AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996
REGISTRATION NO. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SURVIVALINK CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of
incorporation or organization)
3845
(Primary Standard Industrial
Classification Code Number)
41-1719352
(I.R.S. Employer
Identification Number)
5420 FELTL ROAD
MINNEAPOLIS, MINNESOTA 55343
TELEPHONE: (612) 939-4181
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BYRON L. GILMAN, CHIEF EXECUTIVE OFFICER
5420 FELTL ROAD
MINNEAPOLIS, MINNESOTA 55343
TELEPHONE: (612) 939-4181
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of communications to:
ERIC O. MADSON, ESQ. EDWIN L. MILLER, JR., ESQ.
WINTHROP & WEINSTINE, P.A. TESTA, HURWITZ & THIBEAULT, LLP
3000 DAIN BOSWORTH PLAZA HIGH STREET TOWER
60 SOUTH SIXTH STREET 125 HIGH STREET
MINNEAPOLIS, MN 55402 BOSTON, MA 02110
TELEPHONE: (612) 347-0622 TELEPHONE: (617) 248-7000
TELECOPIER: (612) 347-0600 TELECOPIER: (617) 248-7100
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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. |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(1)
Common Stock, $.01 par value $45,540,000 $15,704
(1) Calculated pursuant to Rule 457(o).
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
SURVIVALINK CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM S-1 AND TITLE OF ITEM CAPTION OR LOCATION IN PROSPECTUS
<S> <C> <C>
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus ............. Front of Registration Statement and Outside Front Cover Page
of Prospectus
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus ......................................... Inside Front and Outside Back Cover Pages of Prospectus
Item 3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges ....................... Prospectus Summary; Risk Factors
Item 4. Use of Proceeds .................................... Use of Proceeds
Item 5. Determination of Offering Price .................... Outside Front Cover Page of Prospectus; Risk Factors;
Underwriting
Item 6. Dilution ........................................... Risk Factors; Dilution
Item 7. Selling Security Holders ........................... Not Applicable
Item 8. Plan of Distribution ............................... Outside Front Cover and Inside Front Cover Pages of
Prospectus; Underwriting
Item 9. Description of Securities to be Registered ........ Outside Front Cover Page of Prospectus; Prospectus Summary;
Risk Factors; Dividend Policy; Description of Capital Stock
Item 10. Interests of Named Experts and Counsel ............. Legal Matters; Experts
Item 11. Information With Respect to the Registrant ......... Prospectus Summary; Risk Factors; Capitalization; Dividend
Policy; Selected Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of Operations;
Business; Management; Certain Transactions; Principal
Shareholders; Financial Statements
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ........................................ Not Applicable
</TABLE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 24, 1996
PROSPECTUS
3,000,000 SHARES
[LOGO]
SURVIVALINK CORPORATION
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by SurVivaLink
Corporation ("SurVivaLink" or the "Company"). Prior to this offering, there has
been no public market for the Common Stock. It is currently anticipated that the
initial public offering price will be between $9.00 and $11.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied for listing of its
Common Stock on the Nasdaq National Market under the symbol "SVLK."
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
Per Share $ $ $
Total (3) $ $ $
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$450,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to 450,000 additional shares of Common Stock to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the Underwriters subject to prior
sale, when, as and if delivered to and accepted by them, and to withdrawal,
cancellation or modification of the offer without notice. It is expected that
delivery of the shares of Common Stock will be made on or about _________, 1996.
NATWEST SECURITIES LIMITED
VECTOR SECURITIES INTERNATIONAL, INC.
JOHN G. KINNARD AND COMPANY,
Incorporated
The date of this Prospectus is _______________, 1996.
The VivaLink automated external defibrillator is used by police officers and
other minimally-trained rescuers to treat victims of sudden cardiac arrest.
[PHOTO: Policeman carrying VivaLink AED]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR UNITED KINGDOM PURCHASERS: THE COMMON STOCK MAY NOT BE OFFERED OR SOLD IN
THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM
IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS, WHETHER AS
PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO
THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS PROSPECTUS MAY ONLY BE ISSUED
OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1995 OR IS A PERSON TO WHOM THE PROSPECTUS
MAY OTHERWISE BE LAWFULLY PASSED ON.
Survivalink(R), VivaLink(R), RescueLink(R) and RescueReady(tm) are trademarks of
the Company.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE
INFORMATION PRESENTED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
The Company has developed and is marketing an automated external defibrillator
("AED") which is used to treat victims of sudden cardiac arrest ("SCA"), one of
the leading causes of death in the United States. The Company began marketing
the VivaLink AED (the "VivaLink") following receipt of 510(k) marketing
clearance by the U.S. Food and Drug Administration in February 1995. The
VivaLink incorporates proprietary technologies which make it easy to use,
inexpensive and lightweight. In addition, the unit's automatic daily
self-testing feature ensures operational readiness. The Company believes that
the VivaLink, which is currently used by a broad range of minimally-trained
rescuers ("first responders"), such as firefighters, police officers and basic
life support ambulance personnel, is the easiest to use AED on the market. To
date, more than 20 lives have been saved using the VivaLink.
Sudden cardiac arrest, which causes more than 350,000 deaths in the United
States annually, is caused by disturbances of the heart's electrical signals. As
a consequence, blood flow stops, resulting in death if not treated within
minutes. Over 80% of SCAs are caused by severe heart attacks. Other causes of
SCA include electrocution, drowning and suffocation. The only effective
treatment for SCA is the prompt administration of an electric shock with a
device known as a defibrillator. Timely defibrillation is the most critical
factor in rescuing an individual from SCA. Published studies have indicated that
survival rates for out-of-hospital SCAs can exceed 50% if defibrillation is
administered within the first few minutes of SCA. Since response times by
paramedics and emergency medical technicians equipped with defibrillators are
often more than ten minutes, the average SCA survival rate in the United States
is only 7%.
In order to improve survival rates, the American Heart Association and other
organizations have recommended widespread deployment of AEDs to first responders
and ultimately the public. Despite the automated features of AEDs and the
benefits of early defibrillation, AEDs have only achieved limited market
acceptance and deployment. The Company believes that this is due to the high
maintenance requirements, relative complexity, large size and high cost of other
currently available AEDs. The Company believes the VivaLink overcomes these
limitations.
The VivaLink incorporates a number of proprietary technological advances that
make it suitable for use by minimally-trained rescuers. It is small, weighs 7.75
pounds and incorporates a patented electrode packaging system that is
preconnected to the unit. The VivaLink is the only AED currently available that
automatically conducts daily self-tests of all major systems, including the
electrodes. The unit also incorporates voice prompts and one-button operation
for ease-of-use. The VivaLink's proprietary algorithm makes the decision as to
whether or not a shock is warranted, thereby contributing to patient and
operator safety. The unit is also designed for low-cost production, and the
Company believes that the VivaLink is currently the lowest-priced AED on the
market.
The Company is developing its next-generation product, the VivaLink II, which is
based on its versatile high voltage circuit. The VivaLink II is capable of
delivering monophasic and biphasic waveform shocks with delivered energy ranging
from less than 50 Joules up to 360 Joules.
The Company focuses its marketing and sales efforts on first responders and
out-of-hospital medical facilities. The Company believes that the initial
markets for its AEDs include approximately 515,000 sites. To date, the Company
has sold units to first responders, hospitals, other medical facilities and
industrial and commercial sites. In the United States, the Company currently
markets the VivaLink through a seven person internal sales force and through 39
distributors and six manufacturer's representatives. Internationally, the
Company has signed a worldwide, non-exclusive agreement with a distributor of
electromedical equipment, which is currently selling the Company's products in
the United Kingdom and certain other countries. The Company continues to
significantly expand its distribution network by adding internal sales
personnel, distributors and manufacturer's representatives.
The Company was incorporated in the State of Minnesota in April 1992. Its
principal office is located at 5420 Feltl Road, Minnetonka, Minnesota 55343, and
its telephone number is (612) 939-4181.
THE OFFERING
Common Stock offered hereby ...... 3,000,000 shares
Common Stock to be outstanding
after the offering ............... 7,196,257 shares (1)
Use of proceeds .................. To fund expansion of the Company's
marketing and distribution
capabilities, introduction of new
products, research and development
and acquisition of manufacturing
equipment; to repay debt; and for
general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National
Market symbol ..................... SVLK
(1) Does not include 1,379,033 shares issuable upon exercise of options and
warrants outstanding at the date of this Prospectus. See "Management --
Stock Options" and "Description of Capital Stock -- Stock Options and
Warrants."
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ -- $ 14 $ 1,038 $ 155 $ 434
Cost of goods sold -- 16 1,165 257 408
Gross profit -- (2) (127) (102) 26
Operating expenses:
Research and development 277 648 688 151 366
General and administrative 119 245 604 119 272
Sales and marketing 47 157 432 63 439
Operating loss (443) (1,052) (1,851) (435) (1,051)
Other income, net 1 7 5 2 32
Net loss $ (442) $(1,045) $(1,846) $ (433) $(1,019)
Net loss per share $ (.15) $ (.29) $ (.41) $ (.11) $ (.17)
Weighted average number of shares
outstanding 2,930 3,595 4,478 4,115 6,025
</TABLE>
MARCH 31, 1996
ACTUAL AS ADJUSTED (1)
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,481 $29,931
Working capital 2,666 30,116
Total assets 3,577 31,027
Accumulated deficit (4,423) (4,423)
Total shareholders'
equity 3,221 30,671
(1) Adjusted to give effect to the sale of the 3,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $10.00 per share and
the application of the estimated net proceeds therefrom. Does not include
1,379,033 shares of Common Stock issuable upon exercise of stock options and
warrants outstanding at the date of this Prospectus. See "Use of Proceeds,"
"Capitalization," "Management -- Stock Options" and "Description of Capital
Stock -- Stock Options and Warrants."
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE FOLLOWING RISK
FACTORS AND SHOULD REVIEW CAREFULLY THE INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS.
OPERATING LOSSES; UNCERTAIN MARKET ACCEPTANCE. The Company has accumulated net
losses from inception in April 1992 through March 31, 1996 of approximately $4.4
million. The Company expects to continue to incur operating losses at least
through 1997. Commercial sales of the Company's initial product, the VivaLink,
commenced in the first quarter of 1995. In order to achieve revenue growth and
profitability, the Company must successfully increase the market penetration of
the VivaLink as well as successfully develop and market additional products
currently in development. The Company's future success depends upon
substantially increasing the number of AEDs sold into the first responder market
segment as well as the emerging public access markets. There can be no assurance
that the VivaLink will gain market acceptance or that market demand for the
VivaLink will be sufficient to allow profitable operations. See "Business."
LACK OF PRODUCT DIVERSIFICATION; DEPENDENCE ON NEW PRODUCTS. Substantially all
of the Company's revenues to date have been derived from sales of the VivaLink,
and the Company expects that AEDs and related accessories will account for
substantially all of the Company's revenues for the foreseeable future. If the
market for AEDs fails to develop or if competition in the market for AEDs
intensifies, the Company's business and financial condition will be materially
adversely affected. The Company's future success will depend on its ability to
enhance its current products and to introduce new products which meet the needs
of an emerging market. There can be no assurance that the Company will
successfully complete the development and commercialization of such products.
STRICT GOVERNMENT REGULATION; NEED FOR ADDITIONAL REGULATORY APPROVALS. The
medical device industry is highly regulated by a variety of governmental bodies,
including the U.S. Food and Drug Administration ("FDA") and equivalent agencies
in foreign countries. The Company received marketing clearance from the FDA
pursuant to a 510(k) submission in February 1995 for sale of the VivaLink in the
United States, and the device is also registered as required by the Canadian
Ministry of Health. The Company will be required to obtain necessary device
approval in many of the countries which are potential markets. Future products
and substantial modifications to existing products will also require device
approvals from the FDA and international regulatory agencies. There can be no
assurance that any of such approvals will be obtained on a timely basis, if at
all. Regulatory approvals, if granted, may include significant limitations on
the indicated uses for which the product may be marketed. In the United States,
there also can be no assurance that any such approvals can be obtained under a
510(k) submission. If approval cannot be obtained under a 510(k) submission, the
Company would be required to file a more extensive regulatory submission known
as a premarket approval application, causing the Company to incur substantial
costs and delay.
The European Union has promulgated rules which require that by mid-1998 medical
products receive the right to affix the CE mark, an international symbol of
adherence to quality assurance standards and compliance with applicable European
medical device directives. In order to obtain the right to affix the CE mark to
the VivaLink, the Company will need to obtain certification that its processes
meet European quality standards. The Company has made a submission to a
certified testing laboratory (a "notified body") in the European Union to obtain
the right to affix the CE mark. Failure to receive the right to affix the CE
mark will prohibit the Company from selling the VivaLink in member countries of
the European Union.
In addition, the Company's manufacturing processes are required to comply with
Good Manufacturing Practices ("GMP") regulations of the FDA. These regulations
include design, testing, production, control, documentation and other
requirements. Enforcement of GMP regulations has increased significantly in the
last several years, and the FDA has publicly stated that compliance will be more
strictly scrutinized. The Company's facilities and manufacturing processes, as
well as those of certain of the Company's third-party suppliers, are subject to
periodic inspection by the FDA and other agencies. Failure to comply with these
and other applicable regulatory requirements could result in, among other
things, warning letters, fines, injunctions, civil penalties, recall or seizure
of products, total or partial suspension of production, refusal of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of approvals and criminal prosecution, which could have material
adverse effect on the Company's business, operating results or financial
condition.
Several states have enacted laws and regulations which govern the delivery of
emergency medical services, including the use of external defibrillators. These
laws and regulations in many cases currently restrict use of these devices to
specified categories of trained personnel, mandate levels of operator training
and, in some cases, require that certain features be incorporated into external
defibrillators, including features which are not currently incorporated into the
VivaLink. Accordingly, market acceptance of the VivaLink will be significantly
dependent upon the Company's ability to convince state and local government
bodies and medical directors of the safety and efficacy of the VivaLink and its
potential for widespread deployment. There can be no assurance that such
restrictions on the use of AEDs will be eased or removed, which would have a
material adverse effect on the Company's ability to market the VivaLink.
RELIANCE ON PROPRIETARY TECHNOLOGY; UNCERTAINTY OF PROPRIETARY RIGHTS
PROTECTION. The Company's success and ability to compete depends in part on its
proprietary technology, which it seeks to protect with patents. The Company
currently holds three United States patents related to its products and has
applied for nine additional patents. The Company has also applied for
corresponding foreign patents where it deemed such applications necessary. The
laws of certain foreign countries do not protect the Company's intellectual
property rights to the same extent as do the laws of the United States. There
can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. The Company intends to vigorously
defend and protect its patents and other proprietary technology against
infringement or misappropriation by others. There can be no assurance, however,
that steps taken by the Company will prevent misappropriation of its technology
or preclude competitors from developing products similar to the Company's
products. Further, the enforcement of proprietary rights of the Company through
litigation could result in costs to the Company that could materially adversely
affect its financial condition. Although the Company believes that its products
do not infringe the proprietary rights of third parties, there can be no
assurance that infringement or invalidity claims will not be asserted against
the Company in the future. An adverse determination in any litigation based on
such a claim could subject the Company to significant liabilities to third
parties, require the Company to seek licenses from third parties, prevent the
Company from selling its products or adversely affect the Company's own
intellectual property, any of which could have a material adverse effect on the
Company's business, operating results or financial condition. See "Business
- -- Government Regulation."
The Company also relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or be
independently developed by competitors. See "Business -- Patents and Proprietary
Rights."
TECHNOLOGICAL CHANGE AND PRODUCT OBSOLESCENCE. The markets in which the Company
competes are subject to technological changes. A number of companies may be
engaged in the development of alternative approaches for the treatment of SCA
which differ from those utilized by the Company. There can be no assurance that
superior defibrillation technologies will not be developed,or that alternative
therapies or approaches, including pharmaceutical or other alternatives, will
not render the Company's technology or products under development obsolete or
noncompetitive. The development of such technologies, therapies or approaches
could have a material adverse effect on the Company's business, operating
results or financial condition. The ability of the Company to compete
successfully will depend in part on its ability to continually advance its
technology and to develop and market new applications for its existing and
future products. The Company expends a significant portion of its revenues on
research and development and product enhancement efforts. See "Business --
Research and Development."
INTENSE COMPETITION. The Company encounters and expects to continue to encounter
intense competition in the sale of its products. The Company believes that the
principal competitive factors affecting the market for its products include
product features, product performance and reputation, price and service. The
Company's competitors include companies with established reputations in the
medical device field and that have substantially greater financial, technical,
marketing and other resources than the Company. As a result, such companies may
be able to adapt more quickly to new or emerging technologies and changes in
customer requirements or to devote greater resources to the promotion and sale
of their products than the Company. Competition could increase if new companies
enter the market or if existing competitors expand their product lines or
intensify efforts within existing product lines. There can be no assurance that
the Company's current products, products under development or ability to
discover new technologies will be sufficient to enable it to compete
effectively. See "Business -- Competition."
LIMITED MARKETING AND MANUFACTURING EXPERIENCE. The Company currently has only a
limited sales and marketing organization. In the United States, the Company
intends to sell its products primarily through an internal sales force,
manufacturer's representatives and distributors. The Company expects to expand
its sales and marketing organization substantially. In international markets,
the Company currently sells its products primarily through one non-exclusive
distributor. There can be no assurance that the Company will be able to
successfully expand its internal sales force or marketing organization, that
establishing an internal sales force or marketing organization will be
cost-effective, or that the Company's sales and marketing efforts will be
successful. There can be no assurance that the Company will be able to maintain
its existing agreements or enter into additional agreements with desired
distributors on a timely basis or at all, or that such distributors will devote
adequate resources to selling the Company's products. Failure to establish
appropriate distribution relationships could have a material adverse effect on
the Company's business, operating results or financial condition. Further, the
Company expects that many of the initial purchasers of its products will be
state and local governments and medical service providers under contract to such
entities, and that sales of the VivaLink may be characterized by long sales
cycles. See "Business -- Marketing, Distribution and Sales."
In addition, the Company has no experience manufacturing its products in high
volumes, and there can be no assurance that reliable, high-volume manufacturing
can be established or maintained at commercially reasonable costs. The Company
may encounter difficulties in scaling up production of its products, including
problems involving quality control and assurance and shortages of qualified
personnel. See "Business -- Manufacturing."
NEED FOR ADDITIONAL CAPITAL. The Company believes that the proceeds from this
offering, together with revenue from sales of the VivaLink, will be sufficient
to fund its planned marketing and distribution efforts, new product
introductions, research and development activities, acquisitions of
manufacturing equipment and working capital requirements for at least 24 months
following this offering. However, there can be no assurance that the Company
will not require additional capital prior to such time. There can be no
assurance that additional capital will be available to the Company when needed
or on terms acceptable to the Company. Any additional equity financing may be
dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON PRINCIPAL SUPPLIERS. The Company is dependent on a limited number
of suppliers for key components of the VivaLink, including the injection molded
case and various electronic components. In addition, the Company is dependent on
a single subcontractor for high volume manufacture of the electronic circuitry
of the device. Although the Company believes that alternate suppliers would be
available to it, any disruption of its relationships with its current suppliers
would have a material adverse impact on the Company's operations in the short
term. While the Company seeks to maintain an inventory of components sufficient
for its anticipated needs, certain components are subject to long lead times
and, accordingly, the Company's ability to expand production rapidly could be
limited by the availability of such components. See "Business -- Manufacturing."
PRODUCT RELIABILITY AND RISK OF RECALL. The VivaLink is a complex electronic
device. Component failures, manufacturing errors or design defects could result
in unsafe conditions for patients and trained responders, additional repair
requirements or product recalls, and could significantly impair market
acceptance of the VivaLink. If there were any material deficiencies or defects
in the design or manufacture of the Company's products, the Company might be
required to recall or redesign them. The costs of a product recall or damage to
the Company's reputation could be significant. Any such product problems could
have a material adverse effect on the Company's business, financial condition
and results of operations.
In the third quarter of 1995, the Company initiated a recall by issuing a safety
alert relating to its electrodes. Several customers had reported difficulty
separating the electrodes from the packaging liner which, in some cases,
rendered the electrodes unusable. The Company has subsequently modified its
manufacturing processes to improve the ease of separating the electrodes.
Replacement of electrodes previously sold was commenced in May 1996 and is
expected to be completed in June 1996 at a total cost of approximately $5,000.
PRODUCT LIABILITY. The Company could be liable for personal injuries allegedly
caused by a defect in one of the Company's products. While to date the Company
has not experienced any such claims, there can be no assurance that such claims
will not be made in the future. Although the Company maintains product liability
insurance in the aggregate amount of $1 million with a limit per occurrence of
$1 million, the current coverage may not be adequate to cover the Company's
product liability risk. Product liability insurance is expensive, difficult to
obtain and, in the future, may not be available on acceptable terms or at all.
In addition, the costs related to defending any claim and/or negative publicity
resulting from any liability action could have a material adverse effect on the
Company's business, operating results or financial condition. See "Business --
Product Liability."
MANAGEMENT OF GROWTH. To date, the Company's management, manufacturing, sales
and marketing capabilities have been adequate to keep pace with the growth of
its business. If the Company is successful in pursuing its growth strategy for
its current products and its new products, the Company will be required to
expand or enhance these capabilities, and there can be no assurance that the
Company will be able to secure the management, staffing or other resources
required. There can be no assurance that the Company will be successful in
managing any such growth.
DEPENDENCE ON KEY MANAGEMENT. The Company's operations are materially
dependent upon the services of Byron L. Gilman, Chief Executive Officer,
Kenneth F. Olson, Vice President of Operations, and R. Eric Bosler, Chief
Financial Officer of the Company. The loss of these individuals' services
would adversely affect the Company's business. Mr. Gilman has entered into an
employment agreement with the Company. The Company does not have employment
agreements with Mr. Olson or Mr. Bosler nor key person insurance on the lives
of Mr. Gilman, Mr. Olson, or Mr. Bosler. The Company's future success also
depends on its continuing ability to attract and retain highly qualified
managerial and technical personnel. There can be no assurance that the
Company will be able to retain key employees or attract and retain other
qualified personnel in the future. See "Management."
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATED ENTITIES. The Company's
directors, executive officers and entities affiliated with them will, in the
aggregate, beneficially own approximately 20.4% of the Company's outstanding
shares of Common Stock following the completion of this offering. These
stockholders, if acting together, would be able to significantly influence all
matters requiring approval by the stockholders of the Company, including the
election of directors and the approval of mergers or other business combination
transactions. See "Principal Shareholders."
NO PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to
this offering, there has been no public market for the Company's Common Stock,
and there can be no assurance that an active trading public market will develop
or, if one develops, that it will be sustained. The initial public offering
price, which will be determined by negotiations between the Company and the
Representatives of the Underwriters, may not be indicative of prices that will
prevail in the trading market. See "Underwriting." The market price for the
Common Stock may be highly volatile depending on various factors including,
among others, the Company's operating results, general conditions in the medical
device industry, announcements of technological innovations or new products by
the Company or its competitors, and the market for similar securities, which
market is subject to various pressures. In addition, the stock market is subject
to price and volume fluctuations unrelated to operating performance of the
Company.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE. Of the 7,196,257
shares of Common Stock to be outstanding following this offering, 3,349,940
shares (including the 3,000,000 shares offered hereby) will be freely tradeable
without restrictions under the Securities Act of 1933, as amended (the "Act").
The remaining 3,846,317 shares are restricted securities which may not be sold
publicly unless the shares are registered under the Act or are sold under Rules
144 of the Act or under similar exemptions. In connection with this offering,
officers, directors and shareholders of the Company, who beneficially own
substantially all of the outstanding shares of Common Stock prior to this
offering, have agreed not to offer, sell or otherwise dispose of any of their
shares for a period of 180 days after the date of this Prospectus, without the
prior written consent of the Representatives of the Underwriters. Sales of a
substantial amount of the currently outstanding shares of Common Stock in the
public market may adversely affect the market price of the Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
UNDESIGNATED PREFERRED STOCK. The Company's Board of Directors is authorized,
without further shareholder action, to establish various series of Preferred
Stock from time to time and to determine the rights, preferences and privileges
of any wholly unissued series, including, among other matters, any dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms, the number of shares constituting
any such series, and the description thereof, and to issue any such shares.
Although there is no current intention to do so, the Board of Directors of the
Company may, without shareholder approval, issue shares of a class or series of
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of the Common Stock and may have the effect of
delaying, deferring or preventing a change in control of the Company. See
"Description of Capital Stock -- Undesignated Preferred Stock."
DILUTION. The public offering price is substantially higher than the book value
per share of the outstanding Common Stock. Investors purchasing shares of Common
Stock in this offering will therefore incur immediate and substantial dilution.
See "Dilution." In addition, dilution will occur upon the exercise of
outstanding stock options and warrants of the Company and may occur upon future
equity financings of the Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby at an assumed public offering price of $10.00 per
share, after deduction of the estimated underwriting discounts and commissions
and offering expenses payable by the Company, are estimated to be $27,450,000
($31,635,000 if the Underwriters' over-allotment option is exercised in full).
The Company currently intends to apply the estimated net proceeds of this
offering to support the Company's expansion of its business. Approximately $7.0
million of the net proceeds are intended to be used for sales and marketing,
$6.0 million for research and development, $3.0 million for general and
administrative expenses, and $3.5 million for capital expenditures, including
tooling and manufacturing equipment for new products. The Company also intends
to use approximately $1.0 million of the net proceeds from this offering to
repay bridge financing to be obtained by the Company. The Company has entered
into a non-binding letter of intent with Medtronic, Inc., an existing
shareholder of the Company, for a bridge loan that is expected to be payable in
May 1997 or upon the closing of this offering, if earlier, and to bear interest
at a rate of prime plus 3% per annum. The remainder of the net proceeds of this
offering will be used to provide working capital and will be available for
general corporate purposes. Pending the use of the net proceeds of this
offering, the Company will invest the funds in short-term investment grade
securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common Stock
and does not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company presently expects to retain its earnings to finance the
development and expansion of its business. The payment by the Company of cash
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Company's Board of Directors and will depend on the Company's
earnings, financial condition, capital requirements and other relevant factors.
See "Description of Capital Stock."
CAPITALIZATION
The following table sets forth as of March 31, 1996 (i) the capitalization of
the Company, (ii) the pro forma capitalization of the Company after giving
effect to a change in the number of authorized shares and a change in par value
on May 7, 1996, and (iii) such pro forma capitalization as adjusted to reflect
the sale of the 3,000,000 shares of Common Stock offered hereby at an assumed
public offering price of $10.00 per share and the application of the estimated
net proceeds therefrom (after deduction of estimated underwriting discounts and
commissions and offering expenses). This table should be read in conjunction
with the Company's financial statements and notes thereto included elsewhere in
this Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt ......................................... $ -- $ -- $ --
Shareholders' equity:
Common Stock, no par value,
5,000,000 shares authorized,
4,196,257 shares issued and outstanding
(actual); $.01 par value, 50,000,000 shares,
authorized, 4,196,257 shares issued and
outstanding (pro forma); 7,196,257 shares
issued and outstanding (as adjusted) (1) ............ 7,644 42 72
Additional paid-in capital ........................... -- 7,602 35,022
Accumulated deficit .................................. (4,423) (4,423) (4,423)
Total shareholders' equity ........................... 3,221 3,221 30,671
Total capitalization ............................... $ 3,221 $ 3,221 $30,671
</TABLE>
(1) Does not include 1,379,033 shares of Common Stock issuable upon exercise
of stock options and warrants outstanding at the date of this Prospectus.
See "Management -- Stock Options" and "Description of Capital Stock --
Stock Options and Warrants."
DILUTION
The net tangible book value of the Company at March 31, 1996 was approximately
$3,221,000, or $0.77 per share. "Net tangible book value" per share represents
the tangible assets less total liabilities divided by the number of outstanding
shares of Common Stock. After giving effect to the sale of the 3,000,000 shares
offered hereby at an assumed initial public offering price of $10.00 per share
after deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company, the pro forma net tangible book value of the
Company at March 31, 1996 would have been approximately $30,671,000 million, or
$4.26 per share. This represents an immediate dilution in net tangible book
value to new investors from the assumed offering price of $5.74 per share and an
immediate increase in net tangible book value to existing shareholders of $3.49
per share. The following table illustrates this per share dilution:
Assumed initial public offering price per share $10.00
Net tangible book value per share before offering $0.77
Increase per share attributable to new investors 3.49
Pro forma net tangible book value per share after
offering 4.26
Dilution per share to new investors $ 5.74
The following table sets forth the number of shares of Common Stock purchased
from the Company as of March 31, 1996, the total consideration paid and the
average price per share paid by the existing shareholders for shares of the
Company's Common Stock and to be paid by investors purchasing the 3,000,000
shares of Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Current shareholders 4,196,257 58.3% $ 7,632,324 20.3% $ 1.82
New investors 3,000,000 41.7 30,000,000 79.7 $10.00
Total 7,196,257 100.0% $37,632,324 100.0%
</TABLE>
The foregoing does not include 1,379,033 shares of Common Stock issuable upon
exercise of stock options and warrants outstanding at the date of this
Prospectus. To the extent such options and warrants are exercised, there will be
further dilution to new investors. See "Management -- Stock Options" and
"Description of Capital Stock --Stock Options and Warrants."
SELECTED FINANCIAL DATA
The statement of operations data set forth below for the years ended December
31, 1993, 1994 and 1995, and the balance sheet data set forth below at December
31, 1994 and 1995, are derived from the Company's financial statements included
elsewhere in this Prospectus, which have been audited by Ernst & Young LLP,
independent auditors. The statement of operations data set forth below for the
period from April 16, 1992 (inception) to December 31, 1992 and the balance
sheet data set forth below at December 31, 1992 and 1993 are derived from
audited financial statements not included herein. The statement of operations
data and the balance sheet data set forth below as of and for the three months
ended March 31, 1995 and 1996, have been derived from the Company's unaudited
financial statements included elsewhere in this Prospectus, which, in the
opinion of management, include all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of such information.
Results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996 or any
other period. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1992 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31,
1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ -- $ -- $ 14 $ 1,038 $ 155 $ 434
Cost of goods sold -- -- 16 1,165 257 408
Gross profit -- -- (2) (127) (102) 26
Operating expenses:
Research and development 41 277 648 688 151 366
General and administrative 30 119 245 604 119 272
Sales and marketing -- 47 157 432 63 439
Operating loss (71) (443) (1,052) (1,851) (435) (1,051)
Other income, net -- 1 7 5 2 32
Net loss $ (71) $ (442) $(1,045) $(1,846) $ (433) $(1,019)
Net loss per share $ (.03) $ (.15) $ (.29) $ (.41) $ (.11) $ (.17)
Weighted average number of
shares outstanding 2,676 2,930 3,595 4,478 4,115 6,025
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1992 1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents $ 40 $ 61 $ 194 $ 3,767 $ 34 $ 2,481
Working capital 15 34 325 3,813 111 2,666
Total assets 50 95 670 4,704 488 3,577
Accumulated deficit (71) (513) (1,558) (3,404) (1,991) (4,423)
Total shareholders'
equity 26 60 592 4,240 377 3,221
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was organized in April 1992 for the purpose of developing and
marketing an AED that is easy to use, inexpensive and easy to maintain. The
Company's first product, the VivaLink, received 510(k) marketing clearance from
the FDA in February 1995, and commercial sales of the VivaLink commenced in the
first quarter of 1995. The Company's revenues in 1995 were derived principally
from sales to a major distributor, which purchased products for subsequent
resale to customers. In the third quarter of 1995, the Company initiated
development of a network of manufacturer's representatives and distributors. In
the fourth quarter of 1995, it began to augment this network with development of
an internal sales force. In the first quarter of 1996, the Company terminated
the distribution arrangement with its major distributor. With the commencement
of marketing and promotion of its products and the initiation of a distribution
network, the Company incurred increased sales and marketing expenses. In the
fourth quarter of 1995, the Company accelerated its efforts to develop
complementary and additional products, resulting in increased research and
development expenses. The Company also incurred additional general corporate
expenses related to the growth of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net sales in the first quarter of 1996 were $434,000 compared to $155,000 in the
first quarter of 1995. Commercial sales of the VivaLink did not commence until
February 1995 following receipt of 510(k) marketing clearance from the FDA.
Sales to a major distributor represented approximately 19% and 100% of net sales
in the first quarter of 1996 and the first quarter of 1995, respectively. In the
first quarter of 1996, the Company terminated its distribution arrangement with
such distributor. The Company's products currently are being sold domestically
primarily through the Company's internal sales force, manufacturer's
representatives and distributors, and internationally primarily through one
non-exclusive distributor.
Research and development expenses were $366,000 in the first quarter of 1996
compared to $151,000 in the first quarter of 1995. The increase was due to the
Company's acceleration of product development in late 1995 which continued into
1996.
General and administrative expenses were $272,000 in the first quarter of 1996
compared to $119,000 in the first quarter of 1995. The increase in general and
administrative expenses reflects the hiring of additional personnel and costs in
connection with the Company's continued expansion.
Sales and marketing expenses were $439,000 in the first quarter of 1996 compared
to $63,000 in the first quarter of 1995. The increase in sales and marketing
expenses reflects commencement of commercial sales of the Company's initial
product and the Company's decision to promote and distribute its products
through the Company's internal sales force, manufacturer's representatives and
distributors, rather than through an exclusive distributor, as was the case in
1995.
Other income of $32,000 in the first quarter of 1996 and $2,000 in the first
quarter of 1995 consisted principally of interest earned on net proceeds from
financing transactions, pending utilization of such proceeds.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Net sales in 1995 were $1,038,000 compared to $14,000 in 1994. 1995 was the
first year in which the Company had approval to begin commercial sales of the
VivaLink. Sales to a former distributor represented 81% of net sales in 1995.
Net sales in 1994 were derived from sales of demonstration units.
Research and development expenses were $688,000 in 1995 compared to $648,000 in
1994 and $277,000 in 1993. Research and development expenses in 1995 related
principally to the development of additional and complementary products, whereas
such expenses in 1994 and 1993 were incurred principally in connection with the
development of the Company's initial product, the VivaLink.
General and administrative expenses were $604,000 in 1995 compared to $245,000
in 1994 and $119,000 in 1993. The increase in general and administrative
expenses reflects the hiring of additional personnel and costs incurred in
connection with the Company's continued expansion plans. Such costs include
increased rental expenses commencing in August 1994, when the Company moved its
operations to the larger facility which it currently occupies.
Sales and marketing expenses were $432,000 in 1995 compared to $157,000 in 1994
and $47,000 in 1993. Sales and marketing expenses in 1995 reflected the first
year of marketing and promotion of the VivaLink. In 1994 and 1993, sales and
marketing expenses were incurred for market research activities.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in April 1992, the Company has relied principally on
proceeds from the issuance of common stock to fund its operations, including net
proceeds of $5,191,000 and $1,524,000 in fiscal 1995 and 1994, respectively. The
Company had cash and cash equivalents of $2,481,000 and $3,767,000 and working
capital of $2,666,000 and $3,813,000 at March 31, 1996 and December 31, 1995,
respectively. In May 1996, the Company entered into a non-binding letter of
intent with Medtronic, Inc., an existing shareholder, for a proposed bridge loan
in the amount of $1,000,000 which would be repaid from the proceeds of this
offering.
The Company's operating activities used cash of $1,122,000, $1,579,000 and
$1,159,000 in the first quarter of 1996 and in fiscal 1995 and 1994,
respectively. Operating activities have used cash principally for research and
development of the Company's current and future products, general and
administrative expenses, and sales and marketing purposes.
Capital expenditures were $165,000, $233,000 and $248,000 in the first quarter
of 1996 and in fiscal 1995 and 1994, respectively. At March 31, 1996, the
Company had no material commitments for capital expenditures. The Company
anticipates total capital expenditures of approximately $1,300,000 in 1996 for
expansion of its facility, for additional tooling and manufacturing equipment
purchases associated with new product introductions and for an increase in
overall production capacity.
The Company estimates that the net proceeds from this offering, together with
revenue from sales of the VivaLink, will be sufficient to meet working capital
requirements for current operations and planned product development and
introductions for at least 24 months following the offering. The Company's
long-term capital requirements will depend upon numerous factors, including the
growth of the Company's internal sales force and marketing expenses, the cost of
research and development for new product introduction, capital expenditures and
revenues from the sale of the Company's products. The Company may need to raise
additional capital in the future, including the sale of equity securities which
may be dilutive to shareholders. There can be no assurance that the Company will
be able to raise additional funds when needed or that funds will be available on
terms acceptable to the Company.
The Company has not paid cash dividends. The Board of Directors currently
intends to retain all earnings for expansion of the Company's business.
The Company has not generated taxable income through March 1996. At March 31,
1996, the operating losses available to offset future taxable income were
approximately $4,195,000. The net operating loss carryforwards expire beginning
in 2007 and are subject to limitations under Section 382 of the Internal Revenue
Code due to changes in equity ownership of the Company. An ownership change
occurred in May 1994 and the Company estimates that the utilization of the net
operating loss carryforward for the period from April 16, 1992 (inception) to
May 1994 will be limited in any one fiscal year.
BUSINESS
INTRODUCTION
The Company has developed and is marketing an automated external defibrillator
("AED") which is used to treat victims of sudden cardiac arrest ("SCA"), one of
the leading causes of death in the United States. The Company began marketing
the VivaLink AED (the "VivaLink") following receipt of 510(k) marketing
clearance by the U.S. Food and Drug Administration in February 1995. The
VivaLink incorporates proprietary technologies which make it easy to use,
inexpensive and lightweight. In addition, the unit's automatic daily
self-testing feature ensures operational readiness. The Company believes that
the VivaLink, which is currently used by a broad range of minimally-trained
rescuers ("first responders"), such as firefighters, police officers and basic
life support ambulance personnel, is the easiest to use AED on the market. To
date, more than 20 lives have been saved using the VivaLink.
Sudden cardiac arrest, which causes more than 350,000 deaths in the United
States annually, is caused by disturbances of the heart's electrical signals. As
a consequence, blood flow stops, resulting in death if not treated within
minutes. Over 80% of SCAs are caused by severe heart attacks. Other causes of
SCA include electrocution, drowning and suffocation. The only effective
treatment for SCA is the prompt administration of an electric shock with a
device known as a defibrillator. Timely defibrillation is the most critical
factor in rescuing an individual from SCA. Published studies have indicated that
survival rates for out-of-hospital SCAs can exceed 50% if defibrillation is
administered within the first few minutes of SCA. Since response times by
paramedics and emergency medical technicians ("EMTs") equipped with
defibrillators are often more than ten minutes, the average SCA survival rate in
the United States is only 7%.
