simplex, assign its
rights, duties and obligations under this Agreement to any affiliated entity
of SDS.
16. Force Majeure.
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Neither party is liable to the other for the failure or inability to
perform any part of this Agreement or for any delay in the performance of any
part of this Agreement to the extent the failure or inability is due to any
foreign or domestic embargoes, seizures, acts of God, insurrections, wars
and/or continuance of wars, or the adoption or enactment of any law,
ordinance, regulation, ruling or order, inability to secure materials or
transportation, acts of third parties, fires, floods, explosions, strikes or
other accidents or contingencies beyond its control. In the event of the
occurrence of an event of force majeure, the party affected must give prompt
notice to the other and must use all reasonable efforts to alleviate or
minimize the event and resume full performance at the earliest possible date.
17. Notices.
All notices, reports, requests or demands to be given by either party to
the other under this Agreement must be forwarded, postage prepaid, by
registered or certified mail, or by facsimile, to the respective parties as
follows:
If to SDS: Sybron Dental Specialties, Inc.
Attn: President
1717 West Collins Avenue
Orange, CA 92867
With a copy to: Sybron International Corporation
Attn: General Counsel
411 East Wisconsin Avenue
Suite 2400
Milwaukee, WI 53202
If to Simplex: Simplex Medical Systems, Inc.
Attn: Nicholas G. Levandoski, President
430 Ansin Boulevard, Suite G
Hallandale, FL 33009
With a copy to: Robert J. Van Der Wall, Esquire
Stein, Pendorf & Van Der Wall
Suite 4600 First Union Financial Center
200 South Biscayne Boulevard
Miami, FL 33131-2310
18. Waiver of Rights.
The failure of either party to enforce any of the provisions of this
Agreement, to enforce any rights with respect to this Agreement or to exercise
any election provided for in this Agreement is not considered a waiver of the
provision, right or election or in any way affects the validity of this
Agreement. The failure of either party to exercise any provision, right or
election shall not preclude or prejudice the party from later enforcing or
exercising it or any other provision, right or election which it may have
under this Agreement.
19. Governing Law.
This Agreement is governed by and construed in accordance with the laws
of Colorado.
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20. Arbitration.
Any dispute which may arise in connection with any action brought by
either party shall be brought in the United States pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, provided, however,
arbitration shall not apply in the event interparty and/or third party
discovery shall be needed by either party.
21. Counterparts.
This Agreement will be executed in duplicate, each of which is for all
purposes deemed to be an original and both of which will constitute the same
instrument.
22. Amendments.
This Agreement may not be altered, amended or modified except by written
instrument signed by an authorized representative of each party.
23. Entire Agreement.
This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties with respect to its subject matter, and each
party acknowledges that no representations, inducements, promises or
agreements, orally or otherwise, have been made by any party or anyone acting
on behalf of any party, which are not embodied in this Agreement, and that no
other agreement, statements of promise not contained in this Agreement shall
be valid or binding.
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
signed this Agreement below.
SIMPLEX MEDICAL SYSTEMS, INC. SYBRON DENTAL SPECIALTIES, INC.
(Colorado Corporation)
By:/s/ Nicholas G. Levandoski By:/s/ Floyd W. Pickrell
Title: President Title: President
SIMPLEX MEDICAL SYSTEMS, INC.
(Florida Corporation)
By:/s/ Nicholas G. Levandoski
Title: President
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APPENDIX A
The Airbrator is an improved apparatus for delivery of pressurized
particulate matter against a surface or target to abrade, etch, erase, cut,
penetrate, smooth, clean, polish and/or harden the surface or target. The
most important use to which the Airbrator is adapted is use by dentists and
oral hygienists to very effectively clean teeth, employing a particulate
matter such as aluminum oxide, while at the same time having no effect on soft
tissue such as the gums. This is accomplished using a prefilled, sealed, and
disposable fluidizing chamber and cannula assembly that avoids contamination
and which has already been approved by the FDA for dental use in cleaning and
etching of teeth. Other of the purposes set forth above will be the subject
of an FDA submission for approval in the future.