In order to improve survival rates, the American Heart Association ("AHA") and
other organizations have recommended widespread deployment of AEDs to first
responders and ultimately the public. Despite the automated features of AEDs and
the benefits of early defibrillation, AEDs have only achieved limited market
acceptance and deployment. The Company believes that this is due to the high
maintenance requirements, relative complexity, large size and high cost of other
currently available AEDs. The Company believes the VivaLink AED overcomes these
limitations.
The VivaLink incorporates a number of proprietary technological advances that
make it suitable for use by minimally-trained rescuers. It is small, weighs 7.75
pounds and incorporates a patented electrode packaging system that is
preconnected to the unit. The VivaLink is the only AED currently available that
automatically conducts daily self-tests of all major systems, including the
electrodes. The unit also incorporates voice prompts and one-button operation
for ease-of-use. The VivaLink's proprietary algorithm makes the decision as to
whether or not a shock is warranted, thereby contributing to patient and
operator safety. The unit is also designed for low-cost production, and the
Company believes that the VivaLink is currently the lowest-priced AED on the
market.
The Company is developing its next-generation product, the VivaLink II, which is
based on its versatile high voltage circuit. The VivaLink II is capable of
delivering monophasic and biphasic waveform shocks with delivered energy ranging
from less than 50 Joules up to 360 Joules.
The Company focuses its marketing and sales efforts on first responders and
out-of-hospital medical facilities. The Company believes that the initial
markets for its AEDs include approximately 515,000 sites. To date, the Company
has sold units to first responders, hospitals, other medical facilities and
industrial and commercial sites. In the United States, the Company currently
markets the VivaLink through an internal sales force of seven persons and
through 39 distributors and six manufacturer's representatives. Internationally,
the Company has signed a worldwide, non-exclusive agreement with a distributor
of electromedical equipment, which is currently selling the Company's products
in the United Kingdom and certain other countries. The Company continues to
significantly expand its distribution network by adding internal sales
personnel, distributors and manufacturer's representatives.
BACKGROUND
SUDDEN CARDIAC ARREST
Sudden cardiac arrest causes more than 350,000 deaths in the United States
annually. SCA is caused by disturbances of the heart's electrical signals called
arrhythmias. The most common arrhythmia associated with SCA is Ventricular
Fibrillation ("VF"), chaotic electrical signals throughout the heart that
produce no blood flow. The only effective treatment for VF is prompt
administration of an electric shock by a device known as a defibrillator.
The critical factor determining survival from SCA is the time interval from
onset of VF to the delivery of a defibrillation shock. Since both the brain and
heart muscle deteriorate rapidly when blood flow is stopped, the probability of
survival for a cardiac arrest patient decreases rapidly with time. In the United
States the average response time for paramedics and EMTs, who generally are
equipped with defibrillators, is approximately 10 minutes, which results in a
nationwide survival rate of only 7%. In contrast, the average response time of
police officers is approximately three minutes, making police cars an ideal
location for the placement of AEDs. The following graph, which was prepared by
the Company by compiling published survival statistics, illustrates the
importance of early defibrillation:
RELATIONSHIP BETWEEN VF SURVIVAL RATE AND
TIME TO EXTERNAL DEFIBRILLATION
[CHART]
Time to Defibrillation Survival Rate
(minutes) (percent)
0 100
2.5 50
5 25
10 12.5
15 7
Numerous studies have shown that defibrillation shocks must be delivered within
minutes to achieve higher survival rates. The individuals in a community who are
designated to arrive first in response to a medical emergency call and who have
a duty to respond are called "first responders." These first responders are most
often firefighters, police officers, basic life support ambulance personnel or
volunteer rescue squad members, who currently are not typically equipped with
defibrillators. In congested cities with long response times, such as New York
City, survival rates can be as low as 2%. In cities in which a concerted effort
has been made to encourage early CPR and to deliver early defibrillation by
first responders, survival rates of 50% (Rochester, Minnesota) and 30% (Seattle,
Washington) have been reported.
Patients who are successfully defibrillated have a wide range of available
long-term treatments, including coronary artery bypass grafting, coronary
angioplasty and implantable defibrillators. Recipients of these treatments have
one-year survival rates of over 80% and five-year survival rates of over 50%.
LIMITATIONS OF CURRENT AEDS
First in 1986, and again in 1990 and 1992, the American Heart Association
endorsed the implementation of early defibrillation by first responders. While
this policy statement was first made ten years ago, its implementation was
delayed by the lack of a suitable defibrillator. Portable manual defibrillators,
developed in the late 1960s, are not suitable because they require a medical
decision by highly-trained medical personnel as to whether or not defibrillation
is needed.
More recently, several companies have developed and are selling AEDs which are
somewhat easier to use than manual defibrillators. These AEDs are capable of
making a computer diagnosis of the patient's heart rhythm, eliminating the need
for highly trained operators. When the electrode pads are applied to the
victim's chest and the device detects an abnormal rhythm which requires
defibrillation, it advises the operator to deliver a shock. Despite the
automated features of AEDs and the benefits of early defibrillation, current
AEDs have only achieved limited market acceptance and deployment among EMTs,
first responders, medical professionals in clinics and other emergency response
personnel. The Company believes that this is due to the high maintenance
requirements, relative complexity, large size and high cost of other currently
available AEDs. Currently available units, other than the VivaLink, require
daily testing to assure operational readiness and include features such as
display screens which are not needed by first responders. Such units typically
weigh between 10 and 20 pounds and have list prices ranging from approximately
$3,750 to $7,600 per unit.
In response to these shortcomings, the AHA's Emergency Cardiac Care Committee
has specified three fundamental requirements for an AED to be suitable for use
by a broad range of first responders, as follows:
* The AED must be easy to operate and easily comprehended by users
with minimal training;
* The AED must be affordable in terms of its initial cost, initial
training and ongoing training; and
* The AED must be ready to perform its function at all times.
THE SURVIVALINK SOLUTION
The Company believes that the VivaLink overcomes the limitations of other AEDs
and meets all of the requirements specified by the AHA Emergency Cardiac Care
Committee. The Company began marketing the VivaLink following the receipt of
510(k) marketing clearance in February 1995. The VivaLink features proprietary
technologies, including one-button operation, pre-connected electrodes,
comprehensive voice prompting, automatic daily self-testing (including electrode
presence and condition) and versatile and reliable circuit technology. The
Company believes that this product is superior in all of these categories to all
currently available AEDs.
SURVIVALINK PRODUCTS
VIVALINK AED
[Line drawing of VivaLink AED]
When the VivaLink's electrode pads are applied to the patient, the device
automatically analyzes the patient's heart rhythm with a proprietary algorithm.
If the device determines that a defibrillation shock is appropriate, it audibly
prompts the operator to deliver a potentially life saving shock by pushing the
rescue button. The following summarizes rescuer actions and VivaLink voice
prompts for a rescue where defibrillation is necessary:
Rescuer Action: Assess the patient. Conscious? Breathing? Pulse?
IF THE ANSWER IS NO TO ALL -- open VivaLink lid
VIVALINK PROMPT: "PLACE ELECTRODES"
Rescuer Action: Open electrodes, place on chest
VIVALINK PROMPT: "DO NOT TOUCH PATIENT -- ANALYZING RHYTHM"
Rescuer Action: Observe patient for approximately 10 seconds
VIVALINK PROMPT: "CHARGING"
Rescuer Action: Observe patient for approximately 10 seconds
VIVALINK PROMPT: "PUSH FLASHING BUTTON TO RESCUE"
Rescuer Action: Push flashing rescue button
VIVALINK PROMPT: "DO NOT TOUCH PATIENT -- ANALYZING RHYTHM"
If a shock is not needed, the Vivalink then prompts:
"CHECK PULSE -- IF NO PULSE, GIVE CPR"
If additional shocks are required, the Vivalink will
instruct the rescuer to administer additional shocks.
The following are the key features of the VivaLink:
EASE OF USE. The Company believes that the VivaLink is easier to use than any
other AED currently on the market. The device features one-button operation,
pre-connected electrodes which are stored in an internal compartment, and
comprehensive voice prompting. Other AEDs have at least two or three buttons,
which are prone to cause confusion and improper rescue procedures in
life-threatening emergency situations. Extensive use of voice prompts in the
VivaLink guides the rescuer through a complete rescue. The voice prompt "check
pulse; if no pulse, give CPR", which is unique to the VivaLink, ensures that the
rescuer knows the proper next step in the rescue protocol. The Company has
received notice of allowance of a patent protecting the design of its simple
operator interface.
AFFORDABILITY. The VivaLink's list price of $2,800 makes it the most
affordable AED on the market. Its ease of use makes the initial and
continuing training affordable as well.
COMPLETE AUTOMATIC SELF-TEST. The VivaLink is the only currently available
defibrillator that incorporates a complete daily automatic self-test, including
a test of the pre-connected electrodes. This test verifies the functionality of
all of the essential subsystems needed for a rescue, such as battery charge,
electrodes and electronics. If a problem is detected, the unit will begin to
beep, similar to a smoke detector, and an indicator on the outside of the case
will turn from black to yellow. A record of the most recent ten self-tests is
kept in memory for quality assurance verification. The automatic self-test
feature eliminates the problem of improper maintenance, which has been cited as
the leading cause of defibrillator failure. The Company has received a patent on
the concept of packaging electrodes with the cable and connector extending
through the sealed package for the purpose of confirming presence and quality of
the electrodes. Patent continuations are pending containing broader electrode
pre-connection claims.
PROPRIETARY ELECTRONIC TECHNOLOGY. The Company has developed proprietary high
voltage circuit technology that uses all solid state circuitry, replacing the
expensive, bulky components used in other AEDs. The VivaLink produces the 360
Joule defibrillation energy prescribed by the AHA's rescue protocol. The Company
has been granted two patents covering the high voltage circuitry contained in
the VivaLink.
PATIENT AND OPERATOR SAFETY. The VivaLink one-button operation enables a
minimally-trained rescuer to safely administer a defibrillation shock. Patient
safety is ensured by the sophisticated, computerized decision-making process
which allows high voltage to be produced only if specific, life-threatening
cardiac rhythms are identified. In more than one year of field use, the Company
has received no reports of incorrect decisions made by the VivaLink. The
VivaLink also ensures operator safety by minimizing the possibility of contact
with high voltage. Voice and audible electronic warnings alert the rescuer when
the VivaLink is building a high voltage charge, allowing time to get clear of
the patient prior to shock delivery.
DURABILITY. AEDs are expected to receive rough use due to the rigorous
demands of operation during emergency situations. Consequently, the VivaLink
is made of a proprietary blend of high strength plastic, all solid state
components and a high voltage circuit capable of delivering over 250,000 shocks
during its lifetime. Prior to its market release, the VivaLink passed rigorous
military standards for temperature, humidity, shock, vibration and
electromagnetic compatibility.
DATA STORAGE AND RETRIEVAL. The VivaLink contains a memory chip for storing a
wide variety of data. Rescue data stored includes 20 minutes of
electrocardiogram ("ECG") rhythm, decisions made by the AED, shock delivery, CPR
prompts and the exact time at which these events occurred. The data may be
downloaded to any Windows-based PC using the Company's proprietary RescueLink
software. Medical directors use the rescue data to confirm that both the AED and
the rescue personnel are responding promptly and correctly. The maintenance
records are used by Company personnel to evaluate the AED's performance and aid
in maintenance.
PORTABILITY. The VivaLink features a comfortable "grab and go" handle and an
internal compartment for electrode storage. The VivaLink weighs 7.75 pounds and
measures 3.75" high, 10.5" wide and 12.25" long. The product's light weight,
small size and multiple source battery charging capability make it suitable for
deployment in a wide variety of settings, including emergency vehicles,
buildings and aircraft.
OTHER PRODUCTS
VIVALINK TRAINING UNIT. The VivaLink Training Unit ("VTU") is a low-cost replica
of the VivaLink used specifically for defibrillation training. The device does
not produce any energy output and consequently is completely safe for use in
training situations. The VTU also enables training sessions to be conducted with
or without a mannequin. The VTU is sold to defibrillation trainers and functions
as a promotional tool for the VivaLink.
ACCESSORIES. The Company markets accessories for the VivaLink, including
various battery chargers, additional electrodes, a soft-sided case and a
voice recorder to document the rescue event.
FUTURE PRODUCTS
VIVALINK II. The VivaLink II incorporates an enhancement of the Company's
initial proprietary circuit technology making it a versatile platform capable of
delivering monophasic, biphasic or new waveform shocks with delivered energy
ranging from less than 50 Joules up to 360 Joules. In a monophasic waveform, the
current flows through the body in only one direction from one electrode to the
other, and in a biphasic waveform, the direction of the current is reversed
during the pulse. In the VivaLink II, the shock waveform and energy sequence can
be preselected from among factory-defined waveforms and energy settings. This
feature will enable the VivaLink II to deliver the most up-to-date waveforms as
they evolve. The Company expects to release its VivaLink II in the first half of
1997 with the standard 360 Joules monophasic waveform selected. In the second
half of 1997, the Company expects to release a software upgrade enabling the
VivaLink II to deliver a lower energy optimized waveform, which may be biphasic,
as well as the traditional 360 Joule shock.
PUBLIC ACCESS DEFIBRILLATOR. In December 1994, the AHA sponsored a conference
regarding Public Access Defibrillation (PAD). PAD refers to the concept of
making AEDs available to non-traditional rescuers, ranging from the designated
citizen responder (such as a security guard, store manager, flight attendant,
shop foreman, or floor captain of an apartment building) to the concerned
citizen responder (the first person regardless of training to identify a victim
of SCA). The conference resulted in an AHA policy statement endorsing PAD and
encouraging individuals and organizations to assist in its adoption. While the
Company believes that the VivaLink is nearly suitable for the concerned citizen
responder, it still intends to develop a Public Access Defibrillator
specifically for this segment.
THE AED MARKET
The Company estimates that worldwide sales of automated external defibrillators
were approximately $47.6 million in 1995, or approximately 8,750 units. The
Company believes this market has developed despite the absence of an optimized
first responder defibrillator. The market for AEDs can be broadly segmented into
the United States out-of-hospital market, the United States hospital market, and
the international market. Collectively, these segments amount to approximately
515,000 sites, and certain of these sites may require more than one AED. The
Company has sold AEDs into all of the following segments.
UNITED STATES MARKETS
OUT-OF-HOSPITAL MARKET. A high percentage of SCAs occur outside of a hospital.
Several studies have shown that early defibrillation has a significant impact on
survival from SCA. The AHA has identified the need for early defibrillation and
has issued several statements supporting the principle of early defibrillation.
At its 1992 national conference, the AHA concluded that all emergency vehicles
should be equipped with a defibrillator. In addition, the AHA stated that all
personnel whose jobs require that they perform basic CPR be trained to operate
and permitted to use defibrillators. In 1995, the AHA further endorsed the
principle of early defibrillation by advocating the use of AEDs by laypersons at
home and by firefighters, police, security personnel and non-physician care
providers in the community. Currently, the use of an AED is governed in many
jurisdictions by law and regulation, allowing only adequately trained personnel,
such as paramedics and EMTs, to use the devices. The United States Department of
Transportation recently revised its guidelines to include AED training for EMTs.
As training becomes more widely administered, the Company anticipates the future
placement of defibrillators and increased authorization to defibrillate for
designated citizen responders and concerned citizen responders.
The out-of-hospital market for AEDs can be further segmented based on the skill
levels of these various groups as follows:
FIRST RESPONDERS. The individuals in a community who are designated to
arrive first in response to an emergency call and have a duty to respond are
called "first responders." Generally 40 hours of training in basic first aid
and CPR is required for these individuals. Typically, first responders are
firefighters, police officers, basic life support ambulance personnel and
volunteer rescue squad members. First responders are typically the only
emergency service personnel who are consistently able to respond to an SCA
event within the time limit needed to administer effective defibrillation.
Since firefighters, police officers and basic life support personnel are
tied into the emergency dispatch network, they are frequently able to
respond to calls in less than five minutes. Statistics indicate that there
are approximately 75,000 fire vehicles and 15,000 basic life support
ambulances in the United States. The Company estimates that only 30% of
these vehicles are equipped with defibrillators. The Company also estimates
that there are approximately 210,000 marked law enforcement vehicles in the
United States capable of carrying an AED. The Company believes that less
than 1% of these vehicles are presently equipped with AEDs.
OUT-OF-HOSPITAL MEDICAL FACILITIES. This segment consists of allied
medical sites, including clinics, office-based surgical facilities, extended
care facilities, nursing homes, assisted living centers, military sites and
other locations where professional medical services are provided out of the
hospital. These locations have a greater chance of being the site of SCA for
a variety of reasons, including the use of anesthesia and the demographics
of those under care. The Company estimates that there are more than 190,000
physicians offices, 12,000 assisted living facilities, 16,600 nursing homes,
13,000 oral surgeons, 4,000 urgent care centers and 2,200 surgery centers
that are potential sites for placement of AEDs.
OTHER FACILITIES WITH DESIGNATED RESPONDERS. This segment includes other
sites where large numbers of people gather or are isolated from emergency
medical services and where designated personnel are trained and responsible
for responding to medical emergencies. Such locations include airports,
airplanes, corporate medical stations, stadium/arena medical stations,
cruise ships, high-rise office buildings and athletic facilities. To date,
only a limited number of AEDs have been placed in such locations.
CONCERNED CITIZEN RESPONDERS/PUBLIC ACCESS. The concerned citizen
responder/public access market is anticipated to consist of
minimally-trained personnel, such as security personnel, flight attendants,
and public facility staff. Through awareness and acceptance, it is believed
that concerned citizen responders will emerge as users of AEDs. This market
is at an early stage. While its potential size is substantial, there are
regulatory, funding, training, legal and awareness issues that limit the use
of defibrillators by lay rescuers without supervision by a medical director.
The Company believes that AEDs sold to this user group must be easy to use,
low maintenance, low cost, and require minimal training.
HOSPITAL MARKET. The hospital market in the United States consists of
approximately 5,600 acute care hospitals and 1,000 other hospitals.
Traditionally, the hospital market has utilized manual defibrillators requiring
the operator to read and interpret a patient's ECG. In addition to an ECG
display, many of these devices include additional features, such as printers,
manual energy selection, external pacing and cardioversion, which add to the
cost, complexity, maintenance and training expenses associated with manual
defibrillators. These devices are located on wheeled carts, called "crash
carts," containing other needed emergency equipment. When an SCA event occurs, a
trained team is alerted and responds by rushing the crash cart from a
strategically located position to the SCA victim. The Company believes that the
deployment of AEDs in other areas of the hospital will enable hospitals to
improve their ability to deliver defibrillation faster and at a lower cost. As
hospitals continue to search for areas to reduce health care delivery costs, the
cost/benefit of AED use could cause a transition from the use of manual
defibrillators in some areas of the hospital to the use of AEDs.
INTERNATIONAL MARKETS
Similar to the endorsement of early defibrillation in the United States, the
United Kingdom and Canada have embraced this concept. The European Resuscitation
Council has endorsed early defibrillation concepts similar to those of the AHA.
Adoption of early defibrillation in other countries is an emerging concept.
MARKETING, DISTRIBUTION, AND SALES
The Company focuses its marketing and sales efforts on and has sold the VivaLink
to police and fire departments, basic life support ambulance services,
hospitals, out-of-hospital medical facilities and commercial and industrial
sites. The Company uses a complementary set of distribution channels, including
an internal sales force, distributors and manufacturer's representatives. The
Company currently has three regional sales managers, four direct sales
representatives, six manufacturer's representative organizations and 39
distributors. The Company intends to significantly expand its distribution
network. The Company's strategy has evolved from reliance on a sole
distributorship which was terminated in January 1996. Sales to the Company's
former sole distributor represented 81% of the Company's net sales in 1995.
Internationally, the Company has signed a worldwide, non-exclusive agreement
with Vida Medizinelektronik GmbH ("Vida"), a manufacturer and distributor of a
variety of electromedical equipment, including manual defibrillators. Vida is
currently distributing the Company's products through its dealers in the United
Kingdom, Australia and Northern Africa and plans to distribute the VivaLink,
pending regulatory approval, through its dealer network in Western Europe and
other regions.
There can be no assurance that the Company will be able to strengthen its
distribution or maintain its existing distribution network. Further,
international distribution will depend significantly on the ability of the
Company to obtain required regulatory approvals in foreign countries. There can
be no assurance that the Company will be able to obtain necessary foreign
regulatory approvals or that international distributors will devote adequate
resources to selling the Company's products. Because the concept of early
defibrillation is not as advanced throughout the rest of the world, the Company
anticipates that the international market will develop at a slower rate than the
domestic market. See "Risk Factors -- Limited Marketing and Manufacturing
Experience."
CUSTOMER SERVICE
The Company is committed to rapid response to customer service requests. A
Company representative is available 24 hours a day, 7 days a week. Most customer
service calls can be resolved over the telephone. If factory service is
necessary, the Company is committed to 24 hour delivery of an AED loaner. The
customer's unit will then be repaired or replaced. The Company's standard
warranty covers parts and labor for one year.
MANUFACTURING
Manufacturing operations performed at the Company's headquarters consist
primarily of final assembly and testing of the VivaLink and related accessories.
The Company believes that it has sufficient manufacturing capacity for the
foreseeable future. The Company believes that it is in compliance with FDA good
manufacturing practices and has established a goal for obtaining ISO 9001
certification by mid-1997.
The VivaLink was designed with the goal of minimizing manufacturing cost and
production time. The Company believes that this design gives it a competitive
advantage in cost of goods and production time, which should enhance the
Company's ability to respond rapidly to changes in market demand. The VivaLink
primarily utilizes standard components and consists of a molded case, electronic
circuit boards and wire harness assemblies.
As part of the Company's strategy, the Company outsources circuit boards, cable
assemblies, electrodes and plastic injection-molded parts. The Company has
formed relationships with external suppliers to ensure the cost-effective
procurement of high quality materials and components. This allows the Company to
benefit from greater purchasing power, economies of scale and technical
competencies of industry specialists. Electrodes and certain other materials and
components used in the Company's products are purchased from single sources. The
Company believes that additional sources for such components and materials could
be utilized if necessary. However, there can be no assurance that alternative
sources of supply will be available if needed. The success of the Company
depends, in part, on its ability to increase production and maintain access to
adequate production components and materials. Shortages or poor quality of
materials and components could have a material adverse effect on the Company's
business, operating results or financial condition. While the Company seeks to
maintain an inventory of components sufficient for its anticipated needs,
certain components are subject to long lead times and, accordingly, the
Company's ability to expand production rapidly could be limited by the
availability of such components. The expansion of the Company's manufacturing
operations is subject to a number of other risks. See "Risk Factors -- Limited
Marketing and Manufacturing Experience; -Management of Growth; and -- Dependence
on Principal Suppliers."
RESEARCH AND DEVELOPMENT
The Company is committed to continued product innovation in external
defibrillation and enhancement of existing products. The Company's primary
product development effort is focused on VivaLink II, a versatile platform
capable of multiple waveforms and high/low energy output. The Company believes
that this product will provide AED users the capability of optimizing energy and
waveform delivery under software control without expensive factory upgrades or
replacement units. The Company is also actively studying waveform efficacy in
order to identify and develop an optimized waveform technology for transthoracic
defibrillation. Product development expenses are generally incurred for product
design and qualification, manufacturing process development and validation,
clinical trials, and governmental approvals. For the years ended December 31,
1993, 1994 and 1995, the Company's research and development expenditures were
approximately $277,000, $648,000 and $688,000, respectively. The Company's
research and development expenses are expected to increase as the Company
continues its current product development plans.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend in part on its ability to obtain patent
protection for its products and processes, to preserve its trade secrets and to
operate without infringing the proprietary rights of third parties. The
Company's strategy is to actively pursue patent protection in the United States
and selected foreign jurisdictions for technology that it believes to be
proprietary and that offers a potential competitive advantage for its products.
The Company currently holds three U.S. patents and has received notice of
allowance on a fourth U.S. patent.
The first patent relates to specialized equipment and a method of self-testing
the AED and the condition of its electrodes. The Company's second patent covers
the Company's high voltage circuit; this invention allows for a reduction in the
cost of the high voltage components, which the Company believes gives it a
manufacturing cost advantage. The third patent covers a novel method for
protecting the patient from electrical leakage currents and circuit
malfunctions; the Company believes this invention has broad applications and may
have value in licensing rights to manufacturers of both implantable and external
defibrillators. The fourth patent, for which notice of allowance has been
received, addresses the design of the operator interface for the VivaLink. The
Company has nine additional patents pending in the United States and three
internationally. The patents pending address such items as the user interface,
self-testing features and unique electrical circuits, as well as continuations
on previously issued patents. The Company plans to file additional patent
applications to seek protection for other proprietary aspects of its technology
in the future.
There can be no assurance that any patents from pending patent applications or
from any future patent application will be issued, that the scope of any patent
protection will exclude competitors or provide competitive advantages to the
Company, that any of the Company's patents will be held valid if subsequently
challenged or that others will not claim rights in or ownership of the patents
and other proprietary rights held by the Company. In addition, the laws of
certain foreign countries do not protect the Company's intellectual property
rights to the same extent as do the laws of the United States. Litigation or
regulatory proceedings, which could result in substantial costs and uncertainty
to the Company, may also be necessary to enforce patent or other intellectual
property rights of the Company or to determine the scope and validity of other
parties' proprietary rights. There can be no assurance that third parties will
not assert infringement claims in the future with respect to the Company's
current or future products or that any such claims will not require the Company
to enter into license arrangements or result in litigation, regardless of the
merits of such claims. No assurance can be given that any necessary licenses can
be obtained on commercially reasonable terms, or at all. Should litigation with
respect to any such claims commence, such litigation could be extremely
expensive and time consuming and could have a material adverse effect on the
Company's business, financial condition or results of operations regardless of
the outcome of such litigation. See "Risk Factors -- Reliance on Proprietary
Technology; Uncertainty of Proprietary Rights Protection."
COMPETITION
The market for AEDs is highly competitive. The Company competes with a number of
companies, some of which may have significantly greater financial, technical,
research and development, and marketing and sales resources than the Company.
Competition for AED sales comes from established defibrillator manufacturers,
including Physio-Control International Corporation, Laerdal Medical, Inc.,
Marquette Electronics, Inc. and Zoll Medical Corporation. Physio-Control,
Laerdal and Marquette have developed AEDs based on the technology platforms of
earlier defibrillators. The Company believes these AEDs, while an improvement
over manual defibrillators, have complexities which inhibit their widespread use
by first responders, future designated citizen responders or concerned citizen
first responders. A recently announced product by a development stage company,
Heartstream, Inc., is expected to be introduced in 1996. In addition, the
Company expects additional competitive product entrants from established and new
defibrillator manufacturers.
The Company believes that the key issues for customers in selecting an AED
include ease of use, ease of maintenance, purchase price, training cost,
reliability and field service. The Company believes that the VivaLink and
related accessories compete favorably in these areas. There can be no assurance,
however, that superior defibrillation technologies or products will not be
developed by the Company's current competitors or others or that alternative
therapies or approaches, including pharmaceutical or other alternatives, will
not render the Company's technology or products under development obsolete or
noncompetitive, which could have a material adverse effect on the Company's
business, operating results or financial condition. See "Risk Factors -- Intense
Competition and -- Technological Change and Product Obsolescence."
GOVERNMENT REGULATION
The medical devices developed, manufactured and marketed by the Company are
subject to extensive and rigorous regulation by the FDA and similar agencies in
other countries. The FDA granted 510(k) marketing clearance for the VivaLink in
February 1995, enabling the Company to begin marketing of the device in the
United States. The Company is registered as required by Canadian regulations. In
the United Kingdom, the Company is in the final stages of review by the British
Standards Institute. The Company is working in conjunction with its European
distributor to obtain a CE mark for the VivaLink.
Pursuant to the Federal Food, Drug, and Cosmetic Act of 1976, as amended, and
the regulations promulgated thereunder (the "Act"), the FDA regulates the
design, clinical testing, manufacture, labeling, distribution, and promotion of
medical devices. Noncompliance with applicable requirements can result in, among
other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the government
to grant necessary approvals, withdrawal of marketing approvals and criminal
prosecution. The FDA also has the authority to request repair, replacement or
refund of the cost of any device manufactured or distributed by the Company. In
the United States, medical devices are classified into one of three classes,
Class I, II, or III, on the basis of the controls deemed necessary by the FDA to
reasonably assure their safety and effectiveness. Under FDA regulations, Class I
devices are subject to general controls (for example, labeling, pre-market
notification and adherence to GMP) and Class II devices are subject to general
and special controls (for example, performance standards, post-market
surveillance, patient registries and FDA guidelines). Generally, Class III
devices are those which must receive pre-market approval by the FDA to ensure
their safety and effectiveness (for example, life-sustaining, life-supporting
and implantable devices, or new devices which have not been found substantially
equivalent to legally marketed devices). The FDA has also recently established a
task force, which is considering requiring post-market studies in an effort to
obtain better data on the safety of AEDs and their diagnostic algorithms. Such
post-market studies may result in the imposition of additional regulatory
requirements on the Company.
Before a new medical device can be introduced into the U.S. market, the
manufacturer must generally obtain FDA clearance through either a 510(k)
notification or Pre-Market Approval ("PMA"). A 510(k) clearance will be granted
if the submitted information establishes that the proposed device is
"substantially equivalent" to a legally marketed Class I or II medical device,
or to a Class III medical device for which the FDA has not called for PMAs.
The Company is also subject to state regulations in the United States. Many
states have enacted laws and regulations regarding emergency medical services.
In some states, defibrillation therapy, including the use of AEDs, has been
limited to specified categories of trained personnel. In some cases, specific
features are identified as required for external defibrillators, which may not
currently be part of the VivaLink. There is no assurance that such restrictions
or laws will be changed, which could have a material adverse effect on the
Company's ability to market its products in certain states.
In order for the Company to market the VivaLink and its related accessories in
Europe and certain other foreign countries, the Company and its distributors and
agents must obtain required regulatory approvals and clearances specific to
those jurisdictions. These regulations and marketing clearance protocols are
specific to each country. There can be no assurance the Company will be able to
obtain required regulatory approvals or that it will not incur significant costs
in obtaining such approvals. Delays in receipt of such approvals could
significantly impact the Company's ability to market its products
internationally and could have a material adverse effect on the Company's
business, operating results or financial condition.
The European Union has promulgated rules which require that medical products
receive by mid-1998 the right to affix the CE mark, an international symbol of
adherence to quality assurance standards and compliance with applicable European
medical device directives. In order to obtain the right to affix the CE mark to
the VivaLink or other Company products, the Company must obtain certification
that its processes meet European quality standards. Failure to obtain
certification will prohibit the Company from obtaining the CE mark and marketing
its products in the member European Union countries. There can be no assurance
that the Company will be successful in obtaining the required certifications or
CE mark.
The Company is working in conjunction with Vida, its European distributor, to
obtain a CE mark for the VivaLink. A final decision on this is expected in the
third quarter of 1996. The Company has also engaged TUV Product Services in
Munich, Germany to obtain regulatory approval to market the VivaLink II in
Germany and other European Union member countries. See "Risk Factors -Strict
Government Regulation; Need for Additional Regulatory Approvals."
PRODUCT LIABILITY
The Company inherently faces the potential business risk of product liability
claims in the event that use of its products results in personal injury or
death. There can be no assurance that the Company will not be subjected to such
claims and losses related to such claims. The Company currently maintains
product liability insurance with coverage limits of $1 million per occurrence
and $1 million in the aggregate. There can be no assurance that the coverage
limits of the Company's insurance policies will be adequate. Product liability
insurance is expensive, difficult to obtain, and may not be available in the
future to the Company. To date, there have not been any product liability claims
asserted against the Company. Any claims asserted against the Company could have
a material adverse effect on the Company's business, results of operations or
financial condition. See "Risk Factors -- Product Liability."
EMPLOYEES
At April 30, 1996, the Company had approximately 40 full-time employees, of whom
17 were involved in research and development, 9 in sales and marketing, 8 in
manufacturing, and 6 in administration and management. None of the Company's
employees is represented by a labor union or is covered by a collective
bargaining agreement. The Company has not experienced any work stoppages and
believes its employee relations to be good.
The Company expects to hire additional employees during the next twelve
months, principally in sales, manufacturing and product development. See
"Risk Factors -- Management of Growth; -- Dependence on Key Management."
FACILITIES AND EQUIPMENT
The Company is headquartered in a leased facility of 10,625 square feet located
at 5420 Feltl Road, Minnetonka, Minnesota. The facility is leased pursuant to a
five-year lease that expires August 31, 1999. The Company has signed an addendum
to the lease for an additional 7,633 square feet adjacent to the existing
facility. The Company intends to occupy the additional space beginning in July
1996. The Company believes these facilities are adequate space for its current
and reasonably foreseeable needs.
LITIGATION
The Company is not a party to any material legal proceedings.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are as
follows:
NAME AGE POSITION WITH COMPANY
Byron L. Gilman 49 Chairman, Chief Executive Officer and Director
Kenneth F. Olson 34 Vice President of Operations
R. Eric Bosler 28 Chief Financial Officer
Douglas M. Graham 46 Director of Sales
Thomas K. Klein 45 Director of Marketing
James E. Brewer 42 Director of Research and Regulatory Affairs
Richard B. Emmitt 51 Director
David S. Goldsteen, M.D. 42 Director
Karl J.F. Kroll 34 Director
Mark W. Kroll, Ph.D. 43 Director
Kenneth C. Maki 48 Director
Warren S. Watson 44 Director
BYRON L. GILMAN, a founder of the Company, has been Chairman, Chief Executive
Officer and a Director of the Company since its inception in April 1992. From
1990 to December 1992, Mr. Gilman served as an independent consultant in the
biomedical field. From 1987 to 1990, Mr. Gilman was Vice President of Product
Development and a director of Medilase Inc. (now Clarus Medical), a laser
angioplasty company, of which he was a co-founder.
KENNETH F. OLSON has been Vice President of Operations of the Company since July
1995, and served as Director of Engineering of the Company from January 1993 to
July 1995. From June 1992 to December 1992 Mr. Olson was a Senior Design
Engineer for Ancor Communications, a high speed communications switching
company. From June 1990 to June 1992 Mr. Olson was a Senior Design Engineer for
Network Systems Corp., a computer network design company.
R. ERIC BOSLER has been Chief Financial Officer of the Corporation since
March 1996, and served as Controller of the Company from July 1994 to March
1996. Mr. Bosler was employed by Ernst & Young LLP from 1993 to July 1994 as
an auditor. Mr. Bosler is a certified public accountant.
DOUGLAS M. GRAHAM has been Director of Sales of the Company since June 1995.
Mr. Graham was employed by Aerosport as Director of Sales from December 1994
to June 1995. Prior to Aerosport, Mr. Graham was employed by Medical Graphics
Corporation, a manufacturer of cardiac stress testing equipment, as Sales
Director from August 1993 to August 1994. From November 1986 to July 1993 Mr.
Graham was employed as a District Manager by Siemens Burdick, Inc., a
manufacturer of cardiac monitoring equipment.
THOMAS K. KLEIN has been Director of Marketing of the Corporation since February
1996. From 1990 to February 1996, Mr. Klein was Vice President, Marketing and
Customer Service of Recovery Engineering, Inc., a manufacturer of small-scale
drinking water systems.
JAMES E. BREWER has been Director of Research and Regulatory Affairs of the
Company since October 1995. From June 1993 to October 1995, Mr. Brewer was a
Senior Research Scientist for Angeion Corp., a manufacturer of implantable
defibrillators. From March 1987 to May 1993, Mr. Brewer was Vice President of
Research for Vital Heart Systems, a manufacturer of signal averaging ECG
equipment.
RICHARD B. EMMITT has been a Director of the Company since December 1995. Mr.
Emmitt has been an investment manager with The Vertical Group, L.P., a
private investment entity, since 1989. He is also a director of Xomed
Surgical Products, Inc. and Cardiotronics Systems, Inc.
DAVID S. GOLDSTEEN, M.D., has been a Director of the Company since June 1994.
Dr. Goldsteen has been Medical Director of Healthspan Transportation, a
wholly owned subsidiary of Allina Health Systems, since 1987. Dr. Goldsteen
has also been the President and Chief Executive Officer of Global Capital
Investments, a merchant banking firm, since 1995. Dr. Goldsteen currently
serves on the Board of Directors of TraceNet Technology, Inc. and is the
Chairman of the Board of Advanced Vascular Systems, Inc.
KARL J.F. KROLL, a founder of the Company, has been a Director of the Company
since its inception in April 1992. Mr. Kroll has been employed as a mechanical
engineer, by Intercomp Co., a manufacturer of portable scales for the
transportation industry since November 1994. From 1990 to 1994, Mr. Kroll was
employed by Dahlberg, Inc., a manufacturer of hearing aids, as a mechanical
engineer.
MARK W. KROLL, PH.D., a founder of the Company, has been a Director of the
Company since its inception in April 1992. Since October 1995, Dr. Kroll has
been employed by Pacesetter, Inc., a St. Jude Medical company, as a Vice
President of the tachycardia business unit. From 1991 to October 1995, he was
employed by Angeion Corporation, an implantable defibrillator/medical device
development company, most recently as Vice President of Research and Product
Planning. Mr. Kroll holds a Ph.D. in Mathematics.
KENNETH C. MAKI, a founder of the Company, has been a Director of the Company
since its inception in April 1992. Mr. Maki has been Chief Executive Officer of
Tekna-Seal, Inc., a manufacturer of electronic seals for medical and industrial
equipment, since December 1994. From 1982 to December 1994, he was Chief
Executive Officer of Tau-Med, Inc., a manufacturer's representative for sales of
medical equipment.
WARREN S. WATSON has been a Director of the Company since June 1994. Mr.
Watson has been employed by Medtronic, Inc. since 1976, in various positions,
and he currently serves as Vice President and General Manager of Brady Leads
for Medtronic, Inc.
Directors of the Company are elected annually to serve until the next annual
meeting of shareholders. Certain shareholders have the right to nominate
persons to serve on the Company's Board of Directors, and the Company has
agreed to use its best efforts to secure the election of such nominees to the
Board of Directors. Dr. Goldsteen, Mr. Emmitt and Mr. Watson have been
elected directors of the Company pursuant to such arrangements. See "Certain
Transactions." These arrangements will terminate upon the closing of this
offering. Karl J.F. Kroll and Mark W. Kroll are brothers.
SCIENTIFIC ADVISORS
The Company has established a Scientific Advisory Board ("SAB") to assist the
Company's development team. Specifically, the role of the SAB is to help in
establishing product requirements, usage protocols and features required in
pre-hospital defibrillation; contribute technical expertise to the design of
the AED; and assist with design and implementation of product testing. Dr. G.
Patrick Lilja, Dr. Charles D. Swerdlow, and Dr. Patrick J. Tchou are
currently members of the SAB. Dr. Lilja is the Chief of the Department of
Emergency Medicine at North Memorial Medical Center in Minneapolis,
Minnesota. Dr. Swerdlow is Clinical Associate Professor of Medicine at UCLA
Medical School and Cedars-Sinai Medical Center in Los Angeles, California.
Dr. Tchou is the Head of Cardiac Electrophysiology for the Cleveland Clinic
Foundation in Cleveland, Ohio.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding compensation earned by or awarded to Byron L. Gilman for the years
ended December 31, 1995, 1994 and 1993. No other executive officer has earned or
been awarded annual compensation in excess of $100,000.
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
Byron L. Gilman 1995 $106,500 $13,300 50,000
Chairman of the Board and 1994 $ 84,000 -- --
Chief Executive Officer 1993 $ 84,000 -- --
The following table sets forth certain information regarding stock options
granted to the executive officer named in the Summary Compensation Table during
the Company's fiscal year ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENT OF TOTAL STOCK
OPTIONS GRANTED PRICE APPRECIATION
TO EXERCISE FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM(1)
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Byron L.
Gilman 50,000(2) 33.4% $3.00 01/04/05 $94,334 $239,061
</TABLE>
(1) Represents the potential net realizable value of each grant of options
assuming that the market price of the underlying common stock appreciates in
value from its fair market value on the date of grant to the end of the
option term at the indicated annual rates.
(2) Mr. Gilman was granted an option for 50,000 shares of Common Stock on
September 15, 1995. Such option vests with respect to 25% of the option
shares on the first, second, third and fourth anniversaries of the grant
date.
The following table sets forth certain information regarding the number and
value of unexercised stock options held by the executive officer named in the
Summary Compensation Table as of the end of the Company's fiscal year ended
December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT YEAR-END (#) AT YEAR-END ($)(1)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Byron L.
Gilman 0 $0 0 50,000 $0 $350,000
</TABLE>
(1) Based on the difference between the assumed public offering price of $10.00
per share and the exercise price of the options multiplied by the number of
shares underlying the option. The executive officer named in the table did
not exercise any stock options during the year ended December 31, 1995.
STOCK OPTIONS
The Company's 1992 Stock Option and Incentive Plan (the "Option Plan") was
adopted by the Board of Directors of the Company and approved by the
shareholders in 1992. The Option Plan permits the granting of awards to
employees and consultants of the Company in the form of stock options and grants
of restricted stock. As of the date of this Prospectus, a total of 1,000,000
shares of the Company's Common Stock has been reserved for issuance pursuant to
awards granted under the Option Plan. As of the date of this Prospectus, 447,500
shares were subject to outstanding stock options under the Option Plan, and
518,000 shares were available for grant. Options for a total of 34,500 shares
have been exercised under the Option Plan. The exercise prices for currently
outstanding stock options range from $1.00 to $6.00 per share. Options granted
under the Option Plan generally expire five or ten years from the date of grant
or, if earlier, upon termination of employment.
The Option Plan is administered by the Board of Directors of the Company (the
"Board"), or by a committee appointed by the Board. The Option Plan gives broad
powers to the Board to administer and interpret the Option Plan, including the
authority to select the individuals to be granted options and to prescribe the
particular form and conditions of each option granted. Options may be granted
pursuant to the Option Plan through May 22, 2002. The Option Plan may be
terminated earlier by the Board of Directors in its sole discretion.
The Company has also granted non-qualified stock options, not under the Option
Plan, to certain consultants to the Company in lieu of cash compensation for
their services. At the date of this Prospectus, 362,538 shares were subject to
such options, at exercise prices ranging from $.10 to $4.00 per share. Such
options generally expire five years from the date of grant.
CERTAIN TRANSACTIONS
From December 1993 through March 1994, the Company conducted a private placement
in which it sold an aggregate of 268,999 shares of Common Stock at a price of
$1.50 per share. In December 1993, Dr. David Goldsteen acquired an aggregate of
33,333 shares of Common Stock in such offering. In addition, in exchange for Dr.
Goldsteen's consent to the immediate use by the Company of the funds provided by
Dr. Goldsteen pending the sale of the minimum number of shares in such offering,
the Company issued to Dr. Goldsteen warrants exercisable through December 1998
for the purchase of an additional 33,333 shares of Common Stock at a price of
$1.50 per share, and granted to Dr. Goldsteen the right to make a further
investment of up to $500,000 within a period of two months after completion of
such offering. Pursuant to such investment right, Dr. Goldsteen and others
invested an aggregate of $340,000 in May 1994, as described below, following the
Company's sale of Common Stock to Medtronic, Inc. in April 1994.
In April 1994, the Company entered into an agreement with Medtronic, Inc.
pursuant to which it sold to Medtronic 200,000 shares of Common Stock at a
purchase price of $1.50 per share, and a warrant exercisable through April 1999
for the purchase of an additional 75,000 shares of Common Stock at a price of
$1.50 per share. The holder of the warrant has demand registration rights that
may be exercised one time, and "piggy-back" registration rights that may be
exercised from time to time, prior to April 1999. In addition, the agreement
provides that, so long as Medtronic owns at least 100,000 shares of Common
Stock, Medtronic will have the right to nominate one person to serve on the
Company's Board of Directors, and the Company will use its best efforts to
secure the election of such nominee to the Board of Directors. In June 1994, Mr.
Watson was elected to the Board of Directors pursuant to this arrangement. This
arrangement will terminate upon the closing of this offering.
In May 1994, the Company entered into agreements with Dr. Goldsteen and other
private investors for the sale of an aggregate of 226,667 shares of Common Stock
at a purchase price of $1.50 per share, and warrants exercisable through May
1999 for the purchase of an additional 85,000 shares of Common Stock at a price
of $1.50 per share. Pursuant to such agreements, Dr. Goldsteen acquired 133,333
shares of Common Stock and warrants for an additional 50,000 shares, and four
other investors acquired an aggregate of 93,334 shares of Common Stock and
warrants for an additional 35,000 shares. The holders of the warrants have
demand registration rights that may be exercised one time, and "piggy-back"
registration rights that may be exercised from time to time, prior to April
1999. In addition, the agreements provide that, so long as such investors, as a
group, own at least 100,000 shares of Common Stock, they will have the right to
nominate one person to serve on the Company's Board of Directors, and the
Company will use its best efforts to secure the election of such nominee to the
Board of Directors. In June 1994, Dr. Goldsteen was elected to the Board of
Directors pursuant to this arrangement. This arrangement will terminate upon the
closing of this offering.
In September 1994, the Company offered Units (each Unit consisting of one
share of Common Stock and one Common Stock Purchase Warrant) for sale to its
existing shareholders at $2.25 per Unit. The sale of Units was completed in
October 1994. An aggregate of 153,778 Units was sold, resulting in net
proceeds to the Company of approximately $336,000. Mr. Gilman and Dr.
Goldsteen purchased 11,000 Units and 2,000 Units, respectively. Medtronic,
Inc. purchased 33,333 Units.
In mid-1995, the Company secured $305,000 in bridge loans for working capital
purposes. The loans were unsecured, bore interest at the prime rate plus two
percent, and were payable on demand. The loans included, as additional
compensation to the lenders, warrants for the purchase of 203,333 shares of
Common Stock. In addition, in May 1995, certain key employees of the Company
agreed to defer their salaries pending the sale of the minimum number of shares
in a private placement of Common Stock of the Company conducted during the
period from June to December 1995. The minimum number of shares was sold and the
deferred salaries were repaid in September 1995. In consideration for the salary
deferral, each of the key employees received warrants entitling such employee to
purchase 33 shares of Common Stock for each $100 of salary that was deferred. An
aggregate of $193,968 in bridge loans was converted into 64,556 shares of Common
Stock, and the remainder of the bridge loans were repaid, with interest, from
proceeds of the Company's 1995 private placement of Common Stock. Pursuant to
these arrangements, warrants and options, exercisable at a price of $3.00 per
share, were received by Dr. Goldsteen (33,334 shares), Mr. Gilman (12,834 shares
directly and 13,333 shares indirectly by a family trust), Mr. Bosler (3,184
shares), Mr. Mark Kroll (3,333 shares), and Mr. Olson (5,866 shares).
From June 1995 to December 1995, the Company conducted a private placement of
Common Stock, pursuant to which it sold an aggregate of 1,686,011 shares of
common stock at a price of $3.00 per share. On September 6, 1995, the Company
sold 250,000 shares ($750,000) to The Vertical Group, a venture capital firm, at
a price of $3.00 per share. The subscription from The Vertical Group comprised
the minimum number of shares required for the first closing of the offering. The
Vertical Group subsequently purchased an additional 76,000 shares in the
offering. In connection with the initial sale to The Vertical Group, the Company
agreed that The Vertical Group may nominate one person to serve as a director of
the Company and that the Company will use its best efforts to cause such nominee
to be elected to the Board of Directors. Such right shall continue until such
time as The Vertical Group's percentage ownership of the Company's Common Stock
is reduced to less than 2.9%. In December 1995, Mr. Emmitt was elected to the
Board of Directors pursuant to this arrangement. The Vertical Group also has the
right to be represented at meetings of the Board of Directors by an additional
observer. This arrangement will terminate upon the closing of this offering.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of
shares of Common Stock of the Company by each director of the Company, by each
executive officer named in the compensation table, by all directors and
executive officers of the Company as a group, and by each shareholder known by
the Company to own beneficially more than five percent (5%) of the outstanding
shares of the Company's Common Stock as of the date of this Prospectus. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF OUTSTANDING SHARES(1)
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Byron L. Gilman (2)(3) 378,072 8.9% 5.2%
5420 Feltl Road
Minnetonka, Minnesota 55343
Richard B. Emmitt (3)(4) 334,000 7.9% 4.6%
18 Bank Street
Summit, New Jersey 07901
David S. Goldsteen, M.D. (3) 310,333 7.2% 4.2%
4885 E. Lake Harriet Parkway
Minneapolis, Minnesota 55409
Karl J.F. Kroll, Ph.D. (3)(5) 181,667 4.3% 2.5%
6427 Ithaca Lane N.
Maple Grove, Minnesota 55311
Mark W. Kroll, Ph.D. (3)(6) 125,500 3.0% 1.7%
15900 Valley View Court
Sylmar, California 91392
Kenneth C. Maki (3) 139,667 3.3% 1.9%
505 N.W. 127th Lane
Coon Rapids, Minnesota 55433
Warren S. Watson (7) -- -- --
7000 Central Avenue N.E.
Fridley, Minnesota 55432
All directors and executive
officers as a group (9 individuals)(3) 1,527,812 34.0% 20.4%
OTHER PRINCIPAL SHAREHOLDERS:
Medtronic, Inc. (8) 359,666 8.3% 4.9%
7000 Central Avenue N.E.
Fridley, Minnesota 55432
Vertical Fund Associates, L.P. (9) 326,000 7.8% 4.5%
18 Bank Street
Summit, New Jersey 07901
</TABLE>
* Less than one percent
(1) Based on 4,196,257 shares outstanding at April 30, 1996 and 7,196,257 shares
outstanding after the offering. Does not include (i) 965,500 shares
available for issuance under the Company's 1992 Stock Option and Incentive
Plan, of which 447,500 shares are subject to options currently outstanding;
(ii) 362,538 shares issuable upon exercise of options granted to
consultants, contract advisors or employees in lieu of cash compensation for
services to the Company; (iii) 568,995 shares issuable upon exercise of
outstanding warrants to purchase Common Stock. Each figure showing the
percentage of outstanding shares owned beneficially has been calculated by
treating as outstanding and owned the shares which could be purchased by the
indicated person(s) within 60 days upon the exercise of existing stock
options and warrants.
(2) Includes 26,739 shares held by a trust for members of Mr. Gilman's
family, of which he is the Trustee.
(3) Includes shares of Common Stock which could be purchased within 60 days
upon the exercise of existing stock options or warrants, as follows: Mr.
Gilman, 16,834 shares directly and 23,333 shares by a family trust; Mr.
Emmitt, 8,000 shares; Dr. Goldsteen, 136,667 shares; Mr. Karl Kroll,
23,000 shares; Dr. Mark Kroll, 21,333 shares; Mr. Maki, 23,000 shares;
and all directors and executive officers as a group, 297,467 shares.
(4) Includes 326,000 shares held by Vertical Fund Associates, L.P., of which Mr.
Emmitt is managing partner.
(5) Includes 7,500 shares held by members of Mr. Karl Kroll's family.
(6) Includes 5,000 shares held by members of Dr. Mark Kroll's family.
(7) Does not include shares held by Medtronic, Inc., of which Mr. Watson is
an officer.
(8) Includes 126,333 shares of Common Stock which could be purchased within 60
days upon the exercise of existing stock warrants.
(9) Said shares are also included in the number of shares beneficially owned
by Mr. Emmitt.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 50,000,000 shares of Common Stock,
par value $.01 per share. As of April 30, 1996, there were 4,196,257 shares
outstanding and approximately 215 holders of record of the Company's Common
Stock. The Board of Directors has the authority to establish additional
classes of stock. See "Undesignated Preferred Stock."
Holders of Common Stock are entitled to receive such dividends as are declared
by the Board of Directors of the Company out of funds legally available for the
payment of dividends. In the event of any liquidation, dissolution or winding up
of the Company, the holders of Common Stock will be entitled to receive a pro
rata share of the net assets of the Company remaining after payment or provision
for payment of the debts and other liabilities of the Company. Holders of Common
Stock are entitled to one vote per share in all matters to be voted upon by
shareholders. There is no cumulative voting for the election of directors, which
means that the holders of shares entitled to exercise more than 50% of the
voting rights in the election of directors are able to elect all of the
directors. Holders of Common Stock have no preemptive rights to subscribe for or
to purchase any additional shares of Common Stock.
All of the outstanding shares of Common Stock are fully paid and non-assessable,
and the shares offered hereby will be fully paid and non-assessable. Holders of
Common Stock of the Company are not liable for further calls or assessments.
UNDESIGNATED PREFERRED STOCK
The Company's Board of Directors is authorized, without further shareholder
action, to establish various series of Preferred Stock from time to time and to
determine the rights, preferences and privileges of any wholly unissued series,
including, among other matters, any dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms, the number of shares constituting any such series, and the
description thereof, and to issue any such shares. Although there is no current
intention to do so, the Board of Directors of the Company may, without
shareholder approval, issue shares of a class or series of preferred stock with
voting and conversion rights which could adversely affect the voting power of
the holders of the Common Stock and may have the effect of delaying, deferring
or preventing a change in control of the Company.
OUTSTANDING OPTIONS AND WARRANTS
The Company has reserved an aggregate of 1,000,000 shares for issuance under its
1992 Stock Option and Incentive Plan. At the date of this Prospectus, options
for 447,500 shares were outstanding under the Plan. In addition, stock options
for an aggregate of 362,538 shares had been granted, not under the Plan, to
consultants, contract advisors or employees in lieu of cash in exchange for
services. See "Management -- Stock Options."
In connection with prior sales of securities, the Company has issued to
investors warrants for the purchase of an aggregate of 193,333 shares of
Common Stock at a price of $1.50 per share, expiring at various dates from
December 1998 to May 1999, and warrants for the purchase of an aggregate of
153,778 shares of Common Stock at a price of $2.25 per share, expiring
September 30, 1997. See "Certain Transactions."
CERTAIN PROVISIONS OF MINNESOTA LAW
Minnesota law contains certain provisions, described below, that could delay,
defer or prevent a change in control of the Company and could have the effect of
making it more difficult to acquire the Company or remove incumbent management.
Section 302A.671 of the Minnesota Statutes applies, with certain exceptions, to
any acquisition of voting stock of the Company from a person other than the
Company, and other than in connection with certain mergers and exchanges to
which the Company is a party, resulting in certain percentages of voting control
of the Company (in excess of 20%, 33-1/3% or 50%) by such acquiring person.
Section 302A.671 requires approval of any such acquisitions by a majority vote
of the shareholders of the Company (other than the acquiring person) prior to
its consummation. In general, shares acquired in the absence of such approval
are denied voting rights and are redeemable at their then fair market value by
the Company within 30 days after the acquiring person has failed to give a
timely information statement to the Company or the date the shareholders voted
not to grant voting rights to the acquiring person's shares.
Section 302A.673 of the Minnesota Statutes generally prohibits any business
combination by the Company, or any subsidiary of the Company, with any
shareholder which purchases 10% or more of the Company's voting shares (an
"interested shareholder") within four years following such interested
shareholder's share acquisition date, unless the business combination is
approved by a committee of all of the disinterested members of the Board of
Directors of the Company before the interested shareholder's share acquisition
date.
In the event of certain tender offers for stock of the Company, Section 302A.675
of the Minnesota Statutes precludes the tender offeror from acquiring additional
shares of stock (including acquisitions pursuant to mergers, consolidations or
statutory share exchanges) within two years following the completion of such an
offer unless the selling shareholders are given the opportunity to sell the
shares on terms that are substantially equivalent to those contained in the
earlier tender offer. Section 302A.675 does not apply if a committee of the
Board of Directors consisting of all of its disinterested directors (excluding
present and former officers of the corporation) approves the subsequent
acquisition before shares are acquired pursuant to the earlier tender offer.
The foregoing provisions may have the effect of preventing a change in control
of the Company, thereby denying shareholders the opportunity to sell shares in
such transactions and may also have a depressive effect on the market price of
the Company's Common Stock.
LIMITATION ON DIRECTOR LIABILITY
The Company has adopted in its Articles of Incorporation a provision that
eliminates, to the extent permitted by statute, the personal liability of
directors in their capacities as directors for monetary damages to the Company
or its shareholders for breaches of the directors' duty of care. The principal
effect of the provision is to prevent the Company and its shareholders from
suing any director for monetary damages arising out of a breach of that
director's duty of care or grossly negligent business decisions. The provision
does not affect the ability of the Company or its shareholders to seek
injunctive or other equitable remedies to enforce the directors' duty of loyalty
to the Company or its shareholders, for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, or for any
transaction from which the director derived an improper personal benefit. It
also does not eliminate or limit a director's liability for participating in
unlawful payments of dividends or stock repurchases or redemptions, or for
violations of state or federal securities laws.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A., South Saint Paul, Minnesota is the transfer agent
and registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,196,257 shares of
Common Stock outstanding (assuming no exercise of outstanding options or
warrants). Of these shares, the 3,000,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Act"), except that any shares purchased
by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
under the Act ("Affiliates"), may generally only be sold in compliance with the
limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 4,196,257 shares of Common Stock are deemed "Restricted Shares"
under Rule 144. Of the Restricted Shares, up to 349,940 shares may be eligible
for sale in the public market immediately after this offering pursuant to Rule
144(k) under the Act; substantially all of these shares are subject to the
lock-up agreements described below (the "Lock-up Agreements"). Approximately
1,536,117 additional Restricted Shares may be eligible for sale in the public
market in accordance with Rule 144 or Rule 701 under the Act beginning 90 days
after the date of this prospectus; substantially all of these shares are subject
to Lock-up Agreements. The remaining 2,310,200 outstanding Restricted Shares
will not be eligible for resale under Rule 144 until after the expiration of a
two-year holding period from the date such Restricted Shares were acquired from
the Company or an Affiliate, and may be resold in the public market only in
compliance with the registration requirements of the Act or pursuant to a valid
exemption therefrom; substantially all of these shares are subject to Lock-up
Agreements. Certain security holders have the right to have their Restricted
Shares registered by the Company under the Act as described below.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least two years is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
71,963 shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock in the over-the-counter market during the
four calendar weeks preceding the date on which notice of such sale is filed.
Sales under Rule 144 are also subject to certain limitations on manner of sale,
notice requirements, and availability of current public information about the
Company. In addition, under Rule 144(k), a person who is not an Affiliate and
has not been an Affiliate for at least three months prior to the sale and who
has beneficially owned Restricted Shares for at least three years may resell
such shares without compliance with the foregoing requirements. In meeting the
two and three year holding periods described above, a holder of Restricted
Shares can include the holding periods of a prior owner who was not an
Affiliate. The Securities and Exchange Commission has announced a proposal to
reduce the two-year Rule 144 and the three-year Rule 144(k) holding periods by
one year.
Rule 701 under the Act provides that the shares of Common Stock acquired on the
exercise of currently outstanding options may be resold by persons, other than
Affiliates, beginning 90 days after the date of this Prospectus, subject only to
the manner of sale provisions of Rule 144, and by Affiliates under Rule 144
without compliance with its two-year minimum holding period, subject to certain
limitations.
OPTIONS AND WARRANTS
As of April 30, 1996, options and warrants to purchase a total of 1,351,033
shares of Common Stock were outstanding; substantially all of the shares
issuable pursuant to such options and warrants are subject to Lock-up
Agreements. An additional 546,000 shares of Common Stock are available for
future grants under the Company's stock option and purchase plans. See
"Management -- Stock Plans."
The Company intends to file one or more registration statements on Form S-8
under the Act to register all shares of Common Stock subject to outstanding
stock options and Common Stock issuable pursuant to the Company's stock option
and purchase plans that do not qualify for an exemption under Rule 701 from the
registration requirements of the Act. The Company expects to file these
registration statements promptly following the closing of this offering, and
such registration statements are expected to become effective upon filing.
Shares covered by these registration statements will thereupon be eligible for
sale in the public markets, subject to the Lock-up Agreements, to the extent
applicable.
LOCK-UP AGREEMENTS
Certain security holders and all officers and directors of the Company, who in
the aggregate hold substantially all of the outstanding shares of Common Stock
and options or warrants to purchase substantially all of the outstanding shares
of Common Stock, have agreed, pursuant to the Lock-up Agreements, that they will
not, without the prior written consent of the Representatives of the
Underwriters, offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock beneficially owned by them for a period
of 180 days after the date of this prospectus.
REGISTRATION RIGHTS
At the completion of this offering, certain security holders of the Company (the
"Rights Holders") will be entitled to require the Company to register under the
Act the sale of up to a total of 962,329 shares of outstanding Common Stock and
Common Stock issuable upon exercise of certain outstanding options (the
"Registrable Shares") under the terms of an agreement among the Company and the
Rights Holders (the "Registration Agreement"). The Registration Agreement
provides that in the event the Company proposes to register any of its
securities under the Act at any time or times, the Rights Holders, subject to
certain exceptions, shall be entitled to include Registrable Shares in such
registration. However, the managing underwriter of any such offering may exclude
for marketing reasons some or all of such Registrable Shares from such
registration. Certain Rights Holders have, subject to certain conditions and
limitations, additional rights to require the Company to prepare and file a
registration statement under the Act with respect to their Registrable Shares.
The Company is generally required to bear the expenses of all such
registrations, except underwriting discounts and commissions.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
each of the Underwriters named below, for whom NatWest Securities Limited,
Vector Securities International, Inc. and John G. Kinnard and Company,
Incorporated are acting as Representatives (the "Representatives"), has
severally agreed to purchase from the Company the following respective number of
shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:
NUMBER
UNDERWRITER OF SHARES
NatWest Securities Limited ....................
Vector Securities International, Inc. .........
John G. Kinnard and Company, Incorporated .....
---------
Total ....................................... 3,000,000
=========
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent. The nature of the Underwriters'
obligations is that they are committed to purchase all shares of Common Stock
offered hereby if any such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the Underwriters) at such price less a selling
concession not in excess of $ ________ per share. The Underwriters may allow and
such dealers may re-allow a concession not in excess of $ ________ per share to
certain other dealers (who may include the Underwriters). After commencement of
the offering to the public, the public offering price and other selling terms
may be changed by the Representatives. The Representatives have informed the
Company that the Underwriters do not intend to confirm sales of shares of Common
Stock to any accounts over which they exercise discretionary authority.
The Company has granted to the several Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the public offering price, less the
aggregate underwriting discounts and commissions, set forth on the cover page of
this Prospectus, solely to cover over-allotments. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company, its directors and officers and certain other stockholders of the
Company, have agreed that they will not, without the Representatives' prior
written consent, offer, sell, grant any options to purchase or otherwise dispose
of any shares of Common Stock within 180 days after the date of this Prospectus,
other than in the case of the Company (i) the shares of Common Stock to be sold
to the Underwriters in this offering, (ii) the issuance of options and sales of
Common Stock pursuant to currently existing stock-based compensation plans and
(iii) the issuance of shares of Common Stock as consideration for the
acquisition of one or more businesses (provided that such Common Stock may not
be resold prior to the expiration of the 180-day period referenced above). See
"Shares Eligible for Future Sale" and "Risk Factors -- Shares Eligible for
Future Sale."
Certain of the Underwriters from time to time have performed various investment
banking services for the Company.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of the
Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the shares of Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any shares of Common Stock within the
United States, its territories or possessions or to persons who are citizens
thereof or residents therein. The Underwriting Agreement does not limit sales of
shares of Common Stock offered hereby outside of the United States.
NatWest Securities Limited has also represented and agreed that (i) it has not
offered or sold and will not offer or sell any Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, managing, holding or disposing of investments (as principal or agent)
for the purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 or the
Financial Services Act 1986 (the "Act"), (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Common Stock in, from or otherwise involving the United Kingdom,
and (iii) it has only issued or passed on and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue of the
Common Stock, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document or
instrument required or permitted to be published by listing rules under Part IV
of the Act, to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom the document may otherwise be lawfully issued or passed
on.
Prior to this offering there has been no public market for the Common Stock. The
initial public offering price for the Common Stock will be determined by
negotiation among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price will be prevailing
market and economic conditions, estimates of the business potential and
prospects of the Company, the state of the Company's business operations, an
assessment of the Company's management, the consideration of the above factors
in relation to market valuations of companies in related businesses and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover page of this preliminary prospectus is subject to change as a
result of market conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be passed
upon for the Company by Winthrop & Weinstine, P.A., Minneapolis, Minnesota. Eric
O. Madson, a shareholder in Winthrop & Weinstine, P.A., is the Secretary of the
Company and beneficially owns 2,000 shares of Common Stock. Certain legal
matters will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault
LLP, Boston, Massachusetts.
EXPERTS
The financial statements of the Company as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, included in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon, appearing elsewhere
herein, and in the Registration Statement, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form S-1
under the Act with respect to the offering of the shares of Common Stock made
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is made to such
Registration Statement and exhibits. Statements made in this Prospectus as to
the contents of any contract, agreement or other documents referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved. The
Registration Statement may be inspected without charge and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison, Suite 1400, Chicago, Illinois 60661;
and 7 World Trade Center, New York, New York 10048. Copies of such material may
be obtained at prescribed rates from the Commission's Public Reference Section
at 450 Fifth Street, N.W., Washington, D.C. 20549.
REPORTS TO SHAREHOLDERS
Prior to this offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934. After completion of this
offering, the Company intends to distribute to its shareholders an annual report
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
SURVIVALINK CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Auditors ........... F-2
Balance Sheets ........................... F-3
Statements of Operations ................. F-4
Statement of Shareholders' Equity ........ F-5
Statements of Cash Flows ................. F-6
Notes to Financial Statements ............ F-7
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SurVivaLink Corporation
We have audited the accompanying balance sheets of SurVivaLink Corporation as of
December 31, 1994 and 1995, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SurVivaLink Corporation as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
April 9, 1996
SURVIVALINK CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 194,203 $ 3,767,281 $ 2,480,786
Accounts receivable 2,828 146,776 174,079
Inventories 195,555 316,737 354,439
Prepaid expenses and other current
assets 10,316 46,522 12,572
----------- ----------- -----------
Total current assets 402,902 4,277,316 3,021,876
Property and equipment:
Office and computer equipment 123,560 263,975 423,739
Manufacturing equipment 142,771 157,233 160,162
Leasehold improvements -- 77,779 79,904
----------- ----------- -----------
266,331 498,987 663,805
Less accumulated depreciation 20,449 102,749 138,287
----------- ----------- -----------
245,882 396,238 525,518
Deposits and other assets 21,296 30,904 29,518
----------- ----------- -----------
Total assets $ 670,080 $ 4,704,458 $ 3,576,912
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,019 $ 324,386 $ 261,073
Accrued expenses 31,748 139,961 94,629
----------- ----------- -----------
Total current liabilities 77,767 464,347 355,702
Shareholders' equity:
Common Stock, no par value:
Authorized shares -- 5,000,000
Issued and outstanding shares:
December 31, 1994 -- 2,190,890;
December 31, 1995 and March 31,
1996 -- 4,196,257 2,150,127 7,644,281 7,644,281
Accumulated deficit (1,557,814) (3,404,170) (4,423,071)
----------- ----------- -----------
Total shareholders' equity 592,313 4,240,111 3,221,210
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 670,080 $ 4,704,458 $ 3,576,912
=========== =========== ===========
</TABLE>
See accompanying notes.
SURVIVALINK CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 13,809 $ 1,037,978 $ 154,755 $ 434,321
Cost of goods sold -- 16,194 1,165,277 256,945 408,301
----------- ----------- ----------- ----------- -----------
Gross profit -- (2,385) (127,299) (102,190) 26,020
Operating expenses:
Research and development 276,538 648,076 688,084 151,072 365,829
General and administrative 119,318 245,175 603,578 118,659 271,518
Sales and marketing 46,918 157,154 432,125 62,892 439,506
----------- ----------- ----------- ----------- -----------
Operating loss (442,774) (1,052,790) (1,851,086) (434,813) (1,050,833)
Other income, net 776 7,792 4,730 1,583 31,932
----------- ----------- ----------- ----------- -----------
Net loss $ (441,998) $(1,044,998) $(1,846,356) $ (433,230) $(1,018,901)
=========== =========== =========== =========== ===========
Net loss per share $ (.15) $ (.29) $ (.41) $ (.11) $ (.17)
=========== =========== =========== =========== ===========
Weighted average number of
shares
outstanding 2,929,791 3,595,075 4,478,407 4,114,604 6,025,271
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
SURVIVALINK CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1993 898,571 $ 96,786 $ (70,818) $ 25,968
Issuance of Common Stock at $.80 per
share in exchange for services 31,809 25,405 -- 25,405
Sale of Common Stock at $1.00 per share
in May 1993, net of offering costs 281,000 276,603 -- 276,603
Value of options granted for services -- 63,900 -- 63,900
Sale of Common Stock at $1.50 per share
in November 1993 73,333 110,000 -- 110,000
Net loss -- -- (441,998) (441,998)
----------- ----------- ----------- -----------
Balance at December 31, 1993 1,284,713 572,694 (512,816) 59,878
Sale of Common Stock at $1.50 per share
in January 1994, net of offering costs 195,666 285,987 -- 285,987
Sale of Common Stock at $1.50 per share
in April through May 1994 426,667 640,000 -- 640,000
Issuance of Common Stock at $1.50 per
share in exchange for services 11,511 17,266 -- 17,266
Value of options granted for services -- 35,730 -- 35,730
Sale of Common Stock at $2.25 per share
in September 1994, net of offering
costs 153,778 338,333 -- 338,333
Sale of Common Stock at $2.25 per share
in November 1994, net of offering
costs 118,555 260,117 -- 260,117
Net loss -- -- (1,044,998) (1,044,998)
----------- ----------- ----------- -----------
Balance at December 31, 1994 2,190,890 2,150,127 (1,557,814) 592,313
Sale of Common Stock at $2.25 per share
in January 1995, net of offering costs 84,700 189,223 -- 189,223
Exercise of stock options 34,500 34,500 -- 34,500
Sale of Common Stock at $3.00 per share
in June through December 1995, net of
offering costs 1,686,011 4,831,282 -- 4,831,282
Value of warrants granted in connection
with notes payable -- 4,000 -- 4,000
Conversion of notes payable to Common
Stock at $3.00 per share in June 1995 64,656 193,968 -- 193,968
Value of options granted for services -- 105,681 -- 105,681
Exercise of stock warrants 135,500 135,500 -- 135,500
Net loss -- -- (1,846,356) (1,846,356)
----------- ----------- ----------- -----------
Balance at December 31, 1995 4,196,257 7,644,281 (3,404,170) 4,240,111
Net loss -- -- (1,018,901) (1,018,901)
----------- ----------- ----------- -----------
Balance at March 31, 1996 (unaudited) 4,196,257 $ 7,644,281 $(4,423,071) $ 3,221,210
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
SURVIVALINK CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (441,998) $(1,044,998) $(1,846,356) $ (433,230) $(1,018,901)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,154 20,990 82,300 13,805 35,538
Gain on disposal of equipment -- (9,466) -- -- --
Issuance of Common Stock for services 25,405 17,266 -- -- --
Value of options granted for services 63,900 35,730 105,681 13,465 --
Value of warrants issued in connection
with notes payable -- -- 4,000 -- --
Changes in operating assets and
liabilities:
Accounts receivable (937) (1,891) (143,948) (55,188) (27,303)
Inventories (8,091) (187,464) (121,182) 79,321 (37,702)
Prepaid expenses and other assets 2,198 (26,666) (45,814) 4,730 35,336
Accounts payable 2,335 38,479 278,367 28,986 (63,313)
Accrued expenses 9,055 (1,093) 108,213 1,545 (45,332)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (345,979) (1,159,113) (1,578,739) (346,566) (1,121,677)
INVESTING ACTIVITIES
Purchase of property and equipment (19,339) (248,039) (232,656) (17,756) (164,818)
Proceeds from disposal of equipment -- 15,930 -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (19,339) (232,109) (232,656) (17,756) (164,818)
FINANCING ACTIVITIES
Net proceeds from issuance of
Common Stock 386,603 1,524,437 5,190,505 204,222 --
Proceeds from notes payable -- -- 305,000 -- --
Payments on notes payable -- -- (111,032) -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities 386,603 1,524,437 5,384,473 204,222 --
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents 21,285 133,215 3,573,078 (160,100) (1,286,495)
Cash and cash equivalents at
beginning of year 39,703 60,988 194,203 194,203 3,767,281
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year $ 60,988 $ 194,203 $ 3,767,281 $ 34,103 $ 2,480,786
=========== =========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Conversion of notes payable into
Common Stock $ -- $ -- $ 193,968 $ -- $ --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
SURVIVALINK CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED WITH RESPECT TO MARCH 31, 1996 AND THE
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996)
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
SurVivaLink Corporation was founded in April 1992 to develop, manufacture and
distribute cost-effective therapeutic solutions for emergency cardiac care. The
Company has released its first automated external defibrillator, the VivaLink,
which is intended for use by minimally-trained rescuers in the treatment of
sudden cardiac arrest. Principal market segments for the VivaLink include first
responders (police, fire and basic life support ambulances), industrial
(factories, office buildings) and medical (nursing stations, pre-hospital
medical clinics, alternate care sites). The VivaLink and accessories are sold
primarily through worldwide wholesale distributors. Sales to date have been
predominantly to domestic dealers focusing on the first responder market
segment. The Company is no longer considered a development stage enterprise.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents. Cash equivalents
are carried at cost which approximates market and consist of money market funds.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market. The
majority of inventory consists of purchased components.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets ranging from
3 to 7 years. Leasehold improvements are amortized using the straight-line
method over 4 years, representing the shorter of the related lease term or
estimated useful lives.
INCOME TAXES
Income taxes are accounted for under the liability method. Deferred income taxes
are provided for temporary differences between the financial reporting and tax
basis of assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
The Company follows Accounting Principles Board Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES (APB 25) and related interpretations in accounting for
its stock options. Under APB 25, when the exercise price of stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has not determined the impact of the new statement on
its financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted the Statement in the first quarter of fiscal 1996 and, based on
current circumstances, there was no effect relating to the adoption of Statement
No. 121.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares of
common stock outstanding during the periods presented. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB No. 83"), shares
of common stock issued by the Company at prices less than the initial offering
price during the twelve months immediately preceding the initial public
offering, plus stock options granted at an exercise price less than the initial
public offering price during the same period, have been included in the
determination of shares used in the calculation of net loss per share, using the
treasury method, as if they were outstanding for all periods presented.
INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of March 31, 1996 and for the
three-month periods ended March 31, 1995 and 1996 are unaudited. In the opinion
of the management of the Company, these financial statements reflect all
adjustments, consisting only of normal and recurring adjustments, necessary for
a fair presentation of the financial statements. The results of operations for
the three-month period ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the full year ending December 31, 1996.
2. LEASES
The Company occupies office space under an operating lease agreement which
expires in 1999. Under the agreement, the Company is required to pay a base rent
plus certain operating expenses.
Future minimum rental payments required under the non-cancelable operating lease
as of December 31, 1995 are as follows:
1996 ............................ $ 53,692
1997 ............................ 78,377
1998 ............................ 85,531
1999 ............................ 57,021
--------
$274,621
========
Rent expense was $345, $37,305, $108,345, $5,764, and $16,306 for the years
ended December 31, 1993, 1994 and 1995 and the three months ended March 31, 1995
and 1996, respectively.
3. INCOME TAXES
At December 31, 1995 and March 31, 1996, the Company had net operating loss
carryforwards of approximately $3,189,000 and $4,195,000, respectively, plus
research and development tax credit carryforwards of approximately $112,000. The
net operating loss carryforwards are available to offset future taxable income
through 2010 and are subject to the limitations under Section 382 of the
Internal Revenue Code due to changes in the equity ownership of the Company. An
ownership change occurred on May 23, 1994 and the Company estimates that the net
operating loss deduction of approximately $825,000 for the period from April 16,
1992 (inception) to May 23, 1994 will be subject to an annual limitation of
approximately $155,000.
Components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 568,000 $ 1,270,000 $ 1,678,000
Research and development credits 84,000 112,000 112,000
Other accruals -- 54,000 30,000
----------- ----------- -----------
652,000 1,436,000 1,820,000
Deferred tax liabilities:
Depreciation -- (8,000) (15,000)
Other -- (11,000) --
----------- ----------- -----------
-- (19,000) (15,000)
----------- ----------- -----------
Net deferred tax assets before valuation allowance 652,000 1,417,000 1,805,000
Less valuation allowance (652,000) (1,417,000) (1,805,000)
----------- ----------- -----------
Net deferred tax assets $ -- $ -- $ --
=========== =========== ===========
</TABLE>
4. COMMON STOCK
In January 1994, the Company sold 195,666 shares of Common Stock at $1.50 per
share. In connection with the offering, the Company granted warrants to purchase
33,333 shares of Common Stock at $1.50 per share exercisable over five years.
In April through May 1994, the Company sold a total of 426,667 shares of Common
Stock at $1.50 per share. In connection with the offering the Company granted
warrants to purchase 160,000 shares of Common Stock at $1.50 per share
exercisable over five years.
In September 1994, the Company sold 153,778 shares of Common Stock at $2.25 per
share. In connection with the offering, the Company granted warrants to purchase
153,778 shares of Common Stock at $2.25 per share exercisable over three years.
In May 1996, the Board of Directors increased the authorized shares of Common
Stock from 5,000,000 to 50,000,000 and adjusted the par value from no par to
$.01 par value.