Included in a fluidizing chamber having a discharge end of an inlet tube
that is disposed below or overlaps the intake end of the cannula such that the
discharge of the inlet tube blows the particulate matter into the fluid above
the intake end of the cannula, thereby suspending it therein. Another feature
is a tapered nozzle and optionally bent cannula.
The Airbrator is adapted for use with a custom designed double acting
safety check valve (not included in the pricing recited in the Distribution
Agreement) to prevent backflow of particulate matter in the event of a drop in
pneumatic pressure, and also to prevent excessive pressure from reaching the
fluidizing chamber and cannula in the event of a pressure surge. The check
value may be attached to the pre-existing pneumatic pressure line of a dental
office pedestal.
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AMENDMENT NO. 1 TO
DISTRIBUTION AGREEMENT
DATED JULY 8, 1997
SIMPLEX MEDICAL SYSTEMS, INC., a Colorado corporation, SIMPLEX MEDICAL
SYSTEMS, INC., a Florida corporation (together hereinafter "Simplex"), and
SYBRON DENTAL SPECIALTIES. INC., a Delaware corporation (hereinafter "SDS")
hereby agree that this Amendment No. 1 to Distribution Agreement dated July 8,
1997 ("Amendment No. 1") is incorporated into, made part of and amends the
Distribution Agreement dated July 8, 1997 between Simplex and SDS (the
"Distribution Agreement"), to the extent specifically stated below:
1. In the second line of Section 3. of the Distribution Agreement, the
date of October 1, 1998 is replaced with the date of December 1, 1998.
2. In the third line of Section 4.9 of the Distribution Agreement, the
phrase "by the end of February, 1998" is replaced with the phrase "by April
30, 1998".
3. In the third line of Section 5.1 of the Distribution Agreement, the
date of "December 31, 1997" is replaced with the date of "February 98, 1998".
4. Except as modified by this Amendment No. 17 all other terms and
conditions of the Distribution Agreement shall remain in full force and effect
and are unmodified. Where the terms and conditions of this Amendment No. 1 and
the Distribution Agreement conflict. this Amendment No. 1 shall control.
Effective as of the 31st day of December, 1997.
SIMPLEX MEDICAL SYSTEMS, INC., SYBRON DENTAL SPECIALTIES, INC.
a Colorado Corporation
By: /s/ Henry B. Schur By: /s/ Steven J. Semmelmayer
Name: Henry B. Schur Name: Steven J. Semmelmayer
Title: Vice President & Director Title: Executive Vice President
and General Manager
SIMPLEX MEDICAL SYSTEMS, INC.,
a Florida Corporation
By: /s/ Henry B. Schur
Name: Henry B. Schur
Title: Vice President and Director
SUBSIDIARIES OF THE REGISTRANT
State of Other Names
Name Incorporation Used in Business
---- ------------- ----------------
Simplex Medical Systems, Inc. Florida None
Analyte Diagnostics, Inc. Florida None
IRT Management Corp. Florida None
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of SMLX Technologies, Inc. (formerly Simplex Medical
Systems, Inc. and Subsidiary), we hereby consent to the use of our report as
of December 31, 1997 and for the year then ended, dated March 26, 1998, and to
all references to our Firm included in or made a part of this registration
statement.
/s/ Schmidt & Co.
SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P.L.
Boca Raton, Florida
November 6, 1998
CONSENT OF INDEPENDENT AUDITORS
As consent to the use in this Registration Statement of SMLX Technologies,
Inc. on form SB-2 of our report dated May 16, 1997, appearing in the
Prospectus, which is a part of this Registration Statement and to the
reference to our firm under the heading "Experts" in the Prospectus.
MILLWARD & CO., CPAs
Fort Lauderdale, Florida
November 10, 1998