5. NOTES PAYABLE
In 1995, the Company issued $305,000 of notes payable with an interest rate of
11% per annum payable March 16, 1996. In connection with the sale of Common
Stock in June 1995, note holders were offered the option to convert the
outstanding balance of principal and interest to shares of the Company's Common
Stock at a conversion rate of $3.00 per share. A total of $193,968 of the notes
payable was converted into 64,656 shares of Common Stock with the remaining
balance of the notes paid from proceeds of the sale of Common Stock. In
connection with the issuance of the notes, the Company granted warrants to
purchase 203,333 shares of Common Stock at $3.00 per share. The warrants are
exercisable over five years and were deemed to have a value of $4,000 which was
recorded as interest expense for the year ended December 31, 1995.
6. STOCK OPTIONS AND WARRANTS
The Company has a stock option plan (the "Plan") under which incentive stock
options and non-statutory options may be granted to certain eligible employees,
consultants and non-employee directors of the Company. The maximum number of
shares of Common Stock currently reserved for issuance under the Plan is 650,000
shares.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING SHARES PRICE
PLAN NON-PLAN WARRANTS EXERCISABLE PER SHARE
------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 190,000 103,033 183,333 262,866 $ .10 - $2.25
Granted 116,800 30,679 313,778 -- .10 - 2.25
Becoming exercisable -- -- -- 400,457
------- ------- ------- -------
Balance at December 31, 1994 306,800 133,712 497,111 663,323 .10 - 2.25
Expired (66,500) -- (14,500) -- 1.00
Exercised (34,500) -- (135,500) (170,000) 1.00
Granted 148,400 80,826 221,884 -- .22 - 3.00
Becoming exercisable -- -- -- 356,660 .22 - 3.00
------- ------- ------- -------
Balance at December 31, 1995 354,200 214,538 568,995 849,983 .10 - 3.00
Granted 65,300 48,000 -- -- 3.00 - 4.00
Becoming exercisable -- -- -- 64,200 1.50 - 2.25
------- ------- ------- -------
Balance at March 31, 1996
(unaudited) 419,500 262,538 568,995 914,183 .10 - 4.00
======= ======= ======= =======
</TABLE>
Warrants have been granted in connection with debt and equity offerings and in
lieu of cash payment for services provided. The warrants are exercisable at
prices ranging from $1.00 to $3.00. The warrants expire at various dates through
August 2000.
7. SOURCES OF SUPPLY
Components of the Company's products consist mainly of electronic circuitry. The
Company currently purchases a significant portion of the components of its
product from one supplier. Management believes that alternative sources could
provide equivalent components, however, the time required to identify and
qualify alternative suppliers could cause a delay in manufacturing that may be
financially disruptive to the Company.
8. MAJOR CUSTOMERS
The Company had net sales of 100%, 81%, and 100% from one customer for the years
ended December 31, 1994 and 1995 and for the three months ended March 31, 1995,
respectively. Approximately 44% of net sales for the three months ended March
31, 1996, were a result of sales to two customers.
CAPTION: The VivaLink
delivers the
American Heart [PHOTO: FIREMAN CARRYING VIVALINK AED]
Association's
prescribed
defibrillation
energy, and
performs a complete
self-test daily to
ensure that it is
RescueReady.
The VivaLink automatically In order to deliver defibrillation
determines whether a life-saving shock in the critical minutes following
shock is needed, ensuring patient an SCA, the Company believes that AEDs
and operator safety. increasingly will be placed at
industrial and commercial sites.
[PHOTO: PLACEMENT OF ELECTRODES
SHOWN ON SIMULATED PATIENT.] [PHOTO: VIVALINK AED MOUNTED ON
WALL NEXT TO FIRE
EXTINGUISHER.]
CHAIN OF SURVIVAL
EARLY ACCESS EARLY CPR EARLY DEFIBRILLATION EARLY ADVANCED CARE
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE SECURITIES BY ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF
THIS PROSPECTUS.
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 5
Use of Proceeds 10
Dividend Policy 10
Capitalization 11
Dilution 12
Selected Financial Data 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14
Business 16
Management 28
Certain Transactions 31
Principal Shareholders 33
Description of Capital Stock 34
Shares Eligible for Future Sale 36
Underwriting 38
Legal Matters 39
Experts 39
Available Information 40
Reports to Shareholders 40
Index to Financial Statements F-1
UNTIL ______________, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,000,000 SHARES
SURVIVALINK CORPORATION
[LOGO]
COMMON STOCK
----------
PROSPECTUS
----------
NATWEST SECURITIES LIMITED
VECTOR SECURITIES INTERNATIONAL, INC.
JOHN G. KINNARD AND COMPANY,
INCORPORATED
, 1996
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the Company
in connection with the issuance and distribution of the shares of Common Stock
offered hereby;
SEC registration fee ................................... $ 15,704
NASD filing fee ........................................ 5,054
Nasdaq listing fee ..................................... 47,866
Legal fees and expenses ................................ 85,000
Accounting fees and expenses ........................... 75,000
Blue Sky fees and expenses ............................. 15,000
Printing expenses ...................................... 60,000
Transfer agent fees and expenses ....................... 10,000
D&O Insurance Premium .................................. 100,000
Miscellaneous .......................................... 36,376
--------
TOTAL ................................................ $450,000
========
Each amount set forth above, except the SEC registration fee and the NASD filing
fee, is estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes provides that unless prohibited or
limited by a corporation's articles of incorporation or bylaws, the Company must
indemnify its current and former officers, directors, employees and agents
against expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement and which were incurred in connection with actions,
suits, or proceedings in which such persons are parties by reason of the fact
that they are or were an officer, director, employee or agent of the
corporation, if they (i) have not been indemnified by another organization, (ii)
acted in good faith, (iii) received no improper personal benefit, (iv) in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
was unlawful, and (v) reasonably believed that the conduct was in the best
interests of the corporation. Section 302A.521 also permits a corporation to
purchase and maintain insurance on behalf of its officers, directors, employees
and agents against any liability which may be asserted against, or incurred by,
such persons in their capacities as officers, directors, employees and agents of
the corporation, whether or not the corporation would have been required to
indemnify the person against the liability under the provisions of such section.
Article VI of the Bylaws of the Company provides that the directors, officers,
committee members, of the Company and other persons shall have the rights to
indemnification provided by Section 302A.521 of the Minnesota Statutes.
Section 6 of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement provides certain indemnification rights to officers and
directors of the Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Company has issued the following securities
pursuant to exemptions from registration under the Securities Act of 1933, as
amended (the "Securities Act"):
From May 1993 to October 1993, the Registrant issued 281,000 Units (one share of
Common Stock and one-half stock purchase warrant) at a price of $1.00 per Unit.
The offer and sale of the Units was made to 25 investors pursuant to the
exemption provided by Section 3(b) of the Securities Act and Rule 504 of
Regulation D. Each purchaser of such Units acquired them for his own account and
not with a view to any distribution thereof to the public. The certificates
evidencing the shares and warrants bear a legend stating that the shares and
warrants may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act, or an exemption from
such registration requirements.
In December 1993, the Registrant issued 33,333 Units (one share of Common Stock
and one-half stock purchase warrant) at a price of $1.50 per Unit. The offer and
sale of the Units was made to a single investor pursuant to the exemption
provided by Section 3(b) of the Securities Act and Rule 504 of Regulation D. The
purchaser of such Units acquired them for his own account and not with a view to
any distribution thereof to the public. The certificates evidencing the shares
and warrants bear a legend stating that the shares and warrants may not be
offered, sold or transferred other than pursuant to an effective registration
statement under the Securities Act, or an exemption from such registration
requirements.
From January 1994 to March 1994, the Registrant issued 235,666 shares of Common
Stock at a price of $1.50 per share to 23 investors. The offer and sale of the
shares was made pursuant to the exemption provided by Section 3(b) of the
Securities Act and Rule 504 of Regulation D. Each purchaser of such shares
acquired them for his own account and not with a view to any distribution
thereof to the public. The certificates evidencing the shares bear a legend
stating that the shares may not be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act, or an
exemption from such registration requirements.
In February 1994, the Registrant issued 1,511 shares of Common Stock, valued at
$2,266.50, to consultants in exchange for services. Such issuance was made in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
In March 1994, the Registrant issued 10,000 shares of Common Stock, valued at
$15,000, to its landlord in payment of rent. Such issuance was made in reliance
on the exemption from registration provided by Section 4(2) of the Securities
Act.
In April 1994, the Registrant issued 200,000 shares of Common Stock and 75,000
stock purchase warrants for an aggregate price of $300,000. The offer and sale
of the shares and warrants was made to a single investor pursuant to the
exemptions provided by Section 4(2) and 4(6) of the Securities Act and Rules 505
and 506 of Regulation D. The purchaser of such shares and warrants acquired them
for its own account and not with a view to any distribution thereof to the
public. The certificates evidencing the shares and warrants bear a legend
stating that the shares and warrants may not be offered, sold or transferred
other than pursuant to an effective registration statement under the Securities
Act, or an exemption from such registration requirements.
In May 1994, the Registrant issued 226,667 shares of Common Stock and 85,000
stock purchase warrants for an aggregate price of $340,000. The offer and sale
of the shares and warrants was made to a group of 5 investors pursuant to the
exemptions provided by Section 4(2) and 4(6) of the Securities Act and Rules 505
and 506 of Regulation D. Each of the purchasers of such shares and warrants
acquired them for his own account and not with a view to any distribution
thereof to the public. The certificates evidencing the shares and warrants bear
a legend stating that the shares and warrants may not be offered, sold or
transferred other than pursuant to an effective registration statement under the
Securities Act, or an exemption from such registration requirements.
From September 1994 to October 1994, the Registrant issued 153,778 Units (one
share of Common Stock and one stock purchase warrant) at a price of $2.25 per
Unit to 32 investors. The offer and sale of the Units was made pursuant to the
exemption provided by Section 4(2) of the Securities Act and Rules 505 and 506
of Regulation D. Each purchaser of such Units acquired them for his own account
and not with a view to any distribution thereof to the public. The certificates
evidencing the shares and warrants bear a legend stating that the shares and
warrants may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act, or an exemption from
such registration requirements.
From October 1994 to January 1995, the Registrant issued 203,255 shares of
Common Stock at a price of $2.25 per share to 29 investors. The offer and sale
of the shares was made pursuant to the exemption provided by Section 4(2) of the
Securities Act and Rules 505 and 506 of Regulation D. Each purchaser of such
shares acquired them for his own account and not with a view to any distribution
thereof to the public. The certificates evidencing the shares bear a legend
stating that the shares may not be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act, or an
exemption from such registration requirements.
From September 1995 to December 1995, the Registrant issued 1,686,011 shares of
Common Stock at a price of $3.00 per share to 104 investors. The offer and sale
of the shares was made pursuant to the exemption provided by Section 4(2) of the
Securities Act and Rules 505 and 506 of Regulation D. Each purchaser of such
shares acquired them for his own account and not with a view to any distribution
thereof to the public. The certificates evidencing the shares bear a legend
stating that the shares may not be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act, or an
exemption from such registration requirements.
ITEM 16. EXHIBITS
EXHIBIT
NO. DESCRIPTION
1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of SurVivaLink Corporation
3.2 Bylaws of SurVivaLink Corporation
4.1 Specimen of Common Stock Certificate*
5.1 Opinion of Winthrop & Weinstine, P.A.*
10.1 Lease Agreement dated August 17, 1994, between A.M.W. Properties
Corp. and SurVivaLink Corporation
10.2 First Amendment to Lease dated May 1, 1996 by and between A.M.W.
Properties Corp. and SurVivaLink Corporation
10.3 SurVivaLink Corporation 1992 Stock Option and Incentive Plan,
as amended
10.4 Employment Agreement between Byron L. Gilman and SurVivaLink
Corporation*
10.5 Form of Director Stock Option Agreements
10.6 Investment Agreement dated April 29, 1994 by and among SurVivaLink
Corporation, Medtronic, Inc., Byron L. Gilman, Karl J. F. Kroll,
Kenneth C. Maki and Mark W. Kroll
10.7 Warrant to Purchase 75,000 shares of Common Stock of SurVivaLink
Corporation dated April 29, 1994 and issued to Medtronic, Inc.
10.8 Form of Stock Purchase Agreement dated May 29, 1994 between
SurVivaLink Corporation
10.9 Form of Warrant to Purchase shares of Common Stock of SurVivaLink
Corporation dated May 29, 1994
10.10 Supplement to Subscription Agreement dated September 6, 1995
between SurVivaLink Corporation and Vertical Fund Associates, L.P.
10.11 Form of Dealer Sales Agreement
10.12 Form of Manufacturer Representative Agreement
10.13 Form of Confidentiality Agreement
11.1 Statement re: Computation of Net Loss per Share
23.1 Consent of Ernst & Young LLP
23.2 Consent of Winthrop & Weinstine, P.A. (included in Exhibit 5.1)
24.1 Powers of Attorney
27.1 Financial Data Schedule
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the provisions summarized in Item 14
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act, as
amended, and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
be the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on May 23, 1996.
SurVivaLink Corporation
By /s/ BYRON L. GILMAN
Byron L. Gilman
Chairman and Chief Executive Officer
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman, Chief Executive Officer, and May 23, 1996
Byron L. Gilman Director (Principal Executive Officer)
* Chief Financial Officer (Principal May 23, 1996
R. Eric Bosler Financial and Accounting Officer)
* Director May 23, 1996
Richard B. Emmitt
* Director May 23, 1996
David S. Goldsteen
* Director May 23, 1996
Karl J.F. Kroll
* Director May 23, 1996
Mark W. Kroll
* Director May 23, 1996
Kenneth C. Maki
* Director May 23, 1996
Warren S. Watson
* By /s/ BYRON L. GILMAN
Byron L. Gilman
Attorney-in-fact
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SURVIVALINK CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of SurVivaLink Corporation
3.2 Bylaws of SurVivaLink Corporation
4.1 Specimen of Common Stock Certificate *
5.1 Opinion of Winthrop & Weinstine, P.A. *
10.1 Lease Agreement dated August 17, 1994, between A.M.W. Properties Corp. and SurVivaLink
Corporation
10.2 First Amendment to Lease dated May 1, 1996 by and between A.M.W. Properties Corp.
and SurVivaLink Corporation
10.3 SurVivaLink Corporation 1992 Stock Option and Incentive Plan, as amended
10.4 Employment Agreement between Byron L. Gilman and SurVivaLink Corporation *
10.5 Form of Director Stock Option Agreements
10.6 Investment Agreement dated April 29, 1994 by and among SurVivaLink Corporation,
Medtronic, Inc., Byron L. Gilman, Karl J. F. Kroll, Kenneth C. Maki and Mark W.
Kroll
10.7 Warrant to Purchase 75,000 shares of Common Stock of SurVivaLink
Corporation dated April 29, 1994 and issued to Medtronic, Inc.
10.8 Form of Stock Purchase Agreement dated May 29, 1994 between SurVivaLink Corporation
10.9 Form of Warrant to Purchase shares of Common Stock of SurVivaLink Corporation dated
May 29, 1994
10.10 Supplement to Subscription Agreement dated September 6, 1995 between
SurVivaLink Corporation and Vertical Fund Associates, L.P.
10.11 Form of Dealer Sales Agreement
10.12 Form of Manufacturer Representative Agreement
10.13 Form of Confidentiality Agreement
11.1 Statement re: Computation of Net Loss per Share
23.1 Consent of Ernst & Young LLP
23.2 Consent of Winthrop & Weinstine, P.A. (included in Exhibit 5.1)
24.1 Powers of Attorney
27.1 Financial Data Schedule
</TABLE>
* To be filed by amendment.
TH&T DRAFT 5/17/96
3,000,000 Shares
SURVIVALINK CORPORATION
Common Stock
($.01 par value)
UNDERWRITING AGREEMENT
____________,1996
NATWEST SECURITIES LIMITED
VECTOR SECURITIES INTERNATIONAL, INC.
JOHN G. KINNARD AND COMPANY INCORPORATED
As Representatives of the several
Underwriters named in Schedule I hereto
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M3UR
England
Dear Sirs:
Survivalink Corporation, a Minnesota corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 3,000,000 shares (the "Firm Shares") of Common
Stock, $.01 par value (such class of stock being herein called the "Common
Stock"), of the Company. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
450,000 shares (the "Option Shares") of Common Stock. The Firm Shares and any
Option Shares purchased pursuant to this Agreement are referred to herein as the
"Shares."
This is to confirm the agreement concerning the purchase of the Shares
from the Company by the Underwriters. You represent and warrant that you are
acting as the representatives (the "Representatives") of the Underwriters and
that you have been authorized by each of the other Underwriters to enter into
this Underwriting Agreement on its behalf and to act for it in the manner herein
provided.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agree with, each Underwriter as follows. The
following representations, warranties and agreements shall be deemed to apply to
each Subsidiary (as defined in Section 13) of the Company, unless the context
does not permit:
(a) A registration statement on Form S-1 (File No. 333- ) with respect
to the Shares (i) has been prepared by the Company in material conformity
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) has been filed with the Commission under the Securities
Act and (iii) has become effective under the Securities Act. If any
post-effective amendment to such registration statement has been filed
with the Commission prior to the execution and delivery of this Agreement,
the most recent such amendment has been declared effective by the
Commission. Copies of such registration statement as amended to date have
been delivered by the Company to the Representatives, and, to the extent
applicable, were identical to the electronically transmitted copies
thereof filed with the Commission pursuant to the Commission's Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR"), except to the
extent permitted by Regulation S-T.. For purposes of this Agreement,
"Effective Time" means the date and the time as of which such registration
statement, or the most recent post-effective amendment thereto, if any,
was declared effective by the Commission; "Effective Date" means the date
of the Effective Time; "Preliminary Prospectus" means each prospectus
included in such registration statement, or amendments thereof, before it
became effective under the Securities Act and any prospectus filed with
the Commission by the Company pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement,
as amended at the Effective Time, including all information deemed to be a
part thereof as of the Effective Time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations together with any registration statement
filed by the Company pursuant to Rule 462(b) of the Rules and Regulations;
and "Prospectus" means (i) the form of prospectus relating to the Shares,
as first filed pursuant to paragraph (1) or (4) of Rule 424(b) of the
Rules and Regulations or (ii) the term sheet or abbreviated term sheet
described in Rule 434(b) of the Rules and Regulations, as first filed
pursuant to paragraph (7) of Rule 424(b) of the Rules and Regulations
together with the last preliminary prospectus included in the Registration
Statement filed prior to the Effective Time or filed pursuant to Rule
424(a) of the Rules and Regulations that is delivered by the Company to
the Underwriters for delivery to purchasers of the Shares. For purposes of
this Agreement, all references to the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement to
any of the foregoing, shall be deemed to include the respective copies
thereof filed with the Commission pursuant to EDGAR. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus.
(b) The Registration Statement contains, and any post-effective
amendment to the Registration Statement filed with the Commission after
the Effective Time, the Prospectus and the Prospectus as amended or
supplemented will contain, all statements which are required by the
Securities Act and the Rules and Regulations; at the time of filing
thereof, any Preliminary Prospectus did not, and on the Effective Date,
the Registration Statement did not, and any post-effective amendment to
the Registration Statement filed with the Commission after the Effective
Time, the Prospectus and the Prospectus as amended or supplemented will
not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that the Company makes no
representation or warranty as to information contained in or omitted from
the Registration Statement, the Preliminary Prospectus or the Prospectus
in reliance upon, and in conformity with, written information furnished to
the Company by you, or by any Underwriter through you, specifically for
inclusion therein. There is no contract or document required to be
described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement which is not described or
filed as required.
(c) The accounting firm whose report appears in the Prospectus are
independent certified public accountants as required by the Securities Act
and the Rules and Regulations. The financial statements and schedules
(including the related notes) included in the Registration Statement, any
Preliminary Prospectus or the Prospectus present fairly, in all material
respects, the financial condition, results of operations and cash flows of
the entities purported to be shown thereby at the dates and for the
periods indicated and have been prepared in accordance with generally
accepted accounting principles.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification necessary
except where the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries taken
as a whole; and, except as described in the Prospectus, the Company holds
all material licenses, certificates and permits from governmental
authorities necessary for the conduct of its business as described in the
Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable. Other than as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock
pursuant to the Company's corporate charter, by-laws or other governing
documents or any agreement or other instrument to which the Company is a
party or by which it may be bound. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been
waived or satisfied and other than as described in the Prospectus, for or
relating to the registration of any shares of Common Stock or other
securities of the Company. The capitalization of the Company as of
__________ is as set forth in the Prospectus and the Common Stock conforms
to the description thereof contained in the Prospectus. All of the
outstanding shares of capital stock of each Subsidiary (as defined in
Section 13) of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and are owned directly or indirectly by
the Company, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any
third party.
(f) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse
change in, or any adverse development which materially affects, the
condition (financial or other), results of operations, business or
prospects of the Company on a consolidated basis from the date as of which
information is given in the Prospectus.
(g) The Company is not, and would not be with the giving of notice or
lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions
contemplated hereby result in a violation of, or constitute a default
under, the corporate charter, by-laws or other governing documents of the
Company, or any material agreement, indenture or other instrument to which
the Company is a party or by which it is bound, or to which any of its
properties is subject, nor will the performance by the Company of its
obligations hereunder violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body
having jurisdiction over the Company or any of its properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, which would be material to the
Company and its Subsidiaries taken as a whole. Except for permits and
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any U.S. court, governmental agency or body or
any financial institution is required in connection with the consummation
by the Company of the transactions contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered
by the Company.
(i) The Company owns, or has valid rights to use, all items of real and
personal property which are material to the business of the Company and
its Subsidiaries taken as a whole, free and clear of all liens,
encumbrances and claims which may materially interfere with the business,
properties, financial condition or results of operations of the Company on
a consolidated basis.
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company is a party or to which any
property of the Company is subject or which is pending or, to the
knowledge of the Company, contemplated against the Company that is
required to be disclosed in the Prospectus and that is not so disclosed.
(k) The Company is not in violation of any law, ordinance, governmental
rule or regulation or court decree to which it is subject, which violation
could have a material adverse effect on the condition (financial or
other), results of operations, business or prospects of the Company on a
consolidated basis.
(l) The Company owns or possesses adequate licenses or other rights to
use all intellectual property rights, including patents and trademarks,
necessary to conduct its business as described or referred to in the
Prospectus, and, except as disclosed in the Prospectus, the Company has
not received any notice of infringement of or conflict with (or knows of
any such infringement of or conflict with) rights or claims of others with
respect to any patents, trademarks, service marks, trade names, copyrights
or know-how, that if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse effect upon the Company on a
consolidated basis, and, except as disclosed in the Prospectus, all
products or processes referred to in the Prospectus and relating to the
business of the Company now conducted by it do not infringe upon or
conflict with any right or patent, or with any discovery, invention,
product or process which is the subject of any patent application known to
the Company, in a manner which would materially and adversely affect the
Company on a consolidated basis.
(m) The Company has not and shall not take, directly or indirectly, any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(o) The Shares have been approved for listing on the Nasdaq National
Market, subject only to official notice of issuance.
1A. REPRESENTATIONS AND WARRANTIES OF NATWEST SECURITIES LIMITED.
NatWest Securities Limited represents and agrees that (i) it has not offered or
sold and will not offer or sell any Shares to persons in the United Kingdom
prior to admission of the Shares to listing in accordance with Part IV of the
Financial Services Act 1986 (the "Act") except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act, (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the Shares in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on, and will only issue or pass
on, in the United Kingdom any document received by it in connection with the
issue of the Shares, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the Act,
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued or passed on.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. (a) Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Company agrees to issue and sell to the Underwriters the Firm
Shares and each of the Underwriters agrees, severally and not jointly, to
purchase at a price of $_____ per Share, the number of Firm Shares set forth
opposite such Underwriter's name in Schedule I hereto. The Underwriters agree to
offer the Firm Shares to the public as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
the sale of Firm Shares, all or any portion of the Option Shares for a period of
thirty (30) days from the date hereof at the purchase price per Share set forth
above. Option Shares shall be purchased from the Company, severally and not
jointly, for the accounts of the several Underwriters in proportion to the
number of Firm Shares set forth opposite such Underwriter's name in Schedule I
hereto, except that the respective purchase obligations of each Underwriter
shall be adjusted by the Representatives so that no Underwriter shall be
obligated to purchase Option Shares other than in 100-share quantities.
3. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of certificates for
the Firm Shares and certificates for the Option Shares, if the option to
purchase the same is exercised on or before the second Business Day (as defined
in Section 13 hereof) prior to the First Closing Date (as defined below), to be
purchased by the Underwriters from the Company and payment therefor shall be
made at the offices of Testa, Hurwitz & Thibeault, 125 High Street, Boston,
Massachusetts 02110 (or such other place as mutually may be agreed upon), at
10:00 A.M., Eastern time, on the [______] business day after the date of this
Agreement (the "First Closing Date").
The option to purchase Option Shares from the Company granted in
Section 2 hereof may be exercised during the term thereof by written notice to
the Company from the Representatives. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and the time
and date, not earlier than either the First Closing Date or the second Business
Day after the date on which the option shall have been exercised nor later than
the third Business Day after the date of such exercise, as determined by the
Representatives, when the Option Shares are to be delivered (the "Option Closing
Date"). Delivery and payment for such Option Shares are to be at the offices set
forth above for delivery and payment of the Firm Shares. (The First Closing Date
and the Option Closing Date are herein individually referred to as a "Closing
Date" and collectively referred to as the "Closing Dates.")
Delivery of certificates for the Shares shall be made by or on behalf
of the Company to you, for the respective accounts of the Underwriters, against
payment by you, for the several accounts of the Underwriters, of the purchase
price therefor by certified or official bank check payable in New York Clearing
House funds to the order of the Company. The certificates for the Shares shall
be registered in such names and denominations as you shall have requested at
least two full Business Days prior to the applicable Closing Date, and shall be
made available for checking and packaging at a location in New York, New York as
may be designated by you at least one full Business Day prior to such Closing
Date. Time shall be of the essence and delivery at the time and place specified
in this Agreement is a further condition to the obligations of each Underwriter.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
Underwriter that:
(a) The Company shall comply with the provisions of, and make all
requisite filings with the Commission pursuant to, Rule 430A and Rule
424(b) of the Rules and Regulations and shall notify you promptly (in
writing, if requested) of all such filings. The Company shall notify you
promptly of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information; the Company shall prepare and file with the
Commission, promptly upon your request, any amendments or supplements to
the Registration Statement or the Prospectus which, in your opinion, may
be necessary or advisable in connection with the distribution of the
Shares; and the Company shall not file any amendment or supplement to the
Registration Statement or the Prospectus, which filing is not consented to
by you after reasonable notice thereof, such consent not to be
unreasonably withheld or delayed. The Company shall advise you promptly of
its receipt of notice of the issuance by the Commission or any state or
other regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement, suspending or preventing the
use of any Preliminary Prospectus or the Prospectus or suspending the
qualification of the Shares for offering or sale in any jurisdiction, or
of the institution of any proceedings for any such purpose; and the
Company shall use its best efforts to prevent the issuance of any stop
order or other such order and, should a stop order or other such order be
issued, to obtain as soon as possible the lifting thereof.
(b) The Company shall furnish to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement
as originally filed and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith, and shall furnish to
the Underwriters such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding
exhibits other than this Agreement), the Prospectus and all amendments and
supplements to any of such documents in each case as soon as available and
in such quantities as the Representatives may from time to time reasonably
request. To the extent applicable, the copies of the Registration
Statement and each amendment thereto (including all exhibits filed
therewith), any Preliminary Prospectus or Prospectus (in each case, as
amended or supplemented) furnished to the Underwriters have been and will
be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(c) Within the time during which a prospectus relating to the Shares is
required to be delivered under the Securities Act, the Company shall
comply with all requirements imposed upon it by the Securities Act, as now
and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as is necessary to permit the continuance of sales
of or dealings in the Shares as contemplated by the provisions hereof and
by the Prospectus. If during such period any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it
is necessary to amend the Registration Statement or to supplement the
Prospectus in order to comply with the Securities Act or to file any
document, the Company shall promptly notify you and shall amend the
Registration Statement or supplement the Prospectus or file such document
(at the expense of the Company) so as to correct such statement or
omission or to effect such compliance.
(d) The Company shall take or cause to be taken all necessary action
and furnish to whomever you may direct such information as may be required
in qualifying the Shares for sale under the laws of such jurisdictions as
you shall designate, and to continue such qualifications in effect for as
long as may be necessary for the distribution of the Shares; except that
in no event shall the Company be obligated in connection therewith to
qualify as a foreign corporation or to execute a general consent to
service of process.
(e) The Company shall make generally available to its security holders
(and shall deliver to the Representatives), in the manner contemplated by
Rule 158(b) of the Rules and Regulations or otherwise, as soon as
practicable but in any event not later than 45 days after the end of its
fiscal quarter in which the first anniversary date of the Effective Date
occurs, an earnings statement satisfying the requirements of Section 11(a)
of the Securities Act and covering a period of at least 12 consecutive
months beginning after the Effective Date.
(f) The Company shall not, during the 180-day period following the date
of the Prospectus, except with your prior written consent, offer for sale,
sell or otherwise dispose of, directly or indirectly, any shares of Common
Stock (except for the issuance of shares of Common Stock pursuant to
existing stock option, purchase and compensation plans, or upon conversion
of any currently outstanding convertible securities described in the
Prospectus, or sell or grant options, rights or warrants with respect to
any shares of Common Stock (other than the grant of options pursuant to
existing stock option, purchase and compensation plans), otherwise than in
accordance with this Agreement or as contemplated in the Prospectus. The
Company will not permit any employee stock option, director stock option
or other stock option to purchase Common Stock of the Company granted by
it to be exercised, and the Common Stock issued upon exercise of the stock
option to be sold, prior to the expiration of the 180-day period following
the date of this Prospectus, without your prior written consent.
(g) The Company shall take such steps as shall be necessary to ensure
that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(h) Whether or not this Agreement is terminated or the sale of the
Shares to the Underwriters is consummated, the Company shall pay or cause
to be paid (A) all expenses (including stock transfer taxes) incurred in
connection with the delivery to the several Underwriters of the Shares,
(B) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters) in connection with the
preparation, printing, filing, delivery and shipping of the Registration
Statement (including the financial statements therein and all amendments
and exhibits thereto), each Preliminary Prospectus, the Prospectus and any
amendments or supplements of the foregoing and the printing, delivery and
shipping of this Agreement and other underwriting documents, including,
but not limited to, any Underwriters' Questionnaires, Underwriters' Powers
of Attorney, Blue Sky Memoranda, Agreements Among Underwriters and
Selected Dealer Agreements, (C) all filing fees and fees and disbursements
of counsel to the Underwriters incurred in connection with qualification
of the Shares under state securities laws as provided in Section 4(d)
hereof, (D) the filing fee of the National Association of Securities
Dealers, Inc., (E) any applicable listing or other fees, (F) the cost of
printing certificates representing the Shares, (G) the cost and charges of
any transfer agent or registrar, and (H) all other costs and expenses
incident to the performance of its obligations hereunder for which
provision is not otherwise made in this Section. It is understood,
however, that, except as provided in this Section, Section 6 and Section 8
hereof, the Underwriters shall pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes due upon resale
of any of the Shares by them and any advertising expenses incurred in
connection with any offers they may make. If the sale of the Shares
provided for herein is not consummated by reason of any failure, refusal
or inability on the part of the Company to perform any agreement on its
part to be performed or because any other condition of the Underwriters'
obligations hereunder is not fulfilled or if the Underwriters shall
decline to purchase the Shares for any reason permitted under this
Agreement, the Company shall reimburse the several Underwriters for all
reasonable out-of-pocket disbursements (including fees and disbursements
of counsel) incurred by the Underwriters in connection with any
investigation or preparation made by them in respect of the marketing of
the Shares or in contemplation of the performance by them of their
obligations hereunder.
(i) The Company shall on or prior to each Closing Date use its best
efforts to cause the Shares to be purchased on such date by the
Underwriters to be approved for listing on the Nasdaq National Market,
subject only to official notice of issuance, and shall take such action as
shall be necessary to comply with the rules and regulations of the The
Nasdaq Stock Market with respect to such Shares.
(j) During a period of five years from the Effective Date, the Company
shall furnish to the Representatives copies of all reports or other
communications furnished to shareholders and copies of any reports or
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed. To the extent applicable, such reports or documents
shall be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company contained herein, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission
in a timely fashion in accordance with Section 4(a) hereof, all post-effective
amendments to the Registration Statement shall have become effective, all
filings required by Rule 430A and Rule 424 of the Rules and Regulations shall
have been made and no such filings shall have been made without the consent of
the Representatives; no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto shall have been
issued; no proceedings for the issuance of any such order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been disclosed to you and complied with to your
satisfaction.
(b) No Underwriter shall have been advised by the Company or
shall have discovered and disclosed to the Company that the Registration
Statement, or the Prospectus or any amendment or supplement thereto, contains an
untrue statement of fact which in your reasonable opinion, or in the reasonable
opinion of counsel for the Underwriters, is material, or omits to state a fact
which, in your reasonable opinion, or in the reasonable opinion of counsel to
the Underwriters, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) On or prior to each Closing Date, you shall have received
from Testa, Hurwitz & Thibeault, counsel for the Underwriters, such opinion or
opinions with respect to corporate proceedings by the Company, the form of the
Registration Statement and Prospectus (other than financial statements and other
financial or statistical data), the validity of the Shares, and other related
matters as you may reasonably request and such counsel shall have received such
documents and information as they reasonably request to enable them to pass upon
such matters.
(d) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of Winthrop & Weinstine, P.A.,
counsel to the Company, dated such Closing Date and in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) Each of the Company and its Subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, with full corporate power and
authority to own or lease its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the
business conducted by it or the location of the properties owned or leased
by it makes such qualification necessary, except where the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole.
(ii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein. All of the outstanding
shares of capital stock of the Company have been issued in valid private
placements pursuant to an exemption from registration under the Securities
Act. All of the outstanding shares of Common Stock have been and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable. There are no preemptive or other rights to subscribe for or
to purchase, or any restriction upon the voting or transfer of, any of the
Shares pursuant to the Company's corporate charter, by-laws, other
governing documents, or any agreement or other instrument known to such
counsel to which the Company or a Subsidiary thereof is a party or by
which the Company or a Subsidiary thereof may be bound or to which any of
their respective properties is subject; and, to the best of such counsel's
knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives
rise to any rights for or relating to the registration of any shares of
Common Stock except such as have been waived or satisfied. The Common
Stock conforms in all material respects to the description thereof
contained in the Prospectus. All of the outstanding shares of capital
stock of each Subsidiary of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and are owned directly or
indirectly by the Company free and clear of any claim, lien, encumbrance
or security interest known to such counsel (except for certain obligations
of the Company pursuant to stock and employee benefit plans maintained for
the benefit of employees, officers, directors and consultants of the
Company and its Subsidiaries).
(iii) Each of the Company and its Subsidiaries is not, nor with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery hereof or consummation
of the transactions contemplated hereby result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of the Company or any of its Subsidiaries or, to the
best knowledge of such counsel, any material agreement, indenture or other
instrument to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries may be bound, or to which
any of the properties of the Company or any of its Subsidiaries is
subject, nor, to best of such counsel's knowledge, will the performance by
the Company of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries or the properties of the Company or any of its Subsidiaries,
or, to the best knowledge of such counsel, result in the creation or
imposition of any lien, charge, claim or encumbrance upon the properties
or assets of the Company or any of its Subsidiaries which would be
material to the Company and its Subsidiaries taken as a whole. Except for
permits and similar authorizations required under the Securities Act and
the securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by
the Company of the transactions contemplated by this Agreement.
(iv) This Agreement has been duly authorized, executed and delivered by
the Company.
(v) The Registration Statement and all post-effective amendments
thereto have become effective under the Securities Act and, to the best of
such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending before or contemplated by the
Commission. All filings required by Rule 424 and Rule 430A of the Rules
and Regulations have been made on a timely basis; the Registration
Statement as of the Effective Date, and the Prospectus and any amendment
or supplement thereto as of their respective dates, complied as to form in
all material respects with the requirements of the Securities Act and the
Rules and Regulations (it being understood that such counsel need express
no opinion on the financial statements or other financial and statistical
data included therein). Such counsel has no reason to believe that (i) the
Registration Statement, as of its Effective Date, or any amendment
thereto, at the time it became effective contained any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or (ii) the Prospectus or any supplement or amendment thereto,
or any supplement or amendment thereto, on such Closing Date or at the
time such Prospectus or supplement or amendment thereto was issued
contains or contained any untrue statement of a material fact or omits or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements or other financial and statistical data included in
the Registration Statement and the Prospectus).
(vi) To the best knowledge of such counsel, all descriptions in the
Prospectus of statutes, regulations, legal or governmental proceedings,
contracts and other documents are accurate in all material respects, and
fairly present in all material respects the information required to be
shown and such counsel does not know of any contracts or documents of a
character required to be summarized or described therein or to be filed as
exhibits thereto that are not so summarized, described or filed, nor does
such counsel know of any pending or threatened litigation or any
governmental proceeding, statute or regulation required to be described in
the Prospectus that is not so described. The information in the Prospectus
under the captions "Description of Capital Stock" and "Shares Eligible for
Future Sale" to the extent that they constitute matters of law or legal
conclusions have been reviewed by such counsel and are a fair summary of
such matters and conclusions.
In rendering the foregoing opinion, counsel may rely, as to matters of
fact, upon certificates of officers of the Company and certificates of public
officials. Certificates so relied upon shall be furnished to you and shall be
satisfactory to you and your counsel.
(e) There shall have been furnished to you a certificate,
dated such Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of the Company to the effect that:
(i) the representations and warranties of the Company contained in this
Agreement are true and correct, as if made at and as of such Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such Closing
Date; (ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
initiated or, to the knowledge of the signers of such certificate, threatened;
(iii) all filings required by Rule 424 and Rule 430A of the Rules and
Regulations have been made; (iv) the signers of said certificate have carefully
examined the Registration Statement and the Prospectus, and any amendments or
supplements thereto and such documents contain all statements and information
required to be included therein, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and (v) since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth.
(f) Since the Effective Time, neither the Company nor any of
the Subsidiaries of the Company shall have sustained any loss by fire, flood,
accident or other calamity, or shall have become a party to or the subject of
any litigation, which is material to the Company and its Subsidiaries taken as a
whole, nor shall there have been a material adverse change in the general
affairs, operations, business, prospects, key personnel, capitalization,
financial condition or net worth of the Company and its Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business, which loss,
litigation or change, in your judgment, shall render it inadvisable to proceed
with the payment for and delivery of the Shares.
(g) On the date of this Agreement and on each Closing Date you
shall have received a letter from each accounting firm whose report appears in
the Prospectus, dated the date of this Underwriting Agreement or such Closing
Date, as the case may be, and addressed to you, confirming that they are
independent certified public accountants within the meaning of the Securities
Act and the applicable published Rules and Regulations, and stating, as of the
date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of each such letter), the conclusions and findings of each
such firm with respect to the financial information and other matters covered by
its letter delivered to you concurrently with the execution of this Agreement,
and with respect to each letter delivered on a Closing Date confirming the
conclusions and findings set forth in such prior letter.
(h) You shall have been furnished with such additional
documents and certificates as you or counsel for the Underwriters may reasonably
request.
(i) The Shares to be purchased on such Closing Date by the
Underwriters shall be approved for listing on the Nasdaq National Market,
subject only to official notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The Company
shall furnish to you such conformed copies of such opinions, certificates,
letters and other documents as you shall reasonably request. If any of the
conditions specified in this Section 5 shall not have been fulfilled when and as
required by this Agreement, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, such Closing
Date, by you. Any such cancellation shall be without liability of the
Underwriters to the Company. Notice of such cancellation shall be given to the
Company in writing, or by telegraph or telephone and confirmed in writing.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter
against any loss, claim, damage or liability (or any action in respect thereof),
joint or several, to which such Underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon (i) any untrue
statement or alleged untrue statement made by the Company in Section 1 hereof,
or (ii) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any thereof, or (B) in any "Blue
Sky" application or other document executed by the Company specifically for that
purpose or based upon any written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the Shares
under the securities laws thereof (any such application, document or information
being hereinafter called "Blue Sky Information"), or (iii) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any thereof, or in
any Blue Sky Information a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iv) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (ii) or (iii) above (provided that the Company shall not be
liable under this clause (iv) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly or indirectly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct); and shall reimburse each
Underwriter promptly after receipt of invoices from such Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them shall promptly
refund them; provided, however, that the Company shall not be liable in any such
case to the extent, but only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company through you by or
on behalf of any Underwriter specifically for use in the preparation of the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any thereof, or any Blue Sky Information; and
provided, further, that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any Underwriter on account of any
loss, claim, damage, liability or action arising from the sale of Shares to any
person by that Underwriter if that Underwriter failed to send or give a copy of
the Prospectus, as the same may be amended or supplemented, to that person
within the time required by the Securities Act and the Rules and Regulations,
and the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact in such Preliminary
Prospectus was corrected in the Prospectus, unless such failure resulted from
non-compliance by the Company with Section 4(b).
(b) Each Underwriter severally, but not jointly, shall indemnify and
hold harmless the Company against any loss, claim, damage or liability (or
action in respect thereof) to which the Company may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any thereof, or (B) in any Blue Sky Information, or
(ii) the omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement to
any thereof, or in any Blue Sky Information a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
shall reimburse any legal or other expenses reasonably incurred by the Company
promptly after receipt of invoices from the Company in connection with
investigating or defending against any such loss, claim, damage, liability or
action, notwithstanding the possibility that payments for such expenses might
later be held to be improper, in which case the Company shall promptly refund
them; provided, however, that such indemnification shall be available in each
such case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company through
you by or on behalf of such Underwriter specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been prejudiced in any material respect by such failure or from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it or they wish, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under such subsection for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation, except that the
Representatives shall have the right to employ counsel to represent you and
those other Underwriters who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters against
the Company under such subsection if, in your reasonable judgment, it is
advisable for you and those Underwriters to be represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall be paid
by the indemnifying party or parties; provided, however, in no event, shall the
indemnifying party or parties be responsible for the expenses of more than one
separate counsel for all such indemnified parties.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by one of the parties and such parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(d) were to be determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to in the
first sentence of this subsection (d). The amount paid by an indemnified party
as a result of the losses, claims, damages or liabilities referred to in the
first sentence of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject of
this subsection (d), subject to the proviso in the last sentence of subsection
(c). Notwithstanding the provisions of this subsection (d), no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint. Each party entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in subsection (c) hereof).
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have, and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Securities Act or the Exchange Act;
and the obligations of the Underwriters under this Section 6 shall be in
addition to any liability that the respective Underwriters may otherwise have,
and shall extend, upon the same terms and conditions, to each director of the
Company (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to each
officer of the Company who has signed the Registration Statement and to and each
other person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act.
7. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Shares which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (in the respective proportions which the number of Shares set forth
opposite the name of each non-defaulting Underwriter in Schedule I hereto bears
to the total number of Shares set forth in Schedule I hereto) the Shares which
the defaulting Underwriter agreed but failed to purchase; except that the
non-defaulting Underwriters shall not be obligated to purchase any of the Shares
if the total number of Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase exceed 9.09% of the total number of Shares, and
any non-defaulting Underwriters shall not be obligated to purchase more than
110% of the number of Shares set forth opposite its name in Schedule I hereto
plus the total number of Option Shares purchasable by it pursuant to the terms
of Section 2. If the foregoing maximums are exceeded, the non-defaulting
Underwriters, and any other underwriters satisfactory to you that so agree,
shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all of the Shares. If the
non-defaulting Underwriters or the other underwriters satisfactory to you do not
elect to purchase the Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the Agreement shall terminate without liability
on the part of any non-defaulting Underwriter or the Company, except for the
payment of expenses to be borne by the Company and the Underwriters as provided
in Section 4(h) hereof and the indemnity and contribution agreements of the
Company and the Underwriters contained in Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the First
Closing Date for up to seven full Business Days in order to effect any changes
that may be necessary in the Registration Statement or the Prospectus or in any
other document or agreement, and to file promptly any amendments or any
supplements to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary.
8. TERMINATION.
(a) Until the First Closing Date, this Agreement may be terminated by
you by giving notice as hereinafter provided to the Company, if (i) the Company
shall have failed, refused or been unable, at or prior to the First Closing
Date, to perform any agreement on its part to be performed hereunder, (ii) any
other condition of the obligations of the Underwriters hereunder is not
fulfilled, (iii) trading in securities generally on the New York Stock Exchange,
the Nasdaq National Market or the International Stock Exchange of the United
Kingdom or the over-the-counter market shall have been suspended or minimum
prices shall have been established on any of such exchanges or such market by
the Commission or by such exchange or other regulatory body or governmental
authority having jurisdiction, (iv) a banking moratorium shall have been
declared by Federal, New York, United Kingdom or Massachusetts authorities, or
(v) the United States or the United Kingdom is or becomes engaged in hostilities
which result in the declaration of a national emergency or war, or (vi) there
shall have been such a material adverse change in general economic, political or
financial conditions, or the effect of international conditions on the financial
markets in the United States or the United Kingdom shall be such, as to, in the
judgment of a majority in interest of the several Underwriters, make it
inadvisable or impracticable to proceed with the delivery of the Shares. Any
termination of this Agreement pursuant to this Section 8 shall be without
liability on the part of the Company or any Underwriter, except as otherwise
provided in Sections 4(h) and 6 hereof.
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telegraph or telephone, and if by telegraph
or telephone, shall be immediately confirmed in writing.
9. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND
REPRESENTATIONS. The agreements contained in Section 6 and the representations,
warranties and agreements of the Company in Sections 1 and 4 shall survive the
delivery of the Shares to the Underwriters hereunder and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
10. NOTICES. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, such notice shall be in writing addressed to the Company at 5420
Feltl Road, Minneapolis, Minnesota 55343, Attention: Chief Financial Officer;
and (b) whenever notice is required by the provisions of the Agreement to be
given to the several Underwriters, such notice shall be in writing addressed to
you in care of NatWest Securities Limited, 135 Bishopsgate, London EC2M3UR,
England, Attention: Syndicate Department.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the outside cover page, the paragraph containing
stabilization information on the inside front cover page and the statements
under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus, constitute the only written information furnished by or on behalf of
any Underwriter referred to in paragraph (b) of Section 1 hereof and in
paragraphs (a) and (b) of Section 6 hereof.
12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and their respective
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that (a) the representations, warranties,
indemnities and agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
any Underwriter within the meaning of the Securities Act or the Exchange Act and
(b) the indemnity agreement of the Underwriters contained in Section 6 hereof
shall be deemed to be for the benefit of directors of the Company, officers of
the Company who signed the Registration Statement, and any person controlling
the Company. Nothing in this Agreement shall be construed to give any person,
other than the persons referred to in this paragraph, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
13. DEFINITION OF "BUSINESS DAY", "SUBSIDIARY" AND "SIGNIFICANT
SUBSIDIARY". For purposes of this Agreement, (a) "Business Day" means any day on
which the New York Stock Exchange is open for trading, (b) "Subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations and (c) "Significant
Subsidiary" has the meaning set forth in Item 1-02(v) of the Regulation S-X of
the Rules and Regulations.
14. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of law principles thereof.
15. COUNTERPARTS. This agreement may be signed in one or more
counterparts, each of which together shall constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Please confirm, by signing and returning to us eight counterparts of
this Agreement, that you are acting on behalf of yourselves and the other
several Underwriters and that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
SURVIVALINK CORPORATION
By:
Title:
Confirmed and accepted as of the date first above mentioned:
NATWEST SECURITIES LIMITED
VECTOR SECURITIES INTERNATIONAL, INC.
JOHN G. KINNARD AND COMPANY INCORPORATED
as Representatives of the several
Underwriters named in Schedule I hereto
By: NATWEST SECURITIES LIMITED
By:_____________________________
Authorized Signatory
SCHEDULE I
Number of Firm
Shares To be
Underwriter Purchased
NatWest Securities Limited...................................
Vector Securities International, Inc.........................
John G. Kinnard and Company Incorporated.....................
-----------
Total............................................... 3,000,000
===========
RESTATED ARTICLES OF INCORPORATION
OF
SURVIVA LINK CORPORATION
Article 1
NAME
The name of the Corporation is SurVivaLink Corporation.
Article 2
REGISTERED OFFICE
The registered office of the Corporation in the State of Minnesota is
located at: 5420 Feltl Road, Minnetonka, Minnesota 55343.
Article 3
CAPITAL STOCK
3.a. The Corporation is authorized to issue Fifty Million (50,000,000)
shares of capital stock, having a par value of $.01 per share in the case of
common stock, and having a par value as determined by the Board of Directors in
the case of preferred stock.
3.b. In addition to any and all powers conferred upon the Board of
Directors by the laws of the State of Minnesota, the Board of Directors shall
have the authority to establish by resolution more than one class or series of
shares, either preferred or common, and to fix the relative rights, restrictions
and preferences of any such different class or series, and the authority to
issue shares of a class or series, shares of which may then be outstanding, to
holders of shares of another class or series to effectuate share dividends,
splits or conversions of the Corporation's outstanding shares.
3.c. The Board of Directors shall also have the authority to issue
rights to convert any of the Corporation's securities into shares of stock of
any class or classes, the authority to issue options to purchase or subscribe
for shares of stock of any class or classes, and the authority to issue share
purchase or subscription warrants or any other evidence of such option rights
which set forth the terms, provisions and conditions thereof, including the
price or prices at which such shares may be subscribed for or purchased. Such
options, warrants and rights may be either transferable or nontransferable and
either separable or inseparable from other securities of the Corporation. The
Board of Directors is authorized to fix the terms, provisions and conditions of
such options, warrants and rights, including the conversion basis or bases and
the option price or prices at which shares may be subscribed for or purchased.
Article 4
PURPOSES AND POWERS
The Corporation shall have general business purposes and shall possess
all powers necessary to conduct any business in which it is authorized to
engage, including but not limited to, all those powers expressly conferred upon
business corporations by Chapter 302A of the Minnesota Statutes, as it may from
time to time be amended, together with those powers implied therefrom.
Article 5
DURATION
The Corporation shall have perpetual duration.
Article 6
NO PREEMPTIVE RIGHTS; NO CUMULATIVE VOTING
6.a. No Preemptive Rights. The shareholders of the Corporation shall
not have the preemptive rights provided by Section 302A.413 of the Minnesota
Statutes to subscribe for and to purchase any or all of the shares or other
securities, or rights to purchase shares or other securities, of the
Corporation, now or hereafter authorized.
6.b. No Cumulative Voting. The shareholders of the Corporation shall
not have the right of cumulative voting.
Article 7
LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (b) for acts or
omissions not in good faith or that involved intentional misconduct or a knowing
violation of law, (c) under Section 302A.559 or Section 80A.23 of the Minnesota
Statutes, or (d) for any transaction from which the director derived an improper
personal benefit. If the Minnesota Statutes are amended after this Article
becomes effective to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Minnesota Statutes, as so amended.
Any repeal or modification of this Article 7 by the shareholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
Article 8
ACTION WITHOUT A MEETING
An action required or permitted to be taken at a meeting of the
directors may be taken by written action signed by all of the directors, and in
the case of an action which need not be approved by the shareholders, such
action may be taken by written action signed by the number of directors that
would be required to take such action at a meeting of the directors at which all
directors were present.
BYLAWS
OF
SurViva-Link Corporation
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I. Offices............................................................................................. 1
Section 1.01. Principal Office........................................................................ 1
Section 1.02. Registered Office....................................................................... 1
ARTICLE II. Shareholders....................................................................................... 1
Section 2.01. Regular Meetings........................................................................ 1
Section 2.02. Special Meetings........................................................................ 1
Section 2.03. Demand by Shareholders.................................................................. 1
Section 2.04. Notice.................................................................................. 2
Section 2.05. Quorum.................................................................................. 2
Section 2.06. Voting Rights........................................................................... 2
Section 2.07. Share Register.......................................................................... 2
Section 2.08. Voting of Shares by Organizations and Legal Representatives............................. 3
Section 2.09. Proxies................................................................................. 4
Section 2.10. Action Without a Meeting................................................................ 4
ARTICLE III. Board of Directors................................................................................ 4
Section 3.01. Board to Manage......................................................................... 4
Section 3.02. Number, Qualifications and Terms........................................................ 4
Section 3.03. Meetings................................................................................ 4
Section 3.04. Notice.................................................................................. 5
Section 3.05. Quorum.................................................................................. 5
Section 3.06. Manner of Acting........................................................................ 5
Section 3.07. Presumption of Assent................................................................... 5
Section 3.08. Absent Directors........................................................................ 5
Section 3.09. Action Without a Meeting................................................................ 5
Section 3.10. Resignation............................................................................. 6
Section 3.11. Removal................................................................................. 6
Section 3.12. Vacancies............................................................................... 6
Section 3.13. Compensation............................................................................ 6
ARTICLE IV. Committees......................................................................................... 6
Section 4.01. Generally............................................................................... 6
Section 4.02. Membership.............................................................................. 7
Section 4.03. Quorum.................................................................................. 7
Section 4.04. Procedure............................................................................... 7
Section 4.05. Minutes................................................................................. 7
ARTICLE V. Officers............................................................................................ 7
Section 5.01. Number.................................................................................. 7
Section 5.02. Election and Term of Office............................................................. 7
Section 5.03. Resignation............................................................................. 7
Section 5.04. Removal................................................................................. 7
Section 5.05. Vacancy................................................................................. 7
Section 5.06. Chief Executive Officer................................................................. 8
Section 5.07. President; Vice President............................................................... 8
Section 5.08. Secretary............................................................................... 8
Section 5.09. Chief Financial Officer................................................................. 9
Section 5.10. Assistant Secretaries and Assistant Treasurers.......................................... 9
Section 5.11. Chairman of the Board................................................................... 9
Section 5.12. Compensation............................................................................ 9
ARTICLE VI. Indemnification.................................................................................... 10
ARTICLE VII. Certificates for Shares and Their Transfer........................................................ 10
Section 7.01. Certificates for Shares................................................................. 10
Section 7.02. Transfer of Shares...................................................................... 10
ARTICLE VIII. Distributions.................................................................................... 10
ARTICLE IX. Fiscal Year........................................................................................ 11
ARTICLE X. Seal................................................................................................ 11
ARTICLE XI. Amendment.......................................................................................... 11
ARTICLE XII. Governing Law..................................................................................... 11
</TABLE>
Page ii
BYLAWS
OF
SurViva-Link Corporation
ARTICLE I
Offices
Section 1.01. Principal Office. The principal office of the corporation
shall be located in Minnesota. The corporation may have such other offices,
either within or without Minnesota, as the Board of Directors may designate or
as the business of the corporation may require from time to time.
Section 1.02. Registered Office. The registered office of the
corporation required by chapter 302A, Minnesota Statutes, to be maintained in
Minnesota may be, but need not be, identical with the principal office in
Minnesota, and the address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE II
Shareholders
Section 2.01. Regular Meetings. The Board of Directors may cause
regular meetings of the shareholders to be held on an annual or less frequent
periodic basis for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. Such regular meetings shall
be held on the date and at the time and place fixed by the Board of Directors.
Section 2.02. Special Meetings. Special meetings of the shareholders
may be called for any purpose or purposes at any time, by the Chief Executive
Officer, the Chief Financial Officer, two or more directors or a shareholder or
shareholders holding ten percent or more of the voting shares.
Special meetings shall be held on the date and at the time and place
fixed by the Chief Executive Officer or the Board of Directors, except that a
special meeting called by or at the demand of a shareholder or shareholders
pursuant to section 2.03 of these bylaws shall be held in the county where the
principal executive office is located.
The business transacted at a special meeting shall be limited to the
purposes stated in the notice of the meeting.
Section 2.03. Demand by Shareholders. If a regular meeting of
shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding three percent or more of all voting shares
may demand a regular meeting of shareholders. A shareholder or shareholders
holding ten percent or more of the voting shares may demand a special meeting of
shareholders. The demand for a regular or a special meeting shall be given
Page 1
in writing to the Chief Executive Officer or the Chief Financial Officer of the
corporation. Within 30 days after receipt of the demand by one of those
officers, the Board of Directors shall cause a meeting of shareholders to be
called and held on notice no later than 90 days after receipt of the demand, all
at the expense of the corporation. If the Board of Directors fails to cause a
meeting to be called and held as required by this section, the shareholder or
shareholders making the demand may call the meeting by giving notice as required
by section 2.04 of these bylaws, all at the expense of the corporation.
Section 2.04. Notice. Notice of all meetings of shareholders shall be
given to every holder of voting shares, except where the meeting is an adjourned
meeting and the date, time and place of the meeting were announced at the time
of adjournment. The notice shall be given at least five days before the date of
the meeting, and not more than 60 days before the date of the meeting. The
notice shall contain the date, time and place of the meeting, and any other
information required by this Article II. In the case of a special meeting, the
notice shall contain a statement of the purposes of the meeting. The notice may
also contain any other information deemed necessary or desirable by the Board of
Directors or by any other person or persons calling the meeting.
A shareholder may waive notice of a meeting of shareholders. A waiver
of notice by a shareholder entitled to notice shall be effective whether given
before, at or after the meeting, and whether given in writing, orally or by
attendance. Attendance by a shareholder at a meeting shall be a waiver of notice
of that meeting, except where the shareholder objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened, or objects before a vote on an item of business because the
item may not lawfully be considered at that meeting and does not participate in
the consideration of the item at that meeting.
Section 2.05. Quorum. The holders of a majority of the voting power of
the shares entitled to vote at a meeting present in person or by proxy at the
meeting shall constitute a quorum for the transaction of business. If a quorum
is present when a duly called or held meeting is convened, the shareholders
present may continue to transact business until adjournment, even though the
withdrawal of a number of shareholders originally present leaves less than the
proportion or number otherwise required for a quorum.
Section 2.06. Voting Rights. The Board of Directors may fix a date not
more than 60 days before the date of a meeting of shareholders as the date for
the determination of the holders of voting shares entitled to notice of and to
vote at the meeting. When a date is so fixed, only shareholders on that date are
entitled to notice of and permitted to vote at that meeting of shareholders. If
no record date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, the date on which notice of the
meeting is mailed shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 2.07. Share Register. The officer or agent having charge of the
share register of the corporation shall maintain a share register, not more than
one year old, containing a complete list of the shareholders with the address of
and the number, class and issuance dates
Page 2
of shares held by each. The share register shall be kept on file at the
principal executive office of the corporation, or at another place or places
within the United States determined by the Board of Directors, and shall be
subject to inspection by any shareholder at any time during usual business
hours.
A resolution approved by the affirmative vote of a majority of the
directors present may establish a procedure whereby a shareholder may certify in
writing to the corporation that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more beneficial
owners. Upon receipt by the corporation of the writing, the persons specified as
beneficial owners, rather than the actual shareholder, shall be deemed the
shareholders for the purposes specified in the writing.
A shareholder shall have one vote for each voting share held. Shares
owned by two or more shareholders may be voted by any one of them unless the
corporation receives written notice from any one of them denying the authority
of that person to vote those shares. Except as provided herein, a holder of
voting shares may vote any portion of the shares in any way the shareholder
chooses. If a shareholder votes without designating the proportion or number of
shares voted in a particular way, the shareholder shall be deemed to have voted
all of the shares in that way.
Section 2.08. Voting of Shares by Organizations and Legal
Representatives. Shares of the corporation registered in the name of another
domestic or foreign corporation may be voted by the chief executive officer or
another legal representative of that corporation. Except as provided herein,
shares of the corporation registered in the name of a subsidiary shall not be
entitled to vote on any matter. Shares of the corporation in the name of or
under the control of the corporation or a subsidiary in a fiduciary capacity
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or gives the
corporation binding instructions on how to vote the shares.
Shares under the control of a person in a capacity as a personal
representative, administrator, executor, guardian, conservator or
attorney-in-fact may be voted by the person, either in person or by proxy,
without registration of those shares in the name of the person. Shares
registered in the name of a trustee of a trust or in the name of a custodian may
be voted by the person, either in person or by proxy, but a trustee of a trust
or a custodian shall not vote shares held by the person unless they are
registered in the name of the person.
Shares registered in the name of a trustee in bankruptcy or a receiver
may be voted by the trustee or receiver either in person or by proxy. Shares
under the control of a trustee in bankruptcy or a receiver may be voted by the
trustee or receiver without registering the shares in the name of the trustee or
receiver, if authority to do so is contained in an appropriate order of the
court by which the trustee or receiver was appointed.
Shares registered in the name of any organization not described herein
may be voted either in person or by proxy by the legal representative of that
organization.
A shareholder whose shares are pledged may vote those shares until the
shares are registered in the name of the pledgee.
Page 3
Section 2.09. Proxies. A shareholder may cast or authorize the casting
of a vote by filing a written appointment of a proxy with an officer of the
corporation at or before the meeting at which the appointment is to be
effective. An appointment of a proxy for shares held jointly by two or more
shareholders shall be valid if signed by any one of them, unless the corporation
receives from any one of those shareholders written notice either denying the
authority of that person to appoint a proxy or appointing a different proxy. The
appointment of a proxy shall be valid for eleven months unless a longer period
is expressly provided in the appointment.
Section 2.10. Action Without a Meeting. An action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting by
written action signed by all of the shareholders entitled to vote on that
action. The written action shall be effective when it has been signed by all of
those shareholders, unless a different effective time is provided in the written
action.
ARTICLE III
Board of Directors
Section 3.01. Board to Manage. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors, subject to the rights of the shareholders of the corporation as
provided in these bylaws or pursuant to chapter 302A, Minnesota Statutes.
Section 3.02. Number, Qualifications and Terms. The number of directors
of the corporation shall not be greater than eleven and shall be set from time
to time by the shareholders. The Board of Directors may, at any time, increase
the number of directors up to a maximum of eleven or decrease the number of
directors except that any such decrease shall not result in the removal of a
director except a director named by the Board of Directors to fill a vacancy.
Directors shall be natural persons. Each director shall hold office until his or
her successor is elected and has qualified, or until his or her earlier death,
resignation, removal or disqualification. Directors need not be residents of
Minnesota or shareholders of the corporation.
Section 3.03. Meetings. Meetings of the Board of Directors may be
called from time to time by or at the request of the Chief Executive Officer or
any director. The person calling a meeting of the Board of Directors may fix the
date, time and place of the meeting. If the place fixed for the meeting is
outside of Minnesota, the Board of Directors may change the place of the meeting
to a location within Minnesota.
A conference among directors by any means of communication through
which the directors may simultaneously hear each other during the conference
shall constitute a meeting of the Board of Directors, if the same notice is
given of the conference as would be required by section 3.04 of these bylaws for
a meeting, and if the number of directors participating in the conference would
be sufficient to constitute a quorum at a meeting. Participation in a meeting by
such means shall constitute presence in person at the meeting.
Page 4
Section 3.04. Notice. Notice of any meeting shall be given at least
five days previously thereto by written notice mailed to each director at his or
her business address or at least 24 hours prior thereto delivered personally or
by telegram. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. A director may waive notice
of a meeting of the Board of Directors. A waiver of notice by a director
entitled to notice shall be effective whether given before, at or after the
meeting, and whether given in writing, orally or by attendance. Attendance by a
director at a meeting shall be a waiver of notice of that meeting, except where
the director objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and does not
participate thereafter in the meeting.
Section 3.05. Quorum. A majority of the directors currently holding
office present at a meeting shall constitute a quorum for the transaction of
business. In the absence of a quorum, a majority of the directors present may
adjourn a meeting from time to time until a quorum is present. If a quorum is
present when a duly called or held meeting is convened, the directors present
may continue to transact business until adjournment, even though the withdrawal
of a number of directors originally present leaves less than the number
otherwise required for a quorum.
Section 3.06. Manner of Acting. Except as otherwise provided in
Minnesota Statutes, chapter 302A, the Board of Directors shall take action by
the affirmative vote of a majority of directors present at a duly held meeting.
Section 3.07. Presumption of Assent. A director who is present at a
meeting of the Board of Directors when an action is approved by the affirmative
vote of a majority of the directors present is presumed to have assented to the
action approved, unless the director objects at the beginning of the meeting to
the transaction of business because the meeting is not lawfully called or
convened and does not participate thereafter in the meeting, or votes against
the action at the meeting or is prohibited from voting on the action due to a
conflict of interest.
Section 3.08. Absent Directors. A director may give advance written
consent or opposition to a proposal to be acted on at a Board of Directors
meeting. If the director is not present at the meeting, consent or opposition to
a proposal shall not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected.
Section 3.09. Action Without a Meeting. An action required or permitted
to be taken at a meeting of the Board of Directors may be taken by written
action signed by all of the directors, and in the case of an action which need
not be approved by the shareholders, such action may be taken by written action
signed by the number of directors that would be required to take such action at
a meeting of the Board of Directors at which all directors were present.
Page 5
The written action shall be effective when signed by the required
number of directors, unless a different effective time is provided in the
written action.
When written action is permitted to be taken by less than all
directors, all directors shall be notified immediately of its text and effective
date. Failure to provide the notice shall not invalidate the written action. A
director who does not sign or consent to the written action shall have no
liability for the action or actions taken thereby.
Section 3.10. Resignation. A director may resign at any time by giving
written notice to the corporation. The resignation shall be effective without
acceptance when the notice is given to the corporation, unless a later effective
time is specified in the notice.
Section 3.11. Removal. Any one or all of the directors may be removed
at any time, with or without cause, by the affirmative vote of the holders of a
majority of the common voting shares. A director may be removed at any time,
with or without cause, by the affirmative vote of a majority of the remaining
directors present if the director was named by the Board of Directors to fill a
vacancy, and the shareholders have not elected directors in the interval between
the time of appointment to fill the vacancy and the time of removal. Removal of
a director, whether by shareholders or directors, shall be subject to the
provisions of any shareholder control agreement.
Section 3.12. Vacancies. Any vacancy occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum. Vacancies on the Board of Directors
resulting from newly created directorships may be filled by the affirmative vote
of a majority of the directors serving at the time of the increase. A director
elected to fill a vacancy shall hold office until a qualified successor is
elected by the shareholders at the next regular or special meeting of the
shareholders, or until his or her earlier death, resignation, removal or
disqualification.
Section 3.13. Compensation. By resolution of the Board of Directors,
the directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
ARTICLE IV
Committees
Section 4.01. Generally. A resolution approved by the affirmative vote
of a majority of the directors currently holding office may establish committees
having the authority of the Board of Directors in the management of the business
of the corporation to the extent provided in the resolution. Committees shall be
subject at all times to the direction and control of the Board of Directors.
Section 4.02. Membership. A committee shall consist of one or more
natural persons, who need not be directors, appointed by affirmative vote of a
majority of the directors present.
Page 6
Section 4.03. Quorum. A majority of the members of the committee
present at a meeting shall constitute a quorum for the transaction of business,
unless a larger or smaller proportion or number is provided in a resolution
approved by the affirmative vote of a majority of the directors present.
Section 4.04. Procedure. The provisions of sections 3.03, 3.04 and 3.05
of these bylaws shall apply to committees and members of committees to the same
extent as those sections apply to the Board of Directors and directors.
Section 4.05. Minutes. Minutes, if any, of committee meetings shall be
made available upon request to members of the committee and to any director.
ARTICLE V
Officers
Section 5.01. Number. The officers of the corporation shall be a Chief
Executive Officer, a secretary and a Chief Financial Officer, each of whom shall
be natural persons and elected by the Board of Directors. The Board of Directors
also may, in its discretion, elect one or more vice presidents (the number
thereof to be determined by the Board). A chairman of the Board of Directors and
such other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices may be
held by the same person, except the offices of Chief Executive Officer and vice
president.
Section 5.02. Election and Term of Office. The officers of the
corporation shall be elected by the Board of Directors. In the absence of an
election or appointment of officers by the Board of Directors, the person or
persons exercising the principal functions of the Chief Executive Officer or the
Chief Financial Officer shall be deemed to have been elected to those offices.
Each officer shall hold office until his or her successor is elected and has
qualified, or until his or her earlier death, resignation, removal or
disqualification. The election or appointment of a person as an officer or agent
shall not, of itself, create contract rights.
Section 5.03. Resignation. An officer may resign at any time by giving
written notice to the corporation. The resignation shall be effective without
acceptance when the notice is given to the corporation, unless a later effective
date is specified in the notice.
Section 5.04. Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the directors present, subject to the provisions of any shareholder control
agreements.
Section 5.05. Vacancy. A vacancy in any office because of death,
resignation, removal, disqualification or other cause may, or in the case of a
vacancy in the office of Chief Executive Officer or Chief Financial Officer
shall, be filled by the Board of Directors for the unexpired portion of the
term.
Section 5.06. Chief Executive Officer. The Chief Executive Officer of
the corporation shall:
Page 7
(a) Have general active management of the business of the
corporation;
(b) When present, preside at all meetings of the Board of
Directors and of the shareholders;
(c) See that all orders and resolutions of the Board of Directors
are carried into effect;
(d) Sign and deliver in the name of the corporation any deeds,
mortgages, bonds, contracts, certificates for shares or other
instruments pertaining to the business of the corporation,
except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is
expressly delegated by the articles or these bylaws or by the
Board of Directors to some other officer or agent of the
corporation; and
(e) Perform other duties prescribed by the Board of Directors.
Section 5.07. President; Vice President. In the absence of the Chief
Executive Officer or in the event of his or her death, inability or refusal to
act, the president or the vice president (or in the event there be more than one
vice president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the Chief Executive Officer, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Chief Executive Officer. The president or any vice president may sign, with
the secretary or an assistant secretary, certificates for shares of the
corporation, and shall perform other duties prescribed by the Board of Directors
or by the Chief Executive Officer.
Section 5.08. Secretary. The secretary shall:
(a) Maintain records of and, whenever necessary, certify all
proceedings of the Board of Directors and the shareholders;
(b) See that all notices are duly given in accordance with the
provisions of these bylaws or as required by law;
(c) Be custodian of the corporate records and of the corporate
seal, if any;
(d) See that a share register of the corporation is maintained in
accordance with section 2.07 of these bylaws;
(e) Sign with the Chief Executive Officer, the president or a vice
president, certificates for shares of the corporation; and
(f) Perform other duties prescribed by the Board of Directors or
by the Chief Executive Officer.
Page 8
Section 5.09. Chief Financial Officer. The Chief Financial Officer of
the corporation shall:
(a) Keep accurate financial records for the corporation;
(b) Deposit all moneys, drafts and checks in the name of and to
the credit of the corporation in the banks and depositories
designated by the Board of Directors;
(c) Endorse for deposit all notes, checks and drafts received by
the corporation as ordered by the Board of Directors, making
proper vouchers therefor;
(d) Disburse corporate funds and issue checks and drafts in the
name of the corporation, as ordered by the Board of Directors;
(e) Render to the Board of Directors and the Chief Executive
Officer, whenever requested, an account of all transactions by
the Chief Financial Officer and of the financial condition of
the corporation;
(f) Perform other duties prescribed by the Board of Directors or
by the Chief Executive Officer; and
(g) If required by the Board of Directors, give a bond for the
faithful discharge of his or her duties in such sum and with
such surety or sureties as the Board of Directors shall
determine.
Section 5.10. Assistant Secretaries and Assistant Treasurers. The
assistant secretaries may sign with the Chief Executive Officer, the president
or a vice president certificates for shares of the corporation. The assistant
treasurers shall, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The assistant secretaries and assistant
treasurers shall perform such duties as shall be prescribed by the secretary or
the Chief Financial Officer, respectively, or by the Board of Directors or by
the Chief Executive Officer.
Section 5.11. Chairman of the Board. A chairman of the Board of
Directors may be elected by the Board of Directors. He or she shall perform such
duties as shall be prescribed by the Board of Directors.
Section 5.12. Compensation. The compensation of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such compensation by reason of the fact that he or she
is also a director of the corporation.
ARTICLE VI
Indemnification
The corporation shall indemnify a person made or threatened to be made
a party to a proceeding by reason of the former or present official capacity of
the person with the corporation
Page 9
in accordance with, and to the fullest extent provided by, the provisions of
chapter 302A, Minnesota Statutes.
ARTICLE VII
Certificates for Shares and Their Transfer
Section 7.01. Certificates for Shares. The shares of the corporation
shall be either certificated shares or uncertificated shares. Each holder of
certificated shares shall be entitled to a certificate of shares.
A certificate representing shares of the corporation shall contain on
its face the name of the corporation, a statement that the corporation is
incorporated under the laws of Minnesota, the name of the person to whom it is
issued, the number and class of shares, and the designation of the series, if
any, of shares represented by the certificate. A new share certificate may be
issued in place of one that is alleged to have been lost, stolen or destroyed.
All certificates surrendered to the corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a certificate that is alleged to have been lost, stolen or destroyed a new
one may be issued therefor upon such terms and indemnity to the corporation as
the Board of Directors may prescribe.
Section 7.02. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the share register of the corporation by the record holder
thereof or by his or her legal representative, who shall furnish proper evidence
of authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares, or by
evidence of transfer. The person in whose name shares stand on the share
register of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes unless a different beneficial owner shall have been
designated as provided in section 2.07 of these bylaws.
ARTICLE VIII
Distributions
The Board of Directors may authorize, and the corporation may make, a
distribution only if the Board of Directors determines, in accordance with
Minnesota law, that the corporation will be able to pay its debts in the
ordinary course of business after making the distribution and the Board does not
know before the distribution is made that the determination was or has become
erroneous. For purposes of this section, "distribution" means a direct or
indirect transfer of money or other property, other than shares of the
corporation, with or without consideration, or an incurrence of indebtedness by
the corporation to or for the benefit of its shareholders in respect of its
shares. A distribution may be in the form of a dividend or a distribution in
liquidation or as consideration for the purchase, redemption or other
acquisition of the corporation's shares, or otherwise.
Page 10
ARTICLE IX
Fiscal Year
The fiscal year of the corporation shall begin on the first day of
January and end on the thirty-first day of December, next succeeding.
ARTICLE X
Seal
The Board of Directors may provide a corporate seal which shall be
circular in form and shall have inscribed thereon the state of incorporation and
the words "Corporate Seal."
ARTICLE XI
Amendment
These Bylaws may be amended or repealed and new Bylaws may be adopted
by the Board of Directors, or by the shareholders, as provided in chapter 302A,
Minnesota Statutes.
ARTICLE XII
Governing Law
The corporation has been formed under and pursuant to the provisions of
chapter 302A, Minnesota Statutes. All references in these bylaws to chapter
302A, Minnesota Statutes shall mean and include such chapter as currently
enacted or hereafter amended.
CERTIFICATION OF BYLAWS
The undersigned hereby certifies that the foregoing Bylaws were adopted
at the Board of Directors held on April 29, 1992.
/s/ Mark W. Kroll, Secretary
Page 11
INDUSTRIAL LEASE
between
A.M.W. PROPERTIES CORP., a Nevada corporation
(Landlord)
and
SurVivaLink Corp.,
a Minnesota corporation
(Tenant)
TABLE OF CONTENTS
INDUSTRIAL LEASE
Article Title Page
1 Definitions 1
2 Premises 2
3 Term 2
4 Rental; Adjustments 3
5 Security Deposit 7
6 Use of Premises 8
7 Utilities and Services 10
8 Maintenance and Repairs 11
9 Alterations, Additions and Improvements 13
10 Indemnification and Insurance 14
11 Damage or Destruction 17
12 Condemnation 18
13 Relocation 18
14 Assignment and Subletting 19
15 Default and Remedies 21
16 Attorneys' Fees; Costs of Suit 24
17 Subordination and Attornment 24
18 Quiet Enjoyment 25
19 Parking 25
20 Rules and Regulations 26
21 Estoppel Certificates 26
22 Entry by Landlord 27
23 Landlord's Lease Undertakings--Exculpation from
Personal Liability; Transfer of Landlord's Interest 27
24 Holdover Tenancy 28
25 Notices 28
26 Brokers 29
27 Miscellaneous 29
28 Floor Load Limits 32
29 Landlord's Lien 32
30 Uniform Commercial Code 32
EXHIBITS
Exhibit A Floor Plan of the Premises
Exhibit B Work Letter Agreement
Exhibit C Suite Acceptance Letter
Exhibit D Tenant Operations Inquiry
Schedule 1 List of Permissible Hazardous Materials and
to Exhibit D Quantities for Tenant
Exhibit E List of Additional Insureds
Exhibit F Rules and Regulations
Exhibit G Guaranty
INDUSTRIAL LEASE
[FORM NET LEASE/MULTI-TENANT]
THIS LEASE ("Lease"), dated August 17, 1994, is made and entered into
by and between A.M.W. PROPERTIES CORP., a Nevada corporation ("Landlord") and
SurVivaLink, Corp., a Minnesota corporation ("Tenant") upon the following terms
and conditions:
ARTICLE I -- DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein:
1.01 BUILDING. The term "Building" shall mean that certain
office/warehouse building located at 5420 Feltl Road, Minnetonka, Minnesota,
together with all related site land, improvements, parking facilities, common
areas, driveways, sidewalks and landscaping.
1.02 PREMISES. The term "Premises" shall mean Space No. 5420 in the
Building, as more particularly outlined on the drawing attached hereto as
Exhibit A and incorporated herein by reference.
1.03 RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
Premises" shall mean 10,625 square feet, which Landlord and Tenant have
stipulated as the Rentable Area of the Premises.
1.04 LEASE TERM. The terms "Lease Term" or "Term" shall mean the period
between the Commencement Date and the Expiration Date (as such terms are
hereinafter defined), unless sooner terminated or renewed as otherwise provided
in this Lease.
1.05 COMMENCEMENT DATE. Subject to adjustment as provided in Article 3,
the term "Commencement Date" shall mean September 1, 1994.
1.06 EXPIRATION DATE. Subject to adjustment as provided in Article 3,
the term "Expiration Date" shall mean August 31, 1999.
1.07 BASE RENT. Subject to adjustment as provided in Article 4, the
term "Base Rent" shall mean the amounts described in Paragraph 1 of the Addendum
attached.
1.08 TENANT'S PERCENTAGE SHARE. The term "Tenant's Percentage Share"
shall mean seven and 92/100 percent (7.92%) with respect to Operating Expenses
(as hereinafter defined), seven and 92/100 percent (7.92%) with respect to
Property Taxes (as hereinafter defined), seven and 92/100 percent (7.92%) with
respect to Insurance Expenses (as hereinafter defined) and seven and 92/100
percent (7.92%) with respect to Tenant's law compliance obligations under
Section 6.02(C) of this Lease and for all other purposes under this Lease.
1.09 SECURITY DEPOSIT. The term "Security Deposit" shall mean Sixteen
Thousand and no/100 Dollars ($16,000.00).
1.10 TENANT'S PERMITTED USE. The term "Tenant's Permitted Use" shall
mean general administrative offices, engineering, sales, and general warehouse
for and assembly of Automatic External Defribillators and related equipment and
no other use.
1.11 LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address for
Notices" shall mean Heitman Minnesota Management Inc., 5510 Feltl Road,
Minnetonka, Minnesota 55343, with a copy to Heitman Properties Ltd., 180 North
LaSalle Street, Suite 3600, Chicago, Illinois 60601, Attn: Property Management.
1.12 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean 5420 Feltl Road, Minnetonka, Minnesota 55343.
1.13 BROKERS. The term "Brokers" shall mean Tim Bissen and Joe Smith of
the Steiner Development Co., and Heitman Minnesota Management Inc.
1.14 GUARANTORS. The term "Guarantors" shall mean NONE.
ARTICLE II -- PREMISES
2.01 LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant,
and Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease. On the Commencement Date
described herein, Landlord shall deliver the Premises to Tenant in their "AS IS"
condition as of the date of this Lease with the exception that Landlord shall
perform a general clean-up of the Premises, including shampooing the carpet and
servicing and certifying the existing HVAC is in good working order on the
Commencement Date.
2.02 ACCEPTANCE OF PREMISES. Tenant acknowledges that Landlord has not
made any representation or warranty with respect to the condition of the
Premises or the Building or with respect to the suitability or fitness of either
for the conduct of Tenant's Permitted Use or for any other purpose. Prior to
Tenant's taking possession of the Premises, Landlord or its designee and Tenant
will walk the Premises for the purpose of reviewing the condition of the
Premises (and the condition of completion and workmanship of any tenant
improvements which Landlord is required to construct in the Premises pursuant to
this Lease); after such review, Tenant shall execute a Suite Acceptance Letter
in the form and content of Exhibit C, accepting the Premises.
ARTICLE III -- TERM
3.01 Except as otherwise provided in this Lease, the Lease Term shall
be for the period described in Section 1.04 of this Lease, commencing on the
Commencement Date described in Section 1.05 of this Lease and ending on the
Expiration Date described in Section 1.06 of this Lease; provided, however,
that, if, for any reason, Landlord is unable to deliver possession of the
Premises on the date described in Section 1.05 of this Lease, Landlord shall not
be liable for any damage caused thereby, nor shall the Lease be void or
voidable, but, rather, the Lease Term shall commence upon, and the Commencement
Date shall be, the date that possession of the Premises is so tendered to Tenant
(except for Tenant-caused delays which shall not be deemed to delay commencement
of the Lease Term), and the Expiration Date described in Section 1.06 of this
Lease shall be extended by an equal number of days. However, notwithstanding the
foregoing, occupancy of the Premises by Tenant shall be no later than September
15, 1994.
ARTICLE IV -- RENTAL; ADJUSTMENTS
4.01 DEFINITIONS. As used herein,
(A) "Property Taxes" shall mean the aggregate amount of all
real estate taxes, assessments (whether they be general or special),
sewer rents and charges, transit taxes, taxes based upon the receipt of
rent and any other federal, state or local governmental charge,
general, special, ordinary or extraordinary (but not including income
or franchise taxes, capital stock, inheritance, estate, gift, or any
other taxes imposed upon or measured by Landlord's gross income or
profits, unless the same shall be imposed in lieu of real estate taxes
or other ad valorem taxes), which Landlord shall pay or become
obligated to pay in connection with the Building, or any part thereof.
Taxes shall include all fees and costs, including attorneys' fees,
appraisals and consultants' fees, incurred by Landlord in seeking to
obtain a reduction of, or a limit on the increase in, any Taxes,
regardless of whether any reduction or limitation is obtained. Taxes
for any calendar year shall be Taxes which are due for payment or are
paid during such year. If at any time during the Lease Term the method
of taxation then prevailing shall be altered so that any new tax,
assessment, levy, imposition or charge shall be imposed upon Landlord
in place or partly in place of any such Taxes, or contemplated increase
in any such Taxes, and shall be measured by or be based in whole or in
part upon the Building or the rents or other income from the Building,
then all such new taxes, assessments, levies, impositions or charges,
to the extent that they are so measured or based, shall be included in
Taxes to the extent that such items would be payable if the Building
was the only property of Landlord subject to same and the income
received by Landlord from the Building was the only income of Landlord.
Taxes shall also include any personal property taxes imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances of Landlord used in connection with the Building.
(B) "Operating Expenses" shall mean all costs, fees,
disbursements and expenses paid or incurred by or on behalf of Landlord
in the operation, ownership, maintenance, insurance, management,
replacement and repair of the Building (excluding Property Taxes).
Operating Expenses shall not include costs of alteration of the
premises of tenants of the Building, depreciation charges, interest and
principal payments on mortgages, ground rental payments, real estate brokerage
and leasing commissions, expenses incurred in enforcing obligations of tenants
of the Building, salaries and other compensation of executive officers of the
managing agent of the Building senior to the Building manager, costs of any
special service provided to any one tenant of the Building but not to tenants of
the Building generally, and costs of marketing or advertising the Building.
(C) "Insurance Expenses" shall mean all costs, fees,
disbursements and expenses paid or incurred by or on behalf of Landlord
for premiums for hazard, "all risk", casualty, rent interruption and
liability insurance and all other insurance, obtained by Landlord in
connection with or relating to the Building.
If the Building does not have one hundred percent (100%) occupancy
during an entire calendar year, then the variable cost components of Property
Taxes, Operating Expenses and Insurance Expenses shall be adjusted so that the
total amount of Property Taxes, Operating Expenses and Insurance Expenses equals
the total amount which would have been paid or incurred by Landlord had the
Building been one hundred percent (100%) occupied for the entire calendar year.
4.02 BASE RENT. During the Lease Term, Tenant shall pay to Landlord as
rental for the Premises the Base Rent described in Section 1.07 above, subject
to the following adjustments (herein collectively called the "Rent
Adjustments"):
(A) [deleted]
(B) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord shall be increased by Tenant's
Percentage Share of the Property Taxes for such year (the "Tax
Adjustment").
(C) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord also shall be increased by Tenant's
Percentage Share of the Operating Expenses paid or incurred by Landlord
during such year (the "Operating Expense Adjustment").
(D) During each calendar year during the Lease Term, the Base
Rent payable by Tenant to Landlord also shall be increased by Tenant's
Percentage Share of the Insurance Expenses for such year (the
"Insurance Adjustment").
(E) The Tax Adjustment, the Operating Expense Adjustment and
the Insurance Adjustment are hereinafter referred to collectively as
the "Tax, Operating Expense and Insurance Adjustments".)
4.03 ADJUSTMENT PROCEDURE; ESTIMATES. The Tax, Operating Expense and
Insurance Adjustments specified in Sections 4.02(B), 4.02(C) and 4.02(D) shall
be determined and paid as follows:
(A) During each calendar year during the Lease Term, Landlord
shall give Tenant written notice of Landlord's estimate of amounts
payable under Sections 4.02(B) and 4.2(C) for that calendar year. On or
before the first day of each calendar month during the calendar year,
Tenant shall pay to Landlord one-twelfth (1/12th) of such estimated
amounts; provided, however, that, not more often than quarterly,
Landlord may, by written notice to Tenant, revise its estimate for such
year, and subsequent payments by Tenant for such year shall be based
upon such revised estimate.
(B) Within ninety (90) days after the close of each calendar
year in which any Rent Adjustment is made or as soon thereafter as is
practicable, Landlord shall deliver to Tenant a statement of that
year's Property Taxes, Operating Expenses and Insurance Expenses, and
the actual Tax, Operating Expense and Insurance Expense Adjustments to
be made pursuant to Sections 4.02(B), 4.02(C) and 4.02(D) for such
calendar year, as determined and certified by Landlord (the "Landlord's
Statement") and such Landlord's Statement shall be binding upon
Landlord and Tenant, except as provided in Section 4.04 below. If the
amount of the actual Tax Adjustment, Insurance Adjustment or Operating
Expense Adjustment is more than the estimated payments for the Tax
Adjustment, Insurance Adjustment or Operating Expense Adjustment for
such calendar year made by Tenant, Tenant shall pay the deficiency to
Landlord upon receipt of Landlord's Statement. If the amount of the
actual Tax Adjustment, Insurance Adjustment or Operating Expense
Adjustment is less than the estimated payments for such calendar year
made by Tenant, any excess shall be credited against Rent (as
hereinafter defined) next payable by Tenant under this Lease or, if the
Lease Term has expired, any excess thereof shall be paid to Tenant. No
delay in providing the statements described in this Section 4.03(B)
shall act as a waiver of Landlord's right to payment under Sections
4.02(B), 4.02(C) or 4.02(D) above. Notwithstanding the foregoing,
Tenant's right to receive any credit or payment pursuant to the
preceding sentences of this Section 4.03(B) is conditioned on this
Lease being in full force and effect and Tenant not being in default
under this Lease on the date such credit or payment is due.
(C) If this Lease shall terminate on a day other than the end
of a calendar year, the amount of the Tax, Operating Expense and
Insurance Adjustments to be paid pursuant to Sections 4.02(B), 4.02(C)
and 4.02(D) that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis of the number of days
from January 1 of the calendar year to the termination date bears to
365. The termination of this Lease shall not affect the obligations of
Landlord and Tenant pursuant to Sections 4.03(B) and 4.03(C) to be
performed after such termination.
4.04 REVIEW OF LANDLORD'S STATEMENT. Provided this Lease is in full
force and effect and that Tenant is not then in default under this Lease and
provided further that Tenant strictly complies with the provisions of this
Section 4.04, Tenant shall have the right, once each calendar year, to
reasonably review supporting data for any portion of a Landlord's Statement that
Tenant claims is incorrect, in accordance with the following procedure:
(A) Tenant shall, within ten (10) business days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to
be incorrect, and Tenant shall simultaneously pay to Landlord all
amounts due from Tenant to Landlord as specified in the Landlord's
Statement. Except as expressly set forth in subsection (C) below, in no
event shall Tenant be entitled to withhold, deduct, or offset any
monetary obligations of Tenant to Landlord under the Lease (including
without limitation, Tenant's obligation to make all payments of Base
Rent including the CPI Adjustment and all payments of Tenant's Tax,
Operating Expense and Insurance Adjustments) pending the completion of
and regardless of the results of any review of records under this
Section 4.04. The right of Tenant under this Section 4.04 may only be
exercised once for any Landlord's Statement, and if Tenant fails to
meet any of the above conditions as a prerequisite to the exercise of
such right, the right of Tenant under this Section 4.04 for a
particular Landlord's Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records
for the Building at Landlord's manager's corporate offices and Tenant
agrees that any review of records under this Section 4.04 shall be at
the sole expense of Tenant and shall be conducted by an independent
firm of certified public accountants of national standing. Tenant
acknowledges and agrees that any records reviewed under this Section
4.04 constitute confidential information of Landlord, which shall not
be disclosed to anyone other than the accountants performing the review
and the principals of Tenant who receive the results of the review. The
disclosure of such information to any other person, whether or not
caused by the conduct of Tenant, shall constitute a material breach of
this Lease.
(C) Any errors disclosed by the review shall be promptly
corrected by Landlord, provided, however, that if Landlord disagrees
with any such claimed errors, Landlord shall have the right to cause
another review to be made by an independent firm of certified public
accountants of national standing. In the event of a disagreement
between the two accounting firms, the review that discloses the least
amount of deviation from the Landlord's Statement shall be deemed to be
correct. In the event that the results of the review of records (taking
into account, if applicable, the results of any additional review
caused by Landlord) reveal that Tenant has overpaid obligations for a
preceding period, the amount of such overpayment shall be credited
against Tenant's subsequent installment obligations to pay the
estimated Tax, Operating Expense and Insurance Adjustments. In the
event that such results show that Tenant has underpaid its obligations
for a preceding period, Tenant shall be liable for Landlord's actual
accounting fees, and the amount of such underpayment shall be paid by
Tenant to Landlord with the next succeeding installment obligation of
estimated Tax, Operating Expense and Insurance Adjustments.
4.05 PAYMENT. Concurrently with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.07, as adjusted in accordance with Section
4.02, shall be payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar month, the
prepaid Base Rent for such partial month shall be prorated in the proportion
that the number of days this Lease is in effect during such partial month bears
to the total number of days in the calendar month. All Rent, and all other
amounts payable to Landlord by Tenant pursuant to the provisions of this Lease,
shall be paid to Landlord, without notice, demand, abatement, deduction or
offset, in lawful money of the United States at Landlord's office in the
Building or to such other person or at such other place as Landlord may
designate from time to time by written notice given to Tenant. No payment by
Tenant or receipt by Landlord of a lesser amount than the correct Rent due
hereunder shall be deemed to be other than a payment on account; nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed to effect or evidence an accord and satisfaction; and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this Lease or at law or in
equity provided.
4.06 LATE CHARGE; INTEREST. Tenant acknowledges that the late payment
of Base Rent or any other amounts payable by Tenant to Landlord hereunder (all
of which shall constitute additional rent to the same extent as Base Rent) will
cause Landlord to incur administrative costs and other damages, the exact amount
of which would be impracticable or extremely difficult to ascertain. Landlord
and Tenant agree that if Landlord does not receive any such payment on or before
ten (10) business days after the date the payment is due, Tenant shall pay to
Landlord, as additional rental, (a) a late charge equal to five percent (5%) of
the overdue amount to cover such additional administrative costs; and (b)
interest on the delinquent amounts at the lesser of the maximum rate permitted
by law if any or twelve percent (12%) per annum from the date due to the date
paid.
4.07 ADDITIONAL RENTAL. For purposes of this Lease, all amounts payable
by Tenant to Landlord pursuant to this Lease, whether or not denominated as
such, shall constitute additional rental hereunder. Such additional rental,
together with the Base Rent and Rent Adjustments, shall sometimes be referred to
in this Lease as "Rent".
4.08 ADDITIONAL TAXES. In addition to the Rent and other charges to be
paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for all
taxes payable by or imposed upon Landlord upon or with respect to: any fixtures
or personal property located in the Premises; any leasehold improvements made in
or to the Premises by or for Tenant; the Rent payable hereunder, including,
without limitation, any gross receipts tax, license fee or excise tax levied by
any governmental authority; the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the Premises
(including, without limitation, any applicable possession interest taxes); or
this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises.
ARTICLE V -- SECURITY DEPOSIT
5.01 Upon the execution of this Lease, Tenant shall deposit with
Landlord the Security Deposit described in Section 1.09 above. The Security
Deposit is made by Tenant to secure the faithful performance of all the terms,
covenants and conditions of this Lease to be performed by Tenant. If Tenant
shall default with respect to any covenant or provision hereof, Landlord may
use, apply or retain all or any portion of the Security Deposit to cure such
default or to compensate Landlord for any loss or damage which Landlord may
suffer thereby. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall immediately upon written demand deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to the full
amount hereinabove stated. Landlord shall not be required to keep the Security
Deposit separate from its general accounts and Tenant shall not be entitled to
interest on the Security Deposit. Within thirty (30) days after the expiration
of the Lease Term and the vacation of the Premises by Tenant, the Security
Deposit, or such part as has not been applied to cure the default, shall be
returned to Tenant. In the event of any bankruptcy or other proceeding initiated
by or against Tenant, it is agreed that all such Security Deposit held hereunder
shall be deemed to be applied by Landlord to rent, sales tax and all other
charges due from Tenant to Landlord for the last month of the Term and each
preceding month until such Security Deposit is fully applied.
ARTICLE VI -- USE OF PREMISES
6.01 TENANT'S PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.10 above and shall not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord. Tenant shall, at its sole cost and expense, obtain all
governmental licenses and permits required to allow Tenant to conduct Tenant's
Permitted Use. Landlord disclaims any warranty that the Premises are suitable
for Tenant's use and Tenant acknowledges that it has had a full opportunity to
make its own determination in this regard. Landlord represents that, to
Landlord's actual knowledge without independent investigation, the Premises are
not in violation of municipal codes, laws or regulations.
6.02 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) Tenant shall cause the Premises to comply in all material
respects with all laws, ordinances, regulations and directives of any
governmental authority having jurisdiction including without limitation
any certificate of occupancy and any law, ordinance, regulation,
covenant, condition or restriction affecting the Building or the
Premises which in the future may become applicable to the Premises
(collectively "Applicable Laws"), but only insofar as any such
Applicable Laws pertain to the manner in which the Tenant uses the
Premises. The obligation to comply with Applicable Laws in every other
case is hereby expressly assumed by Landlord.
(B) Tenant shall not use the Premises, or permit the Premises
to be used, in any manner which: (a) violates any Applicable Law; (b)
causes or is reasonably likely to cause damage to the Building or the
Premises; (c) violates a requirement or condition of any fire and
extended insurance policy covering the Building and/or the Premises, or
increases the cost of such policy; (d) constitutes or is reasonably
likely to constitute a nuisance, annoyance or inconvenience to other
tenants or occupants of the Building or its equipment, facilities or
systems; (e) interferes with, or is reasonably likely to interfere
with, the transmission or reception of microwave, television, radio,
telephone or other communication signals by antennae or other
facilities located in the Building; or (f) violates the Rules and
Regulations described in Article XX.
(C) In addition to any other amounts payable by Tenant to
Landlord hereunder, Tenant shall pay to Landlord, as and when billed to
Tenant and as additional rental, Tenant's Percentage Share of the cost
of any improvements, capital expenditures, repairs or replacements to
the Building, or any equipment or machinery used in connection with the
Building, if any such item is required under any Applicable Law which
was not applicable to the Building at the time the Building was
constructed; provided, however, that any such costs which are properly
charged to a capital account shall not be payable in a single year but
shall instead be amortized over their useful lives, as determined by
the Landlord in accordance with generally acceptable accounting
principles, and only the annual amortization amount (prorated based on
the number of days of the Lease Term in the calendar year) shall be
payable by the Tenant with respect to any calendar year.
6.03 HAZARDOUS MATERIALS.
(A) No Hazardous Materials (as defined herein) shall be
Handled (as defined herein) upon, about, above or beneath the Premises
or any portion of the Building by or on behalf of a Responsible Party
(as defined herein), unless the Hazardous Materials are listed in
Exhibit D hereto and then only in the quantities listed in the exhibit.
Any such Hazardous Materials so Handled, or the presence of which is a
result of the act or omission of a Responsible Party, shall be known as
Tenant's Hazardous Materials. Notwithstanding the foregoing, normal
quantities of those Hazardous Materials customarily used in the conduct
of general administrative and executive office activities (e.g., copier
fluids and cleaning supplies) may be Handled at the Premises without
Landlord's prior written consent. Tenant's Hazardous Materials shall be
Handled at all times in compliance with all applicable Environmental
Laws (as defined herein).
(B) Notwithstanding the obligation of Tenant to indemnify
Landlord pursuant to this Lease, Tenant shall, at its sole cost and
expense, promptly take all actions required by any federal, state or
local governmental agency or political subdivision, or necessary for
Landlord to make full economic use of the Premises or any portion of
the Building, which requirements or necessity arises from the Handling
of Tenant's Hazardous Materials upon, about, above or beneath the
Premises or any portion of the Building. Such actions shall include,
but not be limited to, the investigation of the environmental condition
of the Premises or any portion of the Building, the preparation of any
feasibility studies or reports and the performance of any cleanup,
remedial, removal or restoration work. Tenant shall take all actions
necessary to restore the Premises or any portion of the Building to the
condition existing prior to the introduction of Tenant's Hazardous
Materials, notwithstanding any less stringent standards or remediation
allowable under applicable Environmental Laws. Tenant shall
nevertheless obtain Landlord's written approval prior to undertaking
any actions required by this Section, which approval shall not be
unreasonably withheld so long as such actions would not potentially
have a material adverse long-term or short-term effect on the Premises
or any portion of the Building.
(C) "Environmental Laws" means and includes all now and
hereafter existing statutes, laws, ordinances, codes, regulations,
rules, rulings, orders, decrees, directives, policies and requirements
by any federal, state or local governmental authority regulating,
relating to, or imposing liability or standards of conduct concerning
public health and safety or the environment.
(D) "Hazardous Materials" means: (a) any material or
substance: (i) which is defined or becomes defined as a "hazardous
substance", "hazardous waste," "infectious waste," "chemical mixture or
substance," or "air pollutant" under Environmental Laws; (ii)
containing petroleum, crude oil or any fraction thereof; (iii)
containing polychlorinated biphenyls (PCB's); (iv) containing asbestos;
(v) which is radioactive; (b) any other material or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as
all such terms are used in their broadest sense, and are defined or
become defined by Environmental Laws, or (c) materials which cause a
nuisance upon or waste to the Premises or any portion of the Building.
(E) "Handle," "handle," "Handled," "handled," "Handling" or
"handling" shall mean any installation, handling, generation, storage,
treatment, use, disposal, discharge, release, manufacture, refinement,
presence, migration, emission, abatement, removal, transportation, or
any other activity of any type in connection with or involving
Hazardous Materials.
(F) "Responsible Party" shall mean Tenant, its subtenants and
its assignees, and their respective contractors, clients, officers,
directors, employees, agents, and invitees, or any of them as the case
may be.
(G) Tenant agrees to maintain only the Hazardous Materials
listed in Schedule 1 to Exhibit D in the Premises and in or at the
Building and only in the quantities listed in Schedule 1 to Exhibit D.
Tenant also agrees that changes to the type and quantities of such
Tenant's Hazardous Materials may be done only with the prior written
consent of the Landlord, which consent shall not be unreasonably
withheld. Tenant further agrees that Landlord, upon reasonable notice,
shall have the right to inspect the Premises to verify the types and
quantities of the materials stored therein.
(H) Tenant agrees to execute affidavits, representations and
the like from time to time at Landlord's request conveying Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in the Premises or in or at the Building.
ARTICLE VII -- UTILITIES AND SERVICES
7.01 SERVICES. Landlord shall provide the normal utility service
connection into the Premises and Tenant, at its sole expense, shall arrange with
the appropriate utility company to install all necessary connections and without
fail to maintain in continuous operation during the entire term of the Lease,
all such utility service, whether or not Tenant is in actual possession of the
Premises. Tenant shall pay for all water, gas, heat, light, power, sweeping and
other janitorial services, rubbish and trash disposal, sewer and any other
utilities and services supplied in, about or related to the Premises, together
with any taxes thereon, connection charges and deposits, and also shall pay for
all electrical light bulbs, lamps and tubes in connection therewith. If any such
utilities and services are not separately metered to Tenant, Tenant shall pay a
reasonable portion to be determined by Landlord of all charges jointly metered
with other premises. Landlord reserves the right during the Term of this Lease
to grant easements or public utility purposes on, over, or below the Premises
without any abatement in rent, provided that said easements do not unreasonably
interfere with the normal operation of the business conducted by Tenant in the
Premises. Tenant shall arrange for and pay for all telephone service and
equipment, including any additions or alterations to the existing telephone
service boards and conduit, which shall be completed without interference to the
service and/or equipment of other tenants in the Building and which shall be
appropriately labeled upon the termination of this Lease.
Any amounts which Tenant is required to pay to Landlord pursuant to
this Section 7.01 shall be payable upon demand by Landlord and shall constitute
additional rent or Rent under this Lease.
7.02 INTERRUPTION OF SERVICES. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.01, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control, and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rental required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public utility promulgates
or revises any law, ordinance, rule or regulation, or issues mandatory controls
or voluntary controls relating to the use or conservation of energy, water, gas,
light or electricity, the reduction of automobile or other emissions, or the
provision of any other utility or service, Landlord may take any reasonably
appropriate action to comply with such law, ordinance, rule, regulation,
mandatory control or voluntary guideline without affecting Tenant's obligations
hereunder. Tenant recognizes that any security services provided by Landlord at
the Building are for the protection of Landlord's property and under no
circumstances shall Landlord be responsible for, and Tenant waives any rights
with respect to, providing security or other protection for Tenant or its
employees, invitees or property in or about the premises or the Building.
ARTICLE VIII -- MAINTENANCE AND REPAIRS
8.01 LANDLORD'S OBLIGATIONS.
(A) During the Lease Term, Landlord shall, at its expense,
maintain only the roof, foundation and the structural soundness of the
exterior walls (excluding all windows, plate glass, doors and pest
control and extermination) of the portion of the Building containing
the Premises in good repair and condition except for reasonable wear
and tear. Landlord also shall maintain, at its expense, subject to
reimbursement as part of Operating Expenses, the downspouts and fire
safety sprinkler system of the Building. If Tenant determines that any
such repair or maintenance by Landlord is required, Tenant shall
promptly give written notice to Landlord of the need for such repair or
maintenance and unless Landlord in good faith disagrees with such
determination by Tenant, Landlord shall proceed with reasonable
promptness to perform such maintenance. Landlord shall not be liable to
Tenant, except as otherwise expressly provided in this Lease, for any
damage or inconvenience. Tenant shall not be entitled to any abatement
or reduction of Rent by reason of any repairs, alterations or additions
made by Landlord under this Lease.
(B) Tenant shall, at its sole cost, pay for any damage to the
roof, foundation and/or external walls caused by any act, omission,
negligence or fault of tenant or any employee, agent or contractor of
Tenant.
(C) Landlord shall not be liable to Tenant, except as
otherwise expressly provided in this Lease, for any damage or
inconvenience. Tenant shall not be entitled to any abatement or
reduction of Rent by reason of any repairs, alterations or additions
made by Landlord under this Lease.
8.02 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
risk and at its own sole cost and expense, maintain all other parts of the
Building and other improvements in or on the Premises in good repair and
condition (including all necessary replacements), including, but not limited to,
heating, ventilation and air conditioning systems, all glass elements, doors
(including dock doors), dock bumpers, regular mowing of any grass, trimming,
weed removal, regular removal of debris and, if applicable, Tenant shall pay
Tenant's Percentage Share with respect to Operating Expenses of maintenance
expense for any spur railroad track serving the Premises, and Tenant agrees to
sign a joint maintenance agreement with the railroad company servicing the
Premises, if requested by such railroad company. Tenant shall repaint the
exterior doors or other exposed parts of the Building which reasonably require
periodic repainting to prevent deterioration. However, in a multi-occupancy
Building, Landlord reserves the right to perform lawn and other common area
maintenance (including, without limitation, exterior painting) and in such
instance Tenant agrees to pay Landlord for lawn and other common area
maintenance (including, without limitation, exterior painting) based on Tenant's
Percentage Share with respect to Operating Expenses. Tenant shall take good care
of all property and its fixtures, including all landscaping, and suffer no
waste. Tenant shall engage a certified pest control firm to perform as necessary
extermination of pests including, but not limited to, roaches, rodents and
termites. Should Tenant neglect to keep and maintain the Premises as required
herein, the Landlord shall have the right but not the obligation, to have the
work done and any reasonable costs plus a ten percent (10%) overhead charge
therefor shall be charged to Tenant as additional rental and shall become
payable by Tenant with the payment of the rental next due under this Lease. In
connection with Tenant's maintenance and repair of the heating, ventilation and
air conditioning systems, Tenant shall provide Landlord during the Term of this
Lease and any renewal hereof with a duplicate original of a maintenance
contract, in form and substance acceptable to Landlord, with an HVAC maintenance
firm acceptable to Landlord. Further, Tenant shall be responsible for, and upon
demand by Landlord shall promptly reimburse Landlord for, any damage to any
portion of the Building or the Premises caused by (a) Tenant's activities in the
Building or the Premises; (b) the performance or existence of any alterations,
additions or improvements made by Tenant in or to the Premises; (c) the
installation, use, operation or movement of Tenant's property in or about the
Building or the Premises; or (d) any act or omission by Tenant or its officers,
partners, employees, agents, contractors or invitees.
8.03 Tenant shall, at its own cost and expense, repair or replace any
damage or injury to all or any part of the Premises and Building, caused by
Tenant or Tenant's agents, employees, invitees, licensees or visitors; provided,
however, if Tenant fails to make such repairs or replacements promptly, Landlord
may, at its option, make such repairs or replacements and Tenant shall reimburse
the cost, plus a ten percent (10%) overhead charge therefor, to Landlord on
demand.
8.04 Tenant shall not commit or allow any waste or damage to be
committed on any portion of the Premises, and at the termination of this Lease,
by lapse of time or otherwise, Tenant shall deliver the Premises to Landlord,
broom clean with all debris removed, in as good condition as at the date of
first possession of Tenant, ordinary wear and tear excepted. Tenant understands
that "ordinary wear and tear" does not mean Tenant shall be relieved of
performing its obligations under this Lease relating to maintenance, repairs and
replacements as provided for in the Lease. The cost and expense of any repairs
necessary to restore the condition of the Premises shall be borne by Tenant, and
if Landlord undertakes to restore the Premises, it shall have a right of
reimbursement against Tenant.
8.05 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, with 24 hours advance oral or written notice except in an emergency, to
enter upon the Premises to make any repairs to the Premises or the Building
reasonably required or deemed reasonably necessary by Landlord and to erect such
equipment, including scaffolding, as is reasonably necessary to effect such
repairs. During the pendency of such repairs, Landlord shall use reasonable
efforts to minimize any material interruption of Tenant's business; provided,
that if such repairs by Landlord are required to remedy an emergency situation
or to cure a breach or default by Tenant under this Lease, Landlord shall not be
obligated to minimize such interference.
ARTICLE IX -- ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or permit to
be made any alterations, additions, or improvements in or to the Premises
("Alterations") without the prior written consent of Landlord. Landlord may
impose as a condition to such consent such requirements as Landlord in its sole
discretion deems necessary or desirable including without limitation: Tenant's
submission to Landlord, for Landlord's prior written approval, of all plans and
specifications relating to the Alterations; Landlord's prior written approval of
the contractors and subcontractors performing work in connection with the
Alterations; Tenant's receipt of all necessary permits and approvals from all
governmental authorities having jurisdiction over the Premises prior to the
construction of the Alterations; Tenant's written notice of whether the
Alterations include the Handling of any Hazardous Materials, pursuant to Section
6.03; Tenant's delivery to Landlord of such bonds and insurance as Landlord
shall reasonably require; and Tenant's payment to Landlord of all costs and
expenses incurred by Landlord because of Tenant's Alterations, including but not
limited to costs incurred in reviewing the plans and specifications for, and the
progress of, the Alterations.
9.02 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord, all applicable laws, ordinances, rules, regulations and
directives of all governmental authorities having jurisdiction and the
requirements of all carriers of insurance on the Premises and the Building, the
Board of Underwriters, Fire Rating Bureau, or similar organization. All work
shall be performed in a diligent, first class manner and so as not to
unreasonably interfere with any other tenants or occupants of the Building. All
costs incurred by Landlord relating to the Alterations shall be payable to
Landlord by Tenant as additional rent upon demand.
9.03 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises and
the Building free from all liens, stop notices and violation notices relating to
the Alterations or any other work performed for, materials furnished to or
obligations incurred by Tenant and Tenant shall protect, indemnify, hold
harmless and defend Landlord, the Premises and the Building of and from any and
all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Further, Tenant shall
give Landlord not less than seven (7) business days prior written notice before
commencing any Alterations in or about the Premises to permit Landlord to post
appropriate notices of non-responsibility. Tenant shall also secure, prior to
commencing any Alterations, at Tenant's sole expense, a completion and lien
indemnity bond satisfactory to Landlord for such work. During the progress of
such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn
contractor's statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within ten (10) days after Landlord notifies
Tenant in writing that any such lien, stop notice, claim or encumbrance has been
filed. If Tenant fails to pay and remove such lien, claim or encumbrance within
such ten (10) days, Landlord, at its election, may pay and satisfy the same and
in such event the sums to paid by Landlord, with interest from the date at the
rate set forth in Section 4.06 hereof for amounts owed Landlord by Tenant shall
be deemed to be additional rent due and payable by Tenant at once without notice
or demand.
9.04 LEASE TERMINATION. Except as provided in this Section 9.04, upon
expiration or earlier termination of this Lease Tenant shall surrender the
Premises to Landlord in the same condition as when received, subject to
reasonable wear and tear. All Alterations shall become a part of the Premises
and shall become the property of Landlord upon the expiration or earlier
termination of this Lease, unless Landlord shall, by written notice given to
Tenant, require Tenant to remove some or all of Tenant's Alterations, in which
event Tenant shall promptly remove the designated Alterations and shall promptly
repair any resulting damage, all at Tenant's sole expense. All business and
trade fixtures, machinery and equipment, furniture, movable partitions and items
of personal property owned by Tenant or installed by Tenant at its expense in
the Premises shall be and remain the property of Tenant; upon the expiration or
earlier termination of this Lease, Tenant shall, at its sole expense, remove all
such items and repair any damage to the Premises or the Building caused by such
removal. If Tenant fails to remove any such items or repair such damage promptly
after the expiration or earlier termination of the Lease, Landlord may, but need
not, do so with no liability to Tenant, and Tenant shall pay Landlord the cost
thereof upon demand.
ARTICLE X -- INDEMNIFICATION AND INSURANCE
10.01 INDEMNIFICATION. Tenant and Tenant's officers and directors agree
to protect, indemnify, hold harmless and defend Landlord and any mortgagee or
ground lessor, and each of their respective partners, directors, officers,
agents and employees, successors and assigns, regardless of any negligence of,
or imputed to Landlord as owner of the Building, Premises or underlying real
property involved in an injury, from and against:
(A) any and all loss, cost, damage, liability or expense as
incurred (including but not limited to actual attorneys' fees and legal
costs) arising out of or related to any claim, suit or judgment brought
by or in favor of any person or persons for damage, loss or expense due
to, but not limited to, bodily injury, including death, or property
damage sustained by such person or persons which arises out of, is
occasioned by or is in any way attributable to the use or occupancy of
the Premises or any portion of the Building by Tenant or the acts or
omissions of Tenant or its agents, employees, contractors, clients,
invitees or subtenants except that caused by the sole active negligence
of Landlord or its agents or employees. Such loss or damage shall
include, but not be limited to, any injury or damage to, or death of,
Landlord's employees or agents or damage to the Premises or any portion
of the Building.
(B) any and all environmental damages which arise from: (i)
the Handling of any Tenant's Hazardous Materials, as defined in Section
6.03 or (ii) the breach of any of the provisions of this Lease. For the
purpose of this Lease, "environmental damages" shall mean (a) all
claims, judgments, damages, penalties, fines, costs, liabilities, and
losses (including without limitation, diminution in the value of the
Premises or any portion of the Building, damages for the loss of or
restriction on the use of rentable or usable space or of any amenity of
the Premises or any portion of the Building, and from any adverse
impact of Landlord's marketing of space); (b) all reasonable sums paid
for settlement of claims, attorneys' fees, consultants' fees and
experts' fees; and (c) all costs incurred by Landlord in connection
with investigation or remediation relating to the Handling of Tenant's
Hazardous Materials, whether or not required by Environmental Laws,
necessary for Landlord to make full economic use of the Premises or any
portion of the Building, or otherwise required under this Lease. To the
extent that Landlord is strictly liable under any Environmental Laws,
Tenant's obligation to Landlord and the other indemnities under the
foregoing indemnification shall likewise be without regard to fault on
Tenant's part with respect to the violation of any Environmental Law
which results in liability to the indemnitee. Tenant's obligations and
liabilities pursuant to this Section 10.01 shall survive the expiration
or earlier termination of this Lease.
(C) any and all testing or investigation as may be requested
by any governmental agency or lender for the purpose of investigating
the presence of Tenant's Hazardous Materials that may not be in
compliance with Environmental Laws.
(D) notwithstanding anything to the contrary contained herein,
nothing shall be interpreted or used to in any way affect, limit,
reduce or abrogate any insurance coverage provided by any insurers to
either Tenant or Landlord.
Notwithstanding anything to the contrary contained in this Lease, nothing herein
shall be construed to infer or imply that Tenant is a partner, joint venturer,
agent, employee, or otherwise acting by or at the direction of Landlord.
10.02 PROPERTY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure
and maintain, at its sole expense, "all-risk" property insurance, in an
amount not less than one hundred percent (100%) of the replacement cost
covering (a) all leasehold improvements in and to the Premises which
are made at the expense of Tenant; and (b) Tenant's trade fixtures,
equipment and other personal property from time to time situated in the
Premises, including, without limitation, all floor and wall coverings.
The proceeds of such insurance shall be used for the repair or
replacement of the property so insured, except that if not so applied
or if this Lease is terminated following a casualty, the proceeds
applicable to the leasehold improvements shall be paid to Landlord and
the proceeds applicable to Tenant's personal property shall be paid to
Tenant.
(B) At all times during the Lease Term, Tenant shall procure
and maintain business interruption insurance in such amount as will
reimburse Tenant for direct or indirect loss of earnings attributable
to all perils insured against in Section 10.02(A).
10.03 LIABILITY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure
and maintain, at its sole expense, general liability insurance applying
to the use and occupancy of the Premises and the business operated by
Tenant. Such insurance shall have a minimum combined single limit of
liability of at least $2,000,000 per occurrence and a general aggregate
limit of at least $2,000,000. All such policies shall be written to
apply to all bodily injury, property damage, personal injury losses and
shall be endorsed to include Landlord and its agents, beneficiaries,
partners, employees, and any deed of trust holder or mortgagee of
Landlord or any ground lessor as additional insureds. (A list of the
current persons and entities to be named as additional insureds is
attached hereto as Exhibit E.) Such liability insurance shall be
written as primary policies, not excess or contributing with or
secondary to any other insurance as may be available to the Landlord or
additional insureds.
(B) Prior to the sale, storage, use or giving away of
alcoholic beverages on or from the Premises by Tenant or another
person, Tenant, at its own expense, shall obtain a policy or policies
of insurance issued by a responsible insurance company and in a form
acceptable to Landlord saving harmless and protecting Landlord and the
Premises against any and all damages, claims, liens, judgments,
expenses and costs, including actual attorney's fees, arising under any
present or future law, statute, or ordinance of the State of Minnesota
or other governmental authority having jurisdiction of the Premises, by
reason of any storage, sale, use or giving away of alcoholic beverages
on or from the Premises. Such policy or policies of insurance shall
have a minimum combined single limit of $1,000,000 per occurrence and
shall apply to bodily injury, fatal or nonfatal; injury to means of
support; and injury to property of any person. Such policy or policies
of insurance shall name the Landlord and its agents, beneficiaries,
partners, employees and any mortgagee of Landlord or any ground lessor
of Landlord as additional insureds. (A list of the current persons and
entities to be named as additional insureds is attached hereto as
Exhibit E.)
10.04 WORKERS' COMPENSATION INSURANCE. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of Minnesota, and Employers' Liability
insurance with a limit not less than $100,000 Bodily Injury Each Accident;
$100,000 Bodily Injury By Disease -- Each Person; and $100,000 Bodily Injury by
Disease -- Policy Limit.
10.05 AUTOMOBILE LIABILITY INSURANCE. At all times during the Lease
Term, Tenant shall provide and maintain, at its sole expense, commercial
automobile liability insurance including owned, non-owned and hired vehicles,
applying to the use of any vehicles arising out of the operations of Tenant.
Such insurance shall apply to bodily injury and property damage in a combined
single limit of not less than $1,000,000 per accident.
10.06 POLICY REQUIREMENTS. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of Minnesota and rated not less than A-VII in Best's
Insurance Guide and a Standard and Poor's claims paying ability rating of not
less than AA. A certificate of insurance (or, at Landlord's option, copies of
the applicable policies) evidencing the insurance required under this Article X
shall be delivered to Landlord not less than thirty (30) days prior to the
Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket polices, but only if such blanket
policies expressly provide coverage to the Premises and the Landlord as required
by this Lease.
10.07 WAIVER OF SUBROGATION. Each party hereby waives any right of
recovery against the other for injury or loss covered by insurance, to the
extent of the injury or loss covered thereby. Any policy of insurance to be
provided by Tenant pursuant to this Article X shall contain a clause denying the
insurer any right of subrogation against Landlord.
10.08 FAILURE TO INSURE. If Tenant fails to maintain any insurance
which Tenant is required to maintain pursuant to this Article X, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to maintain.
Tenant may not self-insure against any risks required to be covered by insurance
without Landlord's prior written consent.
ARTICLE XI -- DAMAGE OR DESTRUCTION
11.01 TOTAL DESTRUCTION. Except as provided in Section 11.03 below,
this Lease shall automatically terminate if the Premises are totally destroyed.
11.02 PARTIAL DESTRUCTION OF PREMISES. If the Premises are damaged by
any casualty and, in Landlord's opinion, the Premises (exclusive of any
Alterations made to the Premises by Tenant) can be restored to its pre-existing
condition within one hundred twenty (120) days after the date of the damage or
destruction, Landlord shall, upon written notice from Tenant to Landlord of such
damage, except as provided in Section 11.03, promptly and with due diligence
repair any damage to the Premises (exclusive of any Alterations to the Premises
made by Tenant, which shall be promptly repaired by Tenant at its sole expense)
and, until such repairs are completed, the Rent shall be abated from the date of
damage or destruction in the same proportion that the rentable area of the
portion of the Premises which is unusable by Tenant in the conduct of its
business bears to the total rentable area of the Premises. If such repairs
cannot, in Landlord's opinion, be made within said one hundred twenty (120) day
period, then Landlord may, at its option, exercisable by written notice given to
Tenant within thirty (30) days after the date of the damage or destruction,
elect to make the repairs within a reasonable time after the damage or
destruction, in which event this Lease shall remain in full force and effect but
the Rent shall be abated as provided in the preceding sentence; if Landlord does
not so elect to make the repairs, then either Landlord or Tenant shall have the
right, by written notice given to the other within sixty (60) days after the
date of the damage or destruction, to terminate this Lease as of the date of the
damage or destruction.
11.03 EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (a) the Building in which the Premises are
located is so damaged as to require repairs to the Building exceeding twenty
percent (20%) of the full insurable value of the Building; or (b) Landlord
elects to demolish the Building in which the Premises are located; or (c) the
damage or destruction occurs less than two (2) years prior the Termination Date,
exclusive of option periods. Further, Tenant's Rent shall not be abated if
either (i) the damage or destruction is repaired within five (5) business days
after Landlord receives written notice from Tenant of the casualty, or (ii)
Tenant, or any officers, partners, employees, agents or invitees of Tenant, or
any assignee or subtenant of Tenant, is, in whole or in part, responsible for
the damage or destruction.
11.04 WAIVER. The provisions contained in this Lease shall supersede
any contrary laws now or hereafter in effect relating to damage or destruction.
ARTICLE XII -- CONDEMNATION
12.01 TAKING. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), this Lease shall terminate on the date
that title or possession to the Premises is taken by the condemning authority,
whichever is earlier.
12.02 AWARD. In the event of any Condemnation, the entire award for
such taking shall belong to Landlord. Tenant shall have no claim against
Landlord or the award for the value of any unexpired term of this Lease or
otherwise. Tenant shall be entitled to independently pursue a separate award in
a separate proceeding for Tenant's relocation costs directly associated with the
taking, provided such separate award does not diminish Landlord's award.
12.03 TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
ARTICLE XIII -- RELOCATION
13.01 RELOCATION. Landlord shall have the right, at its option upon not
less than sixty (60) days prior written notice to Tenant, to relocate Tenant and
to substitute for the Premises described above other space in the Building of
approximately the same dimensions and size as the Premises described in Section
1.02 above. If Tenant is already in occupancy of the Premises, then Landlord
shall also reimburse Tenant for Tenant's reasonable moving and telephone
relocation expenses and for reasonable quantities of new stationery upon
submission to Landlord of receipts for such expenditures incurred by Tenant.
Upon satisfactory review of substitute Premises, Tenant shall accept substitute
Premises pursuant to Section 2.02.
ARTICLE XIV -- ASSIGNMENT AND SUBLETTING
14.01 RESTRICTION. Without the prior written consent of Landlord,
Tenant shall not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Lease or any interest herein, or sublet the Premises
or any part thereof, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees. An assignment, subletting or other action in
violation of the foregoing shall be void and, at Landlord's option, shall
constitute a material breach of this Lease. For purposes of this Section 14.01,
an assignment shall include any transfer of any interest in this Lease or the
Premises by Tenant pursuant to a merger, division, consolidation or liquidation,
or pursuant to a change in ownership of Tenant involving a transfer of voting
control in Tenant (whether by transfer of partnership interests, corporate stock
or otherwise). Notwithstanding anything contained in this Article XIV to the
contrary, Tenant expressly covenants and agrees not to enter into any lease,
sublease, license, concession or other agreement for use, occupancy or
utilization of the Premises which provides for rental or other payment for such
use, occupancy or utilization based in whole or in part on the net income or
profits derived by any person from the property leased, used, occupied or
utilized (other than an amount based on a fixed percentage or percentages of
receipts or sales), and that any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
14.02 NOTICE TO LANDLORD. If Tenant desires to assign this Lease or any
interest herein, or to sublet all or any part of the Premises, then at least
twenty (20) business days prior to the effective date of the proposed assignment
or subletting, Tenant shall submit to Landlord in connection with Tenant's
request for Landlord's consent:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with
respect to the proposed assignee or subtenant as Landlord shall
reasonably require; (iii) the type of use proposed for the Premises;
and (iv) all of the principal terms of the proposed assignment or
subletting; and
(B) Four (4) originals of the assignment or sublease on a form
approved by Landlord and four (4) originals of the Landlord's Consent
to Sublease or Assignment and Assumption of Lease and Consent.
14.03 LANDLORD'S RECAPTURE RIGHTS. At any time within twenty (20)
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 14.02 above, Landlord may, at its
option by written notice to Tenant, elect to: (a) sublease the Premises or the
portion thereof proposed to be sublet by Tenant upon the same terms as those
offered to the proposed subtenant; (b) take an assignment of the Lease upon the
same terms as those offered to the proposed assignee; or (c) only in the event
the request for assignment or subletting is for the entire Premises, then
Landlord may elect to terminate the Lease. If Landlord elects to terminate
pursuant to this Section (c) then Tenant shall have five (5) days to withdraw
its assignment or sublease request. If Landlord does not exercise any of the
options described in the preceding sentence, then, during the above-described
twenty (20) business day period, Landlord shall either consent or deny its
consent to the proposed assignment or subletting.
14.04 LANDLORD'S CONSENT; STANDARDS. Landlord's consent shall not be
unreasonably withheld; but, in addition to any other grounds for denial,
Landlord's consent shall be deemed reasonably withheld if, in Landlord's good
faith judgment: (i) the proposed assignee or subtenant does not have the
financial strength to perform its obligations under this Lease or any proposed
sublease; (ii) the business and operations of the proposed assignee or subtenant
are not of comparable quality to the business and operations being conducted by
other tenants in the Building; (iii) the proposed assignee or subtenant intends
to use any part of the Premises for a purpose not permitted under this Lease;
(iv) either the proposed assignee or subtenant, or any person which directly or
indirectly controls, is controlled by, or is under common control with the
proposed assignee or subtenant occupies space in the Building, or is negotiating
with Landlord to lease space in the Building; (v) the proposed assignee or
subtenant is disreputable; or (vi) the use of the Premises or the Building by
the proposed assignee or subtenant would, in Landlord's reasonable judgment,
significantly increase the pedestrian traffic in and out of the Building or
vehicular traffic in or to the Building or would require any alterations to the
Building to comply with applicable laws.
14.05 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, all sums or other economic consideration received by Tenant in
connection with such assignment or subletting, whether denominated as rental or
otherwise, which exceeds, in the aggregate, the total sum which Tenant is
obligated to pay Landlord under this Lease (prorated to reflect obligations
allocable to less than all of the Premises under a sublease) shall be paid to
Landlord as additional rent under the Lease without affecting or reducing any
other obligation of Tenant hereunder.
14.06 LANDLORD'S COSTS. If Tenant shall assign this Lease or shall
sublet all or any part of the Premises or shall request the consent of Landlord
to any assignment, subletting or other act, Tenant shall pay to Landlord as
additional rent Landlord's costs not to exceed Five Hundred Dollars ($500.00).
14.07 CONTINUING LIABILITY OF TENANT. Notwithstanding any assignment or
sublease, Tenant shall remain as fully and primarily liable for the payment of
Rent and for the performance of all other obligations of Tenant contained in
this Lease to the same extent as if the assignment or sublease had not occurred;
provided, however, that any act or omission of any assignee or subtenant, other
than Landlord, that violates the terms of this Lease shall be deemed a violation
of this Lease by Tenant.
14.08 NON-WAIVER. The consent by Landlord to any assignment or
subletting shall not relieve Tenant, or any person claiming through or by
Tenant, of the obligation to obtain the consent of Landlord, pursuant to this
Article XIV, to any further assignment or subletting. In the event of an
assignment or subletting, Landlord may collect rent from the assignee or the
subtenant without waiving any rights hereunder and collection of the rent from a
person other than Tenant shall not be deemed a waiver of any of Landlord's
rights under this Article XIV, an acceptance of assignee or subtenant as Tenant,
or a release of Tenant from the performance of Tenant's obligations under this
Lease.
ARTICLE XV -- DEFAULT AND REMEDIES
15.01 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder as and when due and the
continuation of such failure for five (5) days.
(B) The abandonment of the Premises by Tenant or the vacation
of the Premises by Tenant for fourteen (14) consecutive days (with or
without the payment of Rent).
(C) The making by Tenant of any assignment of this Lease or
any sublease of all or part of the Premises, except as expressly
permitted under Article XIV of this Lease.
(D) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other
than those described in Sections 15.01(A), 15.01(B) or 15.01(C) above,
if such failure continues for thirty (30) days after written notice
thereof by Landlord to Tenant; provided, however, that if the nature of
the default is such that it cannot be cured within the thirty (30) day
period, no default shall be deemed to exist if Tenant commences the
curing of the default promptly within such thirty (30) day period and
thereafter diligently prosecutes the same to completion and achieves
the same within sixty (60) days after the occurrence of such default.
The thirty (30) day notice described herein shall be in lieu of, and
not in addition to, any notice required under law now or hereafter in
effect requiring that notice of default be given prior to the
commencement of an unlawful detainer or other legal proceeding.
(E) The making by Tenant of any general assignment for the
benefit of creditors, the filing by or against Tenant of a petition
under any federal or state bankruptcy or insolvency laws (unless, in
the case of a petition filed against Tenant, the same is dismissed
within thirty (30) days after filing); the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets at
the Premises or Tenant's interest in this Lease or the Premises, when
possession is not restored to Tenant within thirty (30) days; or the
attachment, execution or other seizure of substantially all of Tenant's
assets located at the Premises or Tenant's interest in this Lease or
the Premises, if such seizure is not discharged within thirty (30)
days.
15.02 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the
event of any default by Tenant as provided in Section 15.01 above, Landlord
shall have the right without notice or demand to Tenant (Tenant hereby
irrevocably waiving all notices and demands, statutory or otherwise, including
without limitation, any notice otherwise required in connection with any
forcible entry and detainer action), to terminate this Lease or Tenant's right
to possession of the Premises without terminating this Lease, in which event
Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus
(B) The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(D) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(E) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in subparagraphs (A) and (B) above, "worth at the time of
award" shall be computed by discounting such amounts at the then highest lawful
rate of interest, but in no event to exceed one percent (1%) per annum plus the
rate established by the Federal Reserve Bank of Chicago on advances made to
member banks under Section 13 and 13a of the Federal Reserve Act ("discount
rate") prevailing on the date of execution of this Lease by Landlord. As used in
paragraph (C) above, "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
Chicago at the time of award plus one percent (1%).
15.03 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT.
In the event of a default of this Lease and abandonment of the Premises by
Tenant, if Landlord does not elect to terminate this Lease as provided in
Section 15.02 above, Landlord may from time to time, without terminating this
Lease, enforce all of its rights and remedies under this Lease. Without limiting
the foregoing, Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover Rent as it becomes due. Landlord may, but shall have
no obligation to re-let all or any part of the Premises. In the event Landlord
at its sole discretion elects to re-let the Premises, to the fullest extent
permitted by law, the proceeds of any reletting shall be applied first to pay to
Landlord all costs and expenses of such reletting (including without limitation,
costs and expenses of retaking or repossessing the Premises, removing persons
and property therefrom, securing new tenants, including expenses for
redecoration, alterations and other costs in connection with preparing the
Premises for the new tenant, and if Landlord shall maintain and operate the
Premises, the costs thereof) and receivers' fees incurred in connection with the
appointment of and performance by a receiver to protect the Premises and
Landlord's interest under this Lease and any necessary or reasonable
alterations; second, to the payment of any indebtedness of Tenant to Landlord
other than Rent due and unpaid hereunder; third, to the payment of Rent due and
unpaid hereunder; and the residue, if any, shall be held by Landlord and applied
in payment of other or future obligations of Tenant to Landlord as the same may
become due and payable, and Tenant shall not be entitled to receive any portion
of such revenue.
15.04 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, Landlord may, but shall not be obligated
to, make any payment or perform any such other act on Tenant's part to be made
or performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs, together
with interest thereon at the lesser of the maximum rate permitted by law if any
or twelve percent (12%) per annum from the date of such payment, shall be
payable to Landlord as additional rent on demand and Landlord shall have the
same rights and remedies in the event of nonpayment as in the case of default by
Tenant in the payment of Rent.
15.05 DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
this Lease, heretofore or hereafter made by Tenant for any space in the Building
shall be terminated or terminable after the making of this Lease because of any
default by Tenant under such other lease, such fact shall empower Landlord, at
Landlord's sole option, to terminate this Lease by notice to Tenant or to
exercise any of the rights or remedies set forth in Section 15.02.
15.06 NON-WAIVER. Nothing in this Article shall be deemed to affect
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease for personal injury or property damages under the
indemnification clause or clauses contained in this Lease. No acceptance by
Landlord of a lesser sum than the Rent then due shall be deemed to be other than
on account of the earliest installment of such Rent due, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy in the Lease provided.
The delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof shall not operate as a termination of this Lease or a surrender
of the Premises.
15.07 CUMULATIVE REMEDIES. The specific remedies to which Landlord may
resort under the terms of the Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of the Lease. In addition to the other remedies provided in the Lease, including
the right to terminate Tenant's right of possession of the Premises and reenter
and repossess the Premises and remove all persons and property from the Premises
without terminating this Lease as provided in Section 15.02, Landlord shall be
entitled to a restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of the
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
15.08 DEFAULT BY LANDLORD. Landlord's failure to perform or observe any
of its obligations under this Lease shall constitute a default by Landlord under
this Lease only if such failure shall continue for a period of thirty (30) days
(or the additional time, if any, that is reasonably necessary promptly and
diligently to cure the failure) after Landlord receives written notice from
Tenant specifying the default. The notice shall give in reasonable detail the
nature and extent of the failure and shall identify the Lease provision(s)
containing the obligation(s). If Landlord shall default in the performance of
any of its obligations under this Lease (after notice and opportunity to cure as
provided herein), Tenant may pursue any remedies available to it under the law
and this Lease.
ARTICLE XVI -- ATTORNEYS FEES: COST OF SUIT
16.01 ATTORNEYS' FEES. If either Landlord or Tenant shall commence any
action or other proceeding against the other arising out of, or relating to,
this Lease or the Premises, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its actual attorneys
fees irrespective of whether or not the action or other proceeding is prosecuted
to judgment and irrespective of any court schedule of reasonable attorneys'
fees. In addition, Tenant shall reimburse Landlord, upon demand, for all
reasonable attorneys' fees incurred in collecting Rent or otherwise seeking
enforcement against Tenant, its sublessees and assigns, of Tenant's obligations
under this Lease.
16.02 INDEMNIFICATION. Should Landlord be made a party to any
litigation instituted by Tenant against a party other than Landlord, or by a
third party against Tenant, Tenant shall indemnify, hold harmless and defend
Landlord from any and all loss, cost, liability, damage or expense incurred by
Landlord, including attorneys' fees, in connection with the litigation.
ARTICLE XVII -- SUBORDINATION AND ATTORNMENT
17.01 SUBORDINATION. This Lease, and the rights of Tenant hereunder,
are and shall be subordinate to the interests of (i) all present and future
ground leases and master leases of all or any part of the Building; (ii) present
and future mortgages and deeds of trust encumbering all or any part of the
Building or the underlying real estate; (iii) all past and future advances made
under any such mortgages or deeds of trust; and (iv) all renewals,
modifications, replacements and extensions of any such ground leases, master
leases, mortgages and deeds of trust; provided, however, that any lessor under
any such ground lease or master lease or any mortgagee or beneficiary under any
such mortgage or deed of trust shall have the right to elect, by written notice
given to Tenant, to have this Lease made superior in whole or in part to any
such ground lease, master lease, mortgage or deed of trust. Upon demand, Tenant
shall execute, acknowledge and deliver any instruments reasonably requested by
Landlord or any such lessor, mortgagee or beneficiary to effect the purposes of
this Section 17.01. Such instruments may contain, among other things, provisions
to the effect that such lessor, mortgagee or beneficiary (hereafter, for the
purposes of this Section 17.01, a "Successor Landlord") shall (i) not be liable
for any act or omission of Landlord or its predecessors, if any, prior to the
date of such Successor Landlord's succession to Landlord's interest under this
Lease; (ii) not be subject to any offsets or defenses which Tenant might have
been able to assert against Landlord or its predecessors, if any, prior to the
date of such Successor Landlord's succession to Landlord's interest under this
Lease; (iii) not be liable for the return of any security deposit under the
Lease unless the same shall have actually been deposited with such Successor
Landlord; and (iv) be entitled to receive notice of any Landlord default under
this Lease plus a reasonable opportunity to cure such default prior to Tenant
having any right or ability to terminate this Lease as a result of such Landlord
default.
17.02 ATTORNMENT. If requested to do so, Tenant shall attorn to and
recognize as Tenant's landlord under this Lease any superior lessor, superior
mortgagee or other purchaser or person taking title to the Building by reason of
the termination of any superior lease or the foreclosure of any superior
mortgage or deed of trust, and Tenant shall, upon demand, execute any documents
reasonably requested by any such person to evidence the attornment described in
this Section 17.02.
17.03 MORTGAGE AND GROUND LESSOR PROTECTION. Tenant agrees to give any
holder of any mortgage and any ground lessor, by registered or certified mail, a
copy of any notice of default served upon the Landlord by Tenant, provided that
prior to such notice Tenant has been notified in writing (by way of service on
Tenant of a copy of Assignment of Rents and Leases, or otherwise) of the address
of such mortgage holder or ground lessor (hereafter the "Notified Party").
Tenant further agrees that if Landlord shall have failed to cure such default
within twenty (20) days after such notice to Landlord (or if such default cannot
be cured or corrected within that time, then such additional time as may be
necessary if Landlord has commenced within such twenty (20) days and is
diligently pursuing the remedies or steps necessary to cure or correct such
default), then the Notified Party shall have an additional thirty (30) days
within which to cure or correct such default (or if such default cannot be cured
or corrected within that time, then such additional time as may be necessary if
the Notified Party has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default). Until
the time allowed, as aforesaid, for the Notified Party to cure such default has
expired without cure, Tenant shall have no right to, and shall not, terminate
this Lease on account of Landlord's default.
ARTICLE XVIII -- QUIET ENJOYMENT
18.01 Provided that Tenant performs all of its obligations hereunder,
Tenant shall have and peaceably enjoy the Premises during the Lease Term,
subject to all of the terms and conditions contained in this Lease.
ARTICLE XIX -- PARKING
19.01 Tenant, its employees and invitees, are hereby granted the
non-exclusive privilege to use parking space for the Building. Tenant shall
abide by all rules and regulations regarding the use of the parking area as may
now exist or as may hereinafter be promulgated by Landlord. Landlord reserves
the right to modify, restripe and otherwise change the location of drives,
parking spaces and parking area for the Building. Landlord may, but shall have
no obligation to, designate certain parking spaces for trucks, handicapped
persons or designated tenants as Landlord, in its sole discretion, may deem
necessary for the professional and efficient operation of the parking area and
the Building. Landlord shall have the right to reasonably restrict the number
and location of truck/tractor trailers for the overall benefit of all tenants,
it being agreed by Tenant that it is not the intent of this Lease to provide
unrestricted parking for truck/tractor trailers. Tenant agrees not to overburden
the parking facilities and agrees to cooperate with Landlord and other tenants
in the use of parking facilities. Tenant will reimburse Landlord upon demand for
any damage caused to the parking surfaces or facilities caused by Tenant's or
any of its employees', agents' or invitees' trucks/tractor trailers or any other
vehicles. Landlord reserves the right in its absolute discretion to determine
whether parking facilities are becoming crowded and, in such event, to allocate
parking spaces among Tenant and other tenants. At no time shall the parking of
any vehicle be permitted in the fire lanes or handicapped parking areas
servicing the Building.
ARTICLE XX -- RULES AND REGULATIONS
20.01 The Rules and Regulations attached hereto as Exhibit F are hereby
incorporated by reference herein and made a part hereof. Tenant shall abide by,
and faithfully observe and comply with the Rules and Regulations and any
reasonable and non-discriminatory amendments, modifications and/or additions
thereto as may hereafter be adopted and published by written notice to tenants
by Landlord for the safety, care, security, good order and/or cleanliness of the
Premises and/or the Building. Landlord shall not be liable to Tenant for any
violation of such rules and regulations by any other tenant or occupant of the
Building.
ARTICLE XXI -- ESTOPPEL CERTIFICATES
21.01 Tenant agrees at any time and from time to time upon not less
than ten (10) days' prior written notice from Landlord to execute, acknowledge
and deliver to Landlord a statement in writing addressed and certifying to
Landlord, or to the holder or assignee of any existing or prospective mortgage
encumbering the Building or any part thereof (hereafter a "Mortgagee"), or to
the lessor, or existing or prospective assignee of the lessor's position, under
any existing or prospective ground lease of the land underlying the Building
(hereafter a "Ground Lessor"), or to any prospective purchaser of the land,
improvements or both comprising the Building, that this Lease is unmodified and
in full force and effect (or if there have been modifications, that the same is
in full force and effect as modified and stating the modifications); that Tenant
has accepted possession of the Premises, which are acceptable in all respects,
and that any improvements required by the terms of this Lease to be made by
Landlord have been completed to the satisfaction of Tenant; that Tenant is in
full occupancy of the Premises; that no rent has been paid more than thirty (30)
days in advance; that the first month's Base Rent has been paid; that Tenant is
entitled to no free Rent or other concessions except as stated in this Lease;
that Tenant has not been notified of any previous assignment of Landlord's or
any predecessor landlord's interest under this Lease; the dates to which Base
Rent, additional rental and other charges have been paid; that Tenant, as of the
date of such certificate, has no charge, lien or claim of setoff under this
Lease or otherwise against Base Rent, additional rental or other charges due or
to become due under this Lease; and that Landlord is not in default in
performance of any covenant, agreement or condition contained in this Lease or
any other matter relating to this Lease or the Premises or, if so, specifying
each such default. In addition, in the event that such certificate is being
given to any Mortgagee or Ground Lessor, such statement may contain any other
provisions customarily required by such Mortgagee or Ground Lessor including,
without limitation, an agreement on the part of Tenant to furnish to such
Mortgagee or Ground Lessor, as applicable, written notice of any Landlord
default and a reasonable opportunity for such Mortgagee or Ground Lessor to cure
such default prior to Tenant being able to terminate this Lease. Any such
statement delivered pursuant to this Section may be relied upon by Landlord or
any Mortgagee, Ground Lessor or prospective purchaser to whom it is addressed
and such statement, if required by its addressee, may be specifically state. If
Tenant does not execute, acknowledge and deliver to Landlord the statement as
and when required herein, Landlord is hereby granted an irrevocable
power-of-attorney, coupled with an interest, to execute such statement on
Tenant's behalf, which statement shall be binding on Tenant to the same extent
as if executed by Tenant.
ARTICLE XXII -- ENTRY BY LANDLORD
22.01 Landlord may enter the Premises with 24 hours advance oral or
written notice except in an emergency to: inspect the same; exhibit the same to
prospective purchasers, lenders or tenants; determine whether Tenant is
complying with all of its obligations under this Lease; supply janitorial and
other services to be provided by Landlord to Tenant under this Lease; post
notices of non-responsibility; and make repairs or improvements in or to the
Building or the Premises; provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little interference to
Tenant as reasonably possible. Tenant hereby waives any claim for damages for
any inconvenience to, or interference with, Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises or any other loss occasioned by
such entry. As provided for in clause (xiii) of Section 27.19 of this Lease,
Landlord shall at all times have the right, but not the obligation, to obtain
from Tenant and retain a key with which to unlock all of the doors in, on or
about the Premises (excluding Tenant's vaults, safes and similar areas
designated by Tenant in writing in advance), and Landlord shall have the right
to use any and all means by which Landlord may deem proper to open such doors to
obtain entry to the Premises, and any entry to the Premises obtained by Landlord
by any such means, or otherwise, shall not under any circumstances by deemed or
construed to be a forcible or unlawful entry into or a detainer of the Premises
or an eviction, actual or constructive, of Tenant from any part of the Premises.
Such entry by Landlord shall not act as a termination of this Lease. If Landlord
shall be required to obtain entry by means other than a key provided by Tenant,
the cost of such entry shall be payable by Tenant to Landlord as additional
rent.
ARTICLE XXIII
LANDLORD'S LEASE UNDERTAKINGS -- EXCULPATION
FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORD'S INTEREST
23.01 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents (collectively, "Landlord's
Lease Undertakings") shall extend only to Landlord's interest in the real estate
of which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its officers, directors
or shareholders; and (b) except to the extent of Landlord's interest in
Landlord's Real Estate, no personal liability or personal responsibility of any
sort with respect to any of Landlord's Lease Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, Heitman Advisory Corporation, Heitman Properties Ltd. or Heitman
Minnesota Management Inc., or against any of their respective directors,
officers, shareholders, employees, agents, constituent partners, beneficiaries,
trustees or representatives.
It is expressly understood and agreed by and between the parties
hereto, anything herein to the contrary notwithstanding, that each and all of
the representations, warranties, covenants, undertakings and agreements herein
made on the part of Landlord while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of Landlord are nevertheless
each and every one of them made and intended, not as personal representations,
warranties, covenants, undertakings and agreements by Landlord or for the
purpose or with the intention of binding Landlord personally, but are made and
intended for the purpose only of subjecting Landlord's interest in Landlord's
Real Estate to the terms of this Lease and for no other purpose whatsoever, and
in case of default hereunder by Landlord (or default through, under or by any of
its beneficiaries, or agents or representatives of said beneficiaries), the
Tenant shall look solely to the Landlord's interest in Landlord's Real Estate.
23.01 TRANSFER OF LANDLORD'S INTEREST. Landlord and each successor to
Landlord shall be fully released from the performance of Landlord's obligations
subsequent to their transfer of Landlord's interest in the Building. Landlord
shall not be liable for any obligation hereunder after a transfer of its
interest in the Building.
ARTICLE XXIV -- HOLDOVER TENANCY
24.01 If Tenant holds possession of the Premises after the expiration
or termination of the Lease Term, by lapse of time or otherwise, Tenant shall
become a tenant at sufferance upon all of the terms contained herein, except as
to Lease Term and Rent. During such holdover period, Tenant shall pay to
Landlord a monthly rental equivalent to two hundred percent (200%) of the Rent
payable by Tenant to Landlord with respect to the last month of the Lease Term.
The monthly rent payable for such holdover period shall in no event be construed
as a penalty or as liquidated damages for such retention of possession. Without
limiting the foregoing, Tenant hereby agrees to indemnify, defend and hold
harmless Landlord, its beneficiary, and their respective agents, contractors and
employees, from and against any and all claims, liabilities, actions, losses,
damages (including without limitation, direct, indirect, incidental and
consequential) and expenses (including, without limitation, court costs and
reasonable attorneys' fees) asserted against or sustained by any such party and
arising from or by reason of such retention of possession, which obligations
shall survive the expiration or termination of the Lease Term.
ARTICLE XXV -- NOTICES
25.01 All notices which Landlord or Tenant may be required, or may
desire, to serve on the other may be served, as an alternative to personal
service, by mailing the same by registered or certified mail, postage prepaid,
or may be sent by overnight courier, addressed to the Landlord at the address
for Landlord set forth in Section 1.11 above and to Tenant at the address for
Tenant set forth in Section 1.12 above, or, from and after the Commencement
Date, to the Tenant at the Premises whether or not Tenant has departed from,
abandoned or vacated the Premises, or addressed to such other address or
addresses as either Landlord or Tenant may from time to time designate to the
other in writing. Any notice shall be deemed to have been given and served when
delivered personally or otherwise at the time the same was posted, except that
any notice given by overnight courier shall be deemed given on the first
business day following the date such notice is delivered by such courier
provided such courier verifies delivery thereof.
ARTICLE XXVI -- BROKERS
26.01 The parties recognize as the broker(s) who procured this Lease
the firm(s) specified in Section 1.13 and agree that Landlord shall be solely
responsible for the payment of any brokerage commissions to said broker(s), and
that Tenant shall have no responsibility therefor unless written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing, subleasing or renting
space in the Building, Tenant shall be solely responsible for the payment of any
fee due said person or firm and Tenant shall protect, indemnify, hold harmless
and defend Landlord from any liability in respect thereto.
ARTICLE XXVII -- MISCELLANEOUS
27.01 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement of
the parties.
27.02 AMENDMENTS. This Lease shall not be amended, changed or modified
in any way unless in writing executed by Landlord and Tenant. Landlord shall not
have waived or released any of its rights hereunder unless in writing and
executed by the Landlord.
27.03 SUCCESSORS. Except as expressly provided herein, this Lease and
the obligations of Landlord and Tenant contained herein shall bind and benefit
the successors and assigns of the parties hereto.
27.04 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, fire,
earthquake, civil commotion, or failure or disruption of utility services. The
amount of time for Landlord to perform any of Landlord's obligations shall be
extended by the amount of time Landlord is delayed in performing such obligation
by reason of any force majeure occurrence whether similar to or different from
the foregoing types of occurrences.
27.05 SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
to the expiration of the Lease shall survive the termination of the Lease, and
Tenant shall promptly perform all such obligations whether or not this Lease has
expired.
27.06 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
27.07 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Minnesota.
27.08 SEVERABILITY. In the event any provision of this Lease is found
to be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
27.09 CAPTIONS. All captions, headings, titles, numerical references
and computer highlighting are for convenience only and shall have no effect on
the interpretation of this Lease.
27.10 INTERPRETATION. Tenant acknowledges that it has read and reviewed
this Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a fair and reasonable
interpretation in accordance with the meaning of its terms and the intent of the
parties.
27.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of the
Lease.
27.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
27.13 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
27.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder.
27.15 EXHIBITS AND SCHEDULES. Exhibits A (Outline of Premises), B (Work
Letter Agreement), C (Suite Acceptance Letter), D (Tenant Operations Inquiry), E
(List of Additional Insureds, F (Rules and Regulations) and G (Guaranty), and
Schedule 1 to Exhibit D (List of Permissible Hazardous Materials and Quantities)
are incorporated into this Lease by reference and made a part hereof.
27.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed and
delivered by Tenant to Landlord and (b) it is fully reviewed and executed by
Landlord; provided, however, that, upon execution of this Lease by Tenant and
delivery to Landlord, such execution and delivery by Tenant shall, in
consideration of the time and expense incurred by Landlord in reviewing the
Lease and Tenant's credit, constitute an offer by Tenant to Lease the Premises
upon the terms and conditions set forth herein (which offer to Lease shall be
irrevocable for ten (10) business days following the date of delivery).
27.17 WAIVER; NO COUNTERCLAIM; CHOICE OF LAWS. To the extent
permitted by applicable law, Tenant hereby waives the right to a jury trial in
any action or proceeding regarding this Lease and the tenancy created by this
Lease. It is mutually agreed that in the event Landlord commences any summary
proceeding for non-payment of Rent, Tenant will not interpose any counterclaim
of whatever nature or description in any such proceeding. In addition, Tenant
hereby submits to local jurisdiction in the State of Minnesota and agrees that
any action by Tenant against Landlord shall be instituted in the State of
Minnesota and that Landlord shall have personal jurisdiction over Tenant for any
action brought by Landlord against Tenant in the State of Minnesota. To the
extent permitted by applicable law, Tenant hereby waives any and all rights of
redemption granted by any present or future laws.
27.18 ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in Section
7.01 or elsewhere in this Lease to the contrary notwithstanding, electricity to
the Premises shall not be furnished by Landlord, but shall be furnished by the
approved electric utility company serving the Building. Landlord shall permit
Tenant to receive such service directly from such utility company at Tenant's
cost (except as otherwise provided herein) and shall permit Landlord's wire and
conduits, to the extent available, suitable and safely capable, to be used for
such purposes.
27.19 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for
set-off or abatement of Rent: (i) to change the name or street address of the
Building; (ii) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (iii) to designate and/or approve prior to
installation, all types of signs, window shades, blinds, drapes, awnings or
other similar items, and all internal lighting that may be visible from the
exterior of the Premises; (iv) to display the Premises and/or the Building to
mortgagees, prospective mortgagees, prospective purchasers and ground lessors at
reasonable hours upon reasonable advance notice to Tenant; (v) to change the
arrangement of entrances, doors, corridors, elevators and/or stairs in the
Building, provided no such change shall materially adversely affect access to
the Premises; (vi) to grant any party the exclusive right to conduct any
business or render any service in the Building, provided such exclusive right
shall not operate to prohibit Tenant from using the Premises for the purposes
permitted under this Lease; (vii) to prohibit the placement of vending or
dispensing machines of any kind in or about the Premises other than for use by
Tenant's employees; (viii) to prohibit the placement of video or other
electronic games in the Premises; (ix) to have access for Landlord and other
tenants of the Building to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office; (x) to close
the Building after normal business hours, except that Tenant and its employees
and invitees shall be entitled to admission at all times under such rules and
regulations as Landlord prescribes for security purposes; (xi) to install,
operate and maintain security systems which monitor, by close circuit television
or otherwise, all persons entering or leaving the Building; (xii) to install and
maintain pipes, ducts, conduits, wires and structural elements located in the
Premises which serve other parts or other tenants of the Building; and (xiii) to
retain at all times master keys or pass keys to the Premises.
27.20 TENANT OPERATIONS INQUIRY. As a material inducement to Landlord
to enter into this Lease (i) Tenant has completed Exhibit D hereto, and (ii)
Tenant represents and warrants to Landlord that Exhibit D is true and correct in
all material respects and is not misleading.
27.21 [deleted]
ARTICLE XXVIII -- FLOOR LOAD LIMITS
28.01 FLOOR LOAD LIMITS. Tenant shall not place a load upon any floor
of the Premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment in the Building. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Landlord's judgment, to
absorb and prevent vibration, noise and annoyance to occupants of the complex of
adjacent property.
ARTICLE XXIX -- LANDLORD'S LIEN
29.01 LANDLORD'S LIEN. As security for Tenant's payment of Rent,
damages and all other payments required to be made by this Lease, Tenant hereby
grants to Landlord a lien upon all property of Tenant now or subsequently
located upon the Premises. If Lessee abandons or vacates any substantial portion
of the Premises or is in default in the payment of any rentals, damage or other
payments required to be made by this Lease, Landlord may take any action it
deems necessary and may be available to it under the laws of the State of
Minnesota. The proceeds of the sale of the personal property shall be applied by
Landlord toward the cost of the sale and then toward the payment of all sums
then due by Tenant to Landlord under the terms of this Lease.
ARTICLE XXX -- UNIFORM COMMERCIAL CODE
30.01 UNIFORM COMMERCIAL CODE. To the extent, if any, this Lease grants
Landlord any lien or lien rights greater than provided by the laws of the State
of Minnesota pertaining to "Landlord's Liens", this Lease is intended as and
constitutes a security agreement within the meaning of the Uniform Commercial
Code as in effect in the State of Minnesota. Landlord, in addition to the rights
prescribed in this Lease, shall have a lien upon, and Tenant grants to Landlord
an interest in, all of Tenant's property now or hereafter located upon the
Premises, including without limitation all of Tenant's equipment, inventory,
fixtures, accounts, general intangibles and other items of personal property or
fixtures located upon the Premises whether now owned or hereafter acquired, and
all additions, substitutions, replacements and accessions thereto, and all
proceeds of the foregoing, to secure the payment to Landlord of the various
amounts provided in this Lease. The Tenant agrees to and shall execute and
deliver to Landlord such "Financing Statements," continuation statements, and
provide such further assurances as Landlord may from time to time consider
necessary or desirable to create, perfect and preserve the lien and security
interest described above and all additions, substitutions, replacements and
accessions thereto, and all proceeds of its or their sale or other disposition.
The Landlord, at the expense of Tenant, may cause such Financing Statements,
continuation statements, and assurances to be recorded and re-recorded, filed
and re-filed, and renewed or continued, at such times and places as may be
required or permitted by law to create, perfect and preserve such liens and
security interests. In the event Tenant fails to promptly execute and return to
Landlord such Financing Statements or continuation statements as Landlord may
request to create, preserve and perfect its lien, Tenant shall and does hereby
designate Landlord to act as Tenant's agent for the sole and limited purpose of
executing and filing such Financing Statements or continuation statements and
any such execution by Landlord pursuant to this Lease shall be effective and
binding upon Tenant as though executed originally by Tenant, and under such
circumstances Tenant authorizes Landlord to sign such financing and continuation
statements. Tenant's designation of Landlord as agent hereunder shall not be
subject to revocation until this Lease is terminated.
NOTE: Need to file UCC-1 Financing Statement describing such collateral
in Secretary of State's office and county recorder.
AND UCC-2 Financing Statement (fixtures), with legal
description attached, with the county recorder.
Notwithstanding the foregoing, a security interest in favor of the
Landlord is subordinate to any existing security interest in the same collateral
and any future security interest in favor of the Tenants' Lender(s).
IN WITNESS WHEREOF, the parties hereto have executed this lease as of
the date first above written.
TENANT: LANDLORD:
SurVivaLink, Corp., A.M.W. PROPERTIES CORP.,
a Minnesota corporation a Nevada corporation
By: Byron L. Gilman By:
Its: CEO Its: Vice President
ATTEST:
R. Eric Bosler
WITNESSES: WITNESSES:
ADDENDUM
TO INDUSTRIAL LEASE
DATED AUGUST 17, 1994
BETWEEN A.M.W. PROPERTIES CORP. ("Landlord") and
SURVIVALINK CORP. ("Tenant")
The provisions of this Addendum shall modify and amend the hereinafter
specified provisions of, and otherwise supplement, the above-described Lease as
follows:
1. BASE RENT. Section 1.07 of the Lease is hereby amended to set forth
the Base Rent payable during the Lease Term, as follows:
(A) From September 1, 1994 through August 31, 1995, annual
Base Rent shall be Twenty-three Thousand Fifty-six and 20/100 Dollars
($23,056.20), payable in equal monthly installments of One Thousand
Nine Hundred Twenty-one and 35/100 Dollars ($1,921.35).
(B) From September 1, 1995 through August 31, 1996, annual
Base Rent shall be Forty-three Thousand One Hundred Thirty-seven and
48/100 Dollars ($43,137.48), payable in equal monthly installments of
Three Thousand Five Hundred Ninety-four and 79/100 Dollars
($3,594.79).
(C) From September 1, 1996 through August 31, 1997, annual
Base Rent shall be Seventy-four Thousand Seven Hundred Ninety-nine and
96/100 Dollars ($74,799.96), payable in equal monthly installments of
Six Thousand Two Hundred Thirty-three and 33/100 Dollars ($6,233.33).
(D) From September 1, 1997 through August 31, 1999, annual
Base Rent shall be Eighty-five Thousand Five Hundred Thirty-one and
20/100 Dollars ($85,531.20), payable in equal monthly installments of
Seven Thousand One Hundred Twenty-seven and 60/100 Dollars
($7,127.60).
FIRST AMENDMENT TO LEASE
THIS AMENDMENT is made as of May 1, 1996, by and between A.M.W.
PROPERTIES CORP., a Nevada corporation ("Landlord") and SURVIVALINK CORP., a
Minnesota corporation ("Tenant").
RECITALS:
Landlord and Tenant are parties to that certain Lease dated August 17,
1994 (the "Lease") for approximately 10,625 square feet of premises (the
"Original Premises") located in that certain building with an address of 5420
Feltl Road, Minnetonka, Minnesota (the "Original Building").
Tenant desires to expand its use and occupancy into certain space
immediately adjacent to the Building to include approximately 7,633 additional
square feet of Rentable Area in that certain building with an address of 5400
Feltl Road (the "Additional Building") and as depicted on Exhibit A attached to
this Amendment (the "Additional Premises"), effective as of July 15, 1996.
Landlord and Tenant desire to amend certain terms of the Lease pursuant
to this Amendment.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. CONFIRMATION OF LEASE. Tenant warrants that Tenant is now in possession
of the Premises and that the Lease is valid and presently in full force
and effect. Except as expressly stated in this Amendment, the Lease
shall remain unchanged and in full force and effect through its
duration.
2. EXPANSION OF PREMISES. Effective as of July 15, 1996, the Premises are
hereby expanded to include the Additional Premises, which shall be
considered to be a part of the Premises for all purposes described in
the Lease. Accordingly, effective as of July 15, 1996, the Premises
shall consist of a total of approximately 18,258 square feet of
Rentable Area.
3. BASE RENT FOR ADDITIONAL PREMISES. As and for Base Rent for the
Additional Premises, Tenant shall pay the following:
From July 15, 1996 to and including August 3 1, 1997, Annual
Base Rent for the Additional Premises shall be at the rate of
$7.61 per square foot, in the amount of $58,087.08, payable in
equal monthly installments of $4,840.59; and
From September 1, 1997 to and including August 31, 1999,
Annual Base Rent for the Additional Premises shall be in the
amount of $65,720.16, payable in equal monthly installments of
$5,476.68.
Accordingly, the total Base Rent payable for the Premises by Tenant
shall be as follows:
From July 15, 1996 to and including August 31, 1996, total
Annual Base Rent for the Premises shall be in the amount of
$101,224.56, payable in equal monthly installments of
$8,435.38;
From September 1, 1996 to and including August 31, 1997, total
Annual Base Rent for the Premises shall be in the amount of
$132,887.04, payable in equal monthly installments of
$11,073.92;
From September 1, 1997 to and including August 31, 1999, total
Annual Base Rent for the Premises shall be in the amount of
$151,251.36, payable in equal monthly installments of
$12,604.28.
4. TENANT'S PERCENTAGE SHARE. Effective as of July 15, 1996, the total
Tenant's Percentage Share for the Premises shall be 13.48%.
5. NO ADDITIONAL INDUCEMENTS. Tenant acknowledges its acceptance of the
Additional Premises in its "AS IS" condition and further acknowledges
that Landlord shall not be obligated to provide any improvements to the
Additional Premises or to provide any inducements or allowances with
regard to the Additional Premises. Specifically, but not by way of
limitation, Tenant acknowledges and agrees that Landlord shall not be
obligated to perform the clean-up of the Additional Premises described
in Section 2.01 of the Lease.
6. USE OF ADDITIONAL PREMISES. The Additional Premises shall be used in
the same manner as the Original Premises, as described in Section 1.10
of the Lease.
7. LEASING BROKER. Tenant warrants that it has had no dealings with any
broker or agent in connection with this Amendment other than Heitman
Minnesota Management Inc. and covenants to pay, hold harmless and
indemnify Landlord from and against any and all costs, expenses or
liability for any compensation, commissions, and charges claimed by any
other broker or agent with respect to this Amendment or the
negotiations thereof with whom Tenant had dealings.
8. TERMS. Each capitalized term used as a defined term in this Amendment
but not otherwise defined in this Amendment shall have the same meaning
ascribed to such term in the Lease.
IN AGREEMENT, the parties have executed this Amendment as of the date
and year first above written.
LANDLORD:
A.M.W. PROPERTIES CORP.,
a Nevada corporation
By Nigel Comet
Its Vice President
TENANT:
SURVIVALINK CORP.,
a Minnesota corporation
By /s/ Byron L. Gilman
Its Chief Executive Officer
EXHIBIT "A"
Depiction of Additional Premises
[Drawing omitted]
Drawing of a layout of the building.
SURVIVALINK CORPORATION
1992 STOCK OPTION AND INCENTIVE PLAN
As amended through May 2, 1996
The purpose of the SurVivaLink Corporation 1992 Stock Option and
Incentive Plan (the "Plan") is to promote the growth and profitability of
SurVivaLink Corporation (the "Company") and its Affiliates by providing
directors, key employees and consultants with an incentive to achieve long-term
corporate objectives, to attract and retain persons of outstanding competence,
and to provide such persons with an equity interest in the Company.
1. STOCK SUBJECT TO PLAN. An aggregate of 1,000,000 shares (the
"Shares") of the Common Stock, par value $.01 per share, of the Company ("Common
Stock") may be subject to awards granted under the Plan. Such Shares may be
authorized but unissued Common Stock or authorized and issued Common Stock that
has been or may be acquired by the Company. Shares that are subject to an award
which expires or is terminated unexercised, or which are reacquired by the
Company upon the forfeiture of restricted Shares, shall again be available for
issuance under the Plan.
2. ADMINISTRATION.
a. COMMITTEE. The Plan shall be administered by the Stock
Option Committee (the "Committee") of the Board of Directors of the
Company (the "Board"). The Committee shall be comprised of the entire
Board or, if the Board so determines, of two or more members of the
Board.
b. POWERS AND DUTIES. The Committee shall have the authority
to make rules and regulations governing the administration of the Plan;
to select the eligible directors, employees and consultants to whom
awards shall be granted; to determine the type, amount, size, and terms
of awards; to determine the time when awards shall be granted; to
determine whether any restrictions shall be placed on Shares purchased
pursuant to any option or issued pursuant to any award; and to make all
other determinations necessary or advisable for the administration of
the Plan. The Committee's determinations need not be uniform, and may
be made by it selectively among persons who are eligible to receive
awards under the Plan, whether or not such persons are similarly
situated. All interpretations, decisions, or determinations made by the
Committee pursuant to the Plan shall be final and conclusive.
3. ELIGIBILITY. Any director, employee or consultant of the Company or
of any of its Affiliates shall be eligible to receive awards under the Plan. A
person who has been granted an award under this Plan, or under any predecessor
plan, may be granted additional awards if the Committee shall so determine.
Except to the extent otherwise provided in the agreement evidencing an award,
the granting of an award under this Plan shall not affect any outstanding award
previously granted under this Plan or under any other plan of the Company or any
Affiliate. For purposes of the Plan, the term "Affiliate" shall mean any "parent
corporation" or "subsidiary corporation" of the Company, as those terms are
defined in Sections 425(e) and 425(f) of the Internal Revenue Code of 1986, as
amended.
4. AWARDS. The Committee may make awards to eligible persons in the
form of stock options which are intended to qualify as "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or stock options which are not intended to so qualify ("Nonqualified
Options"), or awards of restricted stock, or any combination thereof.
5. STOCK OPTIONS. A stock option granted pursuant to the Plan shall
entitle the optionee, upon exercise, to purchase Shares at a specified price
during a specified period. Options shall be subject to such terms and conditions
as the Committee shall from time to time approve; provided, that each option
shall be subject to the following requirements:
a. TYPE OF OPTION. Each option shall be identified in the
agreement pursuant to which it is granted as an Incentive Stock Option
or as a Nonqualified Option, as the case may be.
b. TERM. No option shall be exercisable more than 121 months
after the date on which it is granted.
c. PAYMENT. The purchase price of Shares subject to an option
shall be payable in full at the time the option is exercised. Payment
may be made in cash, in shares of Common Stock having an aggregate fair
market value on the date of exercise which is not less than the option
price, or by a combination of cash and such shares, as the Committee
may determine, and subject to such terms and conditions as the
Committee deems appropriate.
d. OPTIONS NOT TRANSFERABLE. Options shall not be transferable
except to the extent permitted by the agreement evidencing such option;
provided, that in no event shall any option be transferable by the
optionee, other than by will or the laws of descent and distribution.
Options shall be exercisable during an optionee's lifetime only by such
optionee. If, pursuant to the agreement evidencing any option, such
option remains exercisable after the optionee's death, it may be
exercised, to the extent permitted by such agreement, by the personal
representative of the optionee's estate or by any person who acquired
the right to exercise such option by bequest, inheritance, or otherwise
by reason of the optionee's death.
e. INCENTIVE STOCK OPTIONS. If an option is an Incentive Stock
Option, it shall be subject to the following additional requirements:
i. Incentive Stock Options may be granted only to
persons who are employees of the Company or an Affiliate.
ii. The purchase price of Shares that are subject to
an Incentive Stock Option shall not be less than 100% of the
fair market value of such Shares at the time the option is
granted, as determined in good faith by the Committee.
iii. The aggregate fair market value (determined at
the time the option is granted) of the Shares with respect to
which Incentive Stock Options are exercisable by the optionee
for the first time during any calendar year, under this Plan
or any other plan of the Company or any Affiliate, shall not
exceed $100,000.
iv. An Incentive Stock Option shall not be
exercisable more than ten years after the date on which it is
granted.
v. The purchase price of Shares that are subject to
an Incentive Stock Option granted to an employee who, at the
time such option is granted, owns 10% or more of the total
combined voting power of all classes of stock of the Company
or of any Affiliate shall not be less than 110% of the fair
market value of such Shares on the date such option is
granted, and such option may not be exercisable more than five
years after the date on which it is granted. For the purposes
of this subparagraph, the rules of Section 425(d) of the Code
shall apply in determining the stock ownership of any
employee.
Subject to the foregoing, options may be made exercisable in one or more
installments, upon the happening of certain events, upon the fulfillment of
certain conditions, or upon such other terms and conditions as the Committee
shall determine.
6. RESTRICTED STOCK. Restricted stock awards granted pursuant to the
Plan shall entitle the holder to receive Shares, subject to forfeiture if
specified conditions are not satisfied at the end of a specified period.
Restricted stock awards shall be subject to such terms and conditions as the
Committee shall from time to time approve; provided, that each award shall be
subject to the following requirements:
a. RESTRICTED PERIOD. The Committee shall establish a period
(the "Restricted Period") of not less than three years nor more than
five years, commencing on the date of award, during which the holder
will not be permitted to sell, transfer, pledge, encumber, or assign
the Shares subject to the award. Within these limits, the Committee may
provide for the lapse of restrictions in installments, or upon the
occurrence of certain events, where deemed appropriate. Any attempt by
a holder to dispose of restricted Shares in a manner contrary to the
applicable restrictions shall be void, and of no force and effect.
b. RIGHTS DURING RESTRICTED PERIOD. Except to the extent
otherwise provided in this paragraph 6 or under the terms of any
restricted stock agreement, during the Restricted Period, the holder of
restricted Shares shall have all of the rights of a stockholder in the
Company with respect to such Shares, including the right to vote the
Shares and to receive dividends and other distributions with respect to
the Shares; provided, that all stock dividends, stock rights, and stock
issued upon split-ups or reclassifications of Shares shall be subject
to the same restrictions as the Shares with respect to which such stock
dividends, rights, or additional stock are issued, and may be held in
custody as provided below in this paragraph 6 until the restrictions
thereon shall have lapsed.
c. FORFEITURES. Except to the extent otherwise provided in the
restricted stock agreement, all Shares then subject to any restriction
shall be forfeited to the Company without further obligation of the
Company to the holder thereof, and all rights of the holder with
respect to such Shares shall terminate, if the holder shall cease to be
a director, employee or consultant of the Company and its Affiliates,
or if any condition established by the Committee for the release of any
restriction shall not have occurred, prior to the expiration of the
Restricted Period.
d. CUSTODY. The Committee may provide that the certificates
evidencing restricted Shares shall be held in custody by a bank or
other institution, or by the Company or any Affiliate, until the
restrictions thereon have lapsed, and may require that the holder of
any restricted Shares shall have delivered to the Company one or more
stock powers, endorsed in blank, relating to the restricted Shares as a
condition of receiving the award.
e. CERTIFICATES. A recipient of a restricted stock award shall
be issued a certificate or certificates evidencing the Shares subject
to such award. Such certificates shall be registered in the name of the
recipient, and may bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, which legend
shall be in substantially the following form:
"The transferability of this certificate and the shares
represented hereby are subject to the terms and conditions
(including forfeiture) of the SurVivaLink Corporation 1992
Stock Option and Incentive Plan and an Agreement entered into
between the registered owner and Surviva Link Corporation.
Copies of such Plan and Agreement are on file in the corporate
offices of SurVivaLink Corporation."
f. GIFTS, ETC. Notwithstanding any other provision of this
paragraph 6, the Committee may permit a gift of restricted stock to the
holder's spouse, child, stepchild, grandchild, or legal dependent, or
to a trust whose sole beneficiary or beneficiaries shall be the holder
and/or any one or more of such persons; provided, that the donee shall
have entered into an agreement with the Company pursuant to which it
agrees that the restricted stock shall be subject to the same
restrictions in the hands of such donee as it was in the hands of the
donor.
7. AGREEMENTS. Each option or award granted pursuant to the Plan shall
be evidenced by an agreement setting forth the terms and conditions upon which
it is granted. Multiple options or awards may be evidenced by a single
agreement. Subject to the limitations set forth in the Plan, the Committee may,
with the consent of the person to whom an award has been granted, amend any such
agreement to modify the terms or conditions governing the award evidenced
thereby.
8. ADJUSTMENTS. In the event of any change in the outstanding Shares of
Common Stock by reason of any stock dividend or split, recapitalization,
reclassification, combination, or exchange of Shares or other similar corporate
change, then if the Committee shall determine, in its sole discretion, that such
change necessarily or equitably requires an adjustment in the number of Shares
subject to an award, in the option price or value of an award, or in the maximum
number of Shares subject to this Plan, such adjustments shall be made by the
Committee and shall be conclusive and binding for all purposes of this Plan. No
adjustment shall be made in connection with the issuance by the Company of any
warrants, rights, or options to acquire additional Common Stock or of securities
convertible into Common Stock.
9. MERGER, CONSOLIDATION, REORGANIZATION, LIQUIDATION, ETC. If the
stockholders of the Company shall adopt a resolution providing for the
dissolution or liquidation of the Company, or for a merger, consolidation, or
other corporate reorganization of the Company under circumstances in which the
Company will not be the surviving party, then the options shall become
exercisable in full on the date on which such event occurs. Under no
circumstances, however, shall the options be exercisable after the Expiration
Date or any earlier expiration date specified.
10. EXPENSES OF PLAN. The expenses of administering this Plan shall be
borne by the Company and its Affiliates.
11. RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board of Directors shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of the Company
and its Affiliates and upon any other information furnished in connection with
this Plan by any person or persons other than himself. In no event shall any
person who is or shall have been a member of the Committee or of the Board of
Directors be liable for any determination made or other action taken or omitted
in reliance upon any such report or information, or for any action taken or
omitted, including the furnishing of information, in good faith.
12. RIGHTS AS STOCKHOLDER. Except to the extent otherwise specifically
provided hereon, no recipient of any award shall have any rights as a
stockholder with respect to Shares sold or issued pursuant to the Plan until
certificates for such Shares have been issued to such person.
13. GENERAL RESTRICTIONS. Each award granted pursuant to the Plan shall
be subject to the requirement that if, in the opinion of the Committee:
a. the listing, registration, or qualification of any Shares
related thereto upon any securities exchange or under any state or
federal law;
b. the consent or approval of any regulatory body; or
c. an agreement by the recipient with respect to the
disposition of any such Shares;
is necessary or desirable as a condition of the issuance or sale of such Shares,
such award shall not be consummated unless and until such listing, registration,
qualification, consent, approval, or agreement is effected or obtained in form
satisfactory to the Committee.
14. EMPLOYMENT RIGHTS. Nothing in this Plan, or in any agreement
entered into hereunder, shall confer upon any person the right to continue to
serve as a director, employee or consultant of the Company or an Affiliate, or
affect the right of his employer to terminate such person's service at any time,
with or without cause.
15. WITHHOLDING. If the Company proposes or is required to issue Shares
pursuant to the Plan, it may require the recipient to remit to it, or may
withhold from such award or from the recipient's other compensation, an amount,
in the form of cash or Shares, sufficient to satisfy any applicable federal,
state, or local tax obligations prior to the delivery of any certificates for
such Shares.
16. AMENDMENTS. The Board of Directors of the Company may at any time,
and from time to time, amend the Plan in any respect, except that no amendment:
a. increasing the number of Shares available for issuance or
sale pursuant to the Plan (other than as permitted by paragraphs 8 and
9);
b. changing the classification of persons eligible to
participate in the Plan or the definition of an "Affiliate"; or
c. materially increasing the benefits accruing to participants
under the Plan;
shall be made without the affirmative vote of shareholders holding at least a
majority of the voting stock of the Company represented in person or by proxy at
a duly held shareholders' meeting.
17. STOCKHOLDER APPROVAL. Any award granted under the Plan prior to the
date on which the Plan is approved by stockholders holding at least a majority
of the voting stock of the Company represented in person or by proxy at a duly
held stockholders' meeting shall be contingent upon such approval.
18. DURATION. No options or rights shall be granted under the Plan
after the earlier of (a) the date on which the Plan is terminated by the Board
of Directors of the Company; or (b) May 22, 2002.
NONQUALIFIED STOCK OPTION AGREEMENT
OPTIONEE:
GRANT DATE:
NUMBER OF OPTION SHARES: Shares
OPTION PRICE PER SHARE: $ per Share
EXPIRATION DATE:
THIS AGREEMENT is made as of the Grant Date set forth above, by and
between SurVivaLink Corporation, a Minnesota corporation (the "Company"), and
the Optionee named above, who is a consultant to the Company or of a Subsidiary
of the Company (the "Optionee").
The Company desires to afford the Optionee an opportunity to purchase
shares of its Common Stock, without par value (the "Common Stock"), as
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereby
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of the aggregate number of shares of
Common Stock set forth above (the "Option Shares") (such number being subject to
adjustment as provided in paragraph 8 hereof) on the terms and conditions set
forth in this Agreement. This option is not intended to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
2. PURCHASE PRICE. The purchase price of the Option Shares shall be the
Option Price per share set forth above (such Option Price being subject to
adjustment as provided in paragraph 8 hereof).
3. TERM AND EXERCISE OF OPTION. The term of this option shall commence
on the Grant Date set forth above and shall continue until the Expiration Date
set forth above. Except as otherwise provided herein, this option may be
exercised in whole or in part at any time or from time to time during the term
of this option.
Neither the Optionee nor the Optionee's legal representatives, legatees
or distributees, as the case may be, will be, or will be deemed to be, a holder
of any Option Shares for any purpose unless and until certificates for such
shares are issued to the Optionee or the Optionee's legal representatives,
legatees or distributees.
4. LIMITATIONS ON EXERCISE OF OPTION.
(a) The exercise of this option will be contingent upon receipt from
the Optionee (or the purchaser acting under paragraph 8 below) of (i)
representations in writing (if required by the Stock Option Committee, in its
sole discretion), that the Option Shares are being acquired for investment and
not for resale or with a view to the distribution thereof, and (ii) the full
Option Price of such Option Shares.
(b) The issuance of Option Shares upon the exercise of this option
shall be subject to all applicable laws, rules, and regulations and shares shall
not be issued except upon the approval of proper government agencies or stock
exchanges as may be required.
(c) This option shall not be exercisable if at any date of exercise, it
is the opinion of counsel for the Company that registration of said shares under
the Securities Act of 1933, or other applicable statute or regulation, is
required and this option shall again become exercisable only if the Company
elects to and thereafter effects a registration of said shares under the
Securities Act of 1933, or other applicable statute or regulation, within the
period of this option.
5. NONTRANSFERABILITY OF OPTION. This option shall not be transferable
by the Optionee, other than by will or the laws of descent and distribution.
During the lifetime of the Optionee, this option shall be exercisable only by
the Optionee.
6. TERMINATION OF SERVICE. This option will not confer upon the
Optionee any right with respect to continuance of service as a consultant to the
Company or a Subsidiary of the Company, nor will it interfere in any way with
the Company's right or the Subsidiary's right to terminate his service at any
time.
7. DEATH OF OPTIONEE. In the event of the death of the Optionee, this
option shall be exercisable only by the executors or administrators of the
Optionee or by the person or persons to whom the Optionee's rights under the
option shall pass by the Optionee's Will or the laws of descent and
distribution.
8. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of shares, or rights
offering to purchase Common Stock at a price substantially below fair market
value, or other similar change affecting the Common Stock, while any portion of
this option is outstanding and unexercised, the Stock Option Committee shall
make such adjustments in the number of Option Shares and in the Option Price as
shall be equitable and appropriate in order to prevent substantial dilution or
enlargement of the rights granted to, or available for, the Optionee. No
adjustment shall be made in connection with the issuance by the Company of any
warrants, rights, or options to acquire additional shares of Common Stock or of
securities convertible into Common Stock at a price that is not substantially
below the fair market value of the Common Stock at the date such warrants,
rights or options are issued.
9. INTERPRETATION. The interpretation and construction of any provision
of this Option Agreement shall be made by the Stock Option Committee and shall
be final, conclusive and binding on the Optionee and all other persons.
10. SUBSIDIARY. The term "Subsidiary" as used in this Option Agreement
means a subsidiary corporation, at least 50% of the outstanding voting stock or
voting power of which is beneficially owned, directly or indirectly, by the
Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by its duly authorized officer, and the Optionee
has executed this Agreement as of the Grant Date set forth above.
COMPANY: SURVIVALINK CORPORATION
By ____________________________
Byron L. Gilman
Chief Executive Officer
OPTIONEE:
_____________________________
[Optionee]
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made and entered into as of April 29, 1994
by and among SURVIVA LINK CORPORATION (the "Company"), a Minnesota corporation,
MEDTRONIC, INC. ("Medtronic"), a Minnesota corporation, and the following
shareholders of the Company: BYRON L. GILMAN, KARL J.F. KROLL, KENNETH C. MAKI,
and MARK W. KROLL (each individually a "Shareholder"; collectively the
"Shareholders").
RECITALS
WHEREAS, the Company desires to issue and sell to Medtronic, and
Medtronic desires to purchase from the Company, upon the terms and subject to
the conditions set forth in this Agreement, 200,000 shares of the Company's
common stock, no par value ("Common Stock"); and
WHEREAS, as a condition to Medtronic's investment described above, the
Company is willing to grant to Medtronic a Warrant to purchase up to 75,000
shares of Common Stock (the "Warrant"); and
WHEREAS, as a further condition to Medtronic's investment described
above, the Company is willing to grant to Medtronic certain rights (i) to
purchase its pro rata portion of any issuances of additional securities of the
Company, (ii) to designate a member of the Company's Board of Directors, and
(iii) to have the Purchased Shares and/or Warrant Shares registered under the
Securities Act; and
WHEREAS, as a condition to Medtronic's investment described above, the
Shareholders are willing to (i) grant to Medtronic certain rights of co-sale in
the event any Shareholder proposes to sell Common Stock, and (ii) agree to vote
in favor of Medtronic's designee to the Company's Board of Directors.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"Affiliate" of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified. "Control"
shall mean ownership of more than 50% of the shares of stock entitled to vote
for the election of directors in the case of a
Page -1-
corporation, and more than 50% of the voting power in the case of a business
entity other than a corporation.
"Agreement" means this Agreement and all Exhibits and Schedules hereto.
"Board" means the Company's Board of Directors.
"Capital Stock" means any of the authorized shares of the Company.
"Confidential Information" means know-how, trade secrets, and unpublished
information disclosed (whether before or during the term of this Agreement) by
one of the parties (the "disclosing party") to the other party (the "receiving
party") or generated under this Agreement, excluding information which:
(a) was already in the possession of receiving party prior to
its receipt from the disclosing party (provided that the receiving party is able
to provide the disclosing party with reasonable documentary proof thereof);
(b) is or becomes part of the public domain by reason of acts
not attributable to the receiving party;
(c) is or becomes available to receiving party from a source
other than the disclosing party which source, to the best of receiving party's
knowledge, has rightfully obtained such information and has no obligation of
non-disclosure or confidentiality to the disclosure party with respect thereto;
(d) is made available by the disclosing party to a third party
unaffiliated with the disclosing party on an unrestricted basis;
(e) has been independently developed by the receiving party
without breach of this Agreement or use of any Confidential Information of the
other party; or
(f) has been or must be publicly disclosed by reason of legal,
accounting or regulatory requirements beyond the reasonable control, and despite
the reasonable efforts of the receiving party.
All Confidential Information disclosed by one party to the other under
this Agreement shall be in writing and bear a legend "Company Proprietary,"
"Company Confidential" or words of similar import or, if disclosed in any manner
other than writing, shall be preceded by an oral statement indicating that the
information is Company proprietary or confidential, and shall be followed by
transmittal of a reasonably detailed written summary of the information provided
to the receiving party with identification as Confidential Information
designated as above within thirty (30) days.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and all
regulations promulgated thereunder.
Page -2-
"Holder" shall mean Medtronic and any person holding Registrable Securities to
whom the rights under Article 7 have been transferred in accordance with Section
7.10 hereof
"Initiating Holders" shall mean Medtronic or transferees of Medtronic under
Section 7.10 hereof who in the aggregate are holders of fifty percent (50%) or
more of the Registrable Securities.
"Intellectual Property" means letters patent and patent applications;
trademarks, service marks and registrations thereof and applications therefor;
copyrights and copyright registrations and applications; all discoveries, ideas,
technology, know-how, trade secrets, processes, formulas, drawings and designs,
computer programs or software; and all amendments, modifications, and
improvements to any of the foregoing.
"Knowledge" means actual knowledge of a fact or the knowledge which such person
could reasonably be expected to have based on reasonable inquiry. The knowledge
of an entity shall include the knowledge of such entity's employees.
"Liens" means liens, mortgages, charges, security interests, claims, voting
trusts, pledges, encumbrances, options, assessments, restrictions, or
third-party or spousal interests of any nature.
"Purchased Shares" means the shares of Common Stock purchased by Medtronic
pursuant to Section 2.1.
"Registrable Securities" means (i) the Purchased Shares and the shares of Common
Stock issued or issuable upon exercise of the Warrant, and (ii) any Common Stock
issued or issuable in respect of the Purchased Shares or the Warrant Shares upon
any stock split, stock dividend, recapitalization, or similar event.
"Registration Expenses" shall mean all expenses, except as otherwise stated
below, incurred by the Company in complying with Sections 7.1, 7.2, and 7.3
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, "Blue Sky" fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company) and the reasonable fees and disbursements of one counsel for all
Holders.
"Registration Statement" means a registration statement filed by the Company
with the Commission for a public offering and sale of securities of the Company
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"SEC" shall mean the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
Page -3-
"Securities Act" means the Securities Act of 1933, as amended, and all
regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts, selling commissions
and stock transfer taxes applicable to the securities registered by the Holders
and, except as set forth above, all reasonable fees and disbursements of counsel
for any Holder.
"Warrant Shares" means the shares of Common Stock which may be purchased by
Medtronic upon exercise of the Warrant.
1.2 DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice-versa.
(c) References to an "Exhibit" or to a "Schedule" are, unless
otherwise specified, to one of the Exhibits or Schedules attached to or
referenced in this Agreement, and references to an "Article" or a "Section" are,
unless otherwise specified, to one of the Articles or Sections of this
Agreement.
(d) The term "person" includes any individual, partnership,
joint venture, corporation, trust, unincorporated organization or government or
any department or agency thereof
ARTICLE 2
PURCHASE OF COMMON STOCK AND WARRANT
2.1 PURCHASE AND SALE OF SHARES. The Company hereby issues and delivers
to Medtronic, and Medtronic hereby purchases from the Company, 200,000 shares of
Common Stock (the "Purchased Shares").
2.2 ISSUANCE OF WARRANT. The Company hereby issues and delivers to
Medtronic a Warrant (the "Warrant") to purchase 75,000 shares of Common Stock at
a purchase price of $1.50 per shares exercisable until the five-year anniversary
of the Closing.
2.3 PURCHASE PRICE. The purchase price for the Purchased Shares and the
Warrant shall be Three Hundred Thousand Dollars ($300,000) payable by wire
transfer of funds to the Company's account designated to Medtronic prior to the
Closing.
Page -4-
2.4 ANTI-DILUTION ADJUSTMENT.
(a) If, within 180 days after the date hereof, the Company
issues, sells, or contracts to issue and sell shares of Common Stock or options,
warrants or other rights to acquire shares of Common Stock (the "Later-Issued
Shares") for a consideration per share less than $1.50 (subject to adjustment in
the event of any stock splits, stock dividends or other recapitalization of the
Common Stock), then the Company shall issue such number of additional shares of
Common Stock to Medtronic so that the average per share purchase price of the
Purchased Shares plus any additional shares previously issued to Medtronic
pursuant to this Section plus the additional shares to be issued hereunder
(determined by dividing $300,000 by the sum of 200,000 (subject to adjustment in
the event of any stock splits, stock dividends or other recapitalization of the
Common Stock) plus any additional shares previously issued to Medtronic pursuant
to this Section plus the number of such additional shares) is equal to the
lowest price per share received or to be received by Company for the
Later-Issued Shares.
(b) Notwithstanding any contrary provision contained herein,
this Section shall not apply to, and no additional shares of Common Stock shall
be issued to Medtronic as a result of, issuances, sales or grants of: (i) the
Warrant Shares; (ii) up to 150,000 shares of Common Stock (subject to adjustment
in the event of any stock splits, stock dividends or other recapitalization of
the Common Stock) issuable upon exercise of the Warrants dated between March
1993 and October 1993 issued in connection with private placements of Common
Stock; (iii) up to 333,333 shares of Common Stock (subject to adjustment in the
event of any stock splits, stock dividends or other recapitalization of the
Common Stock) issuable upon exercise at $1.50 per share of an option granted to
one investor in the Company's November 1, 1993 private placement of Common
Stock; (iv) securities issued for the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets of such corporation
or another reorganization resulting in the ownership by the Company of not less
than a majority of the voting power of such corporation; (v) options to purchase
not more than 500,000 shares of Common Stock (subject to adjustment in the event
of any stock splits, stock dividends or other recapitalization of the Common
Stock) issued to directors or employees of or consultants to the Company
pursuant to the Company's Stock Option Incentive Plan of 1992 (and the Common
Stock issuable upon exercise thereof); or (vi) securities issued as a result of
any stock split, stock dividend or reclassification of Common Stock,
distributable on a pro rata basis to all holders of Common Stock.
(c) Upon any adjustment contemplated by this Section 2.4, the
Company shall give written notice thereof to Medtronic, which notice shall state
the number of shares to be issued as a result of such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
ARTICLE 3
MEDTRONIC RIGHTS OF CO-SALE, FIRST REFUSAL AND BOARD DESIGNEE
3.1 RESTRICTION ON TRANSFER. Each of the Shareholders hereby agrees
that he will not sell, transfer or otherwise dispose of (or enter into a binding
agreement to
Page -5-
sell, transfer or otherwise dispose of) all or any of his shares of Capital
Stock, whether now owned or hereafter acquired unless the right of co-sale set
forth in Section 3.2 has been fully complied with to the extent applicable.
3.2 RIGHT OF CO-SALE. Each of the Shareholders agrees that for so long
as this Article 3 remains in force and effect he will not sell, transfer or
otherwise dispose of any shares of Capital Stock (as defined herein) or any
rights to acquire Capital Stock, without permitting Medtronic to participate as
a seller in such transaction at the same price per share and on the same terms
and conditions. If the proposed purchaser is unwilling to purchase all shares
proposed to be sold by such Shareholder(s) and Medtronic, Medtronic shall have
the right to sell the same percentage of issued and outstanding shares of
Capital Stock owned by Medtronic as the highest percentage of shares proposed to
be sold by any Shareholder (as a percentage of the total number of issued and
outstanding shares of Capital Stock owned by such Shareholder). Each of the
Shareholders shall give prompt notice to Medtronic in the event that he has a
present intention to sell, transfer or otherwise dispose of Capital Stock in a
transaction subject to this right of co-sale, which notice shall specify in
detail the number of shares proposed to be sold, the proposed purchase price
thereof, the proposed purchaser thereof and any other relevant terms. Medtronic
hereby agrees to notify such Shareholder within thirty (30) days of receipt of
such notice as to whether Medtronic wishes to participate in such transaction
with all negotiations leading to the consummation of such transaction to be
conducted thereafter under the joint control of all sellers. Failure to respond
within such thirty (30)-day period shall be deemed a declination of any right to
participate in such transaction, provided that such transaction is fully closed
and consummated within ninety (90) days after the expiration of such thirty
(30)-day period, and the terms of the actual transaction are materially no more
favorable to the sellers than those set forth in the notice to Medtronic. If the
transaction is not fully closed and consummated within ninety (90) days of the
expiration of such thirty (30)-day period, or if the terms of the actual
transaction are more favorable to the sellers than those set forth in the notice
to Medtronic, then such Shareholder(s) shall again notify Medtronic of such
proposed transaction and comply anew with the provisions of this Section.
3.3 EXCEPTIONS. The following sales, transfers or other disposals of
Capital Stock shall not be subject to the right of co-sale set forth in Section
3.2:
(a) sales of Capital Stock by any Shareholder in a bona fide
public offering pursuant to a registration statement filed with the Securities
and Exchange Commission;
(b) sales of Capital Stock by any Shareholder in a market
transaction in a bona fide public market pursuant to Rule 144 (or any successor
rule) promulgated under the Securities Act;
(c) transfers of Capital Stock by any Shareholder to a member
of his immediate family or a trust for the benefit of the Shareholder or any
such immediate family member, so long as the transferee agrees to be bound by
the terms, conditions and stock transfer restrictions contained in this
Agreement;
(d) transfers by will or the laws of descent and distribution;
and
Page -6-
(e) sales of up to 10,000 shares of Common Stock (subject to
adjustment in the event of any stock splits, stock dividends or other
recapitalization of the Common Stock) per Shareholder in any consecutive
12-month period.
3.4 RIGHT OF FIRST REFUSAL ON NEW ISSUANCES.
(a) The Company hereby grants to Medtronic a right of first
refusal to purchase all or part of its pro rata share of any New Securities (as
defined below) which the Company may, from time to time, propose to sell and
issue, subject to the terms and conditions set forth below. Medtronic's pro rata
share, for purposes of this Section 3.4, shall equal a fraction, the numerator
of which is the number of issued and outstanding shares of Common Stock then
held by Medtronic and the denominator of which is the total number of shares of
Common Stock then issued and outstanding.
(b) "New Securities" shall mean any Capital Stock whether now
authorized or not, and rights, options or warrants to purchase Capital Stock,
and securities of any type whatsoever which are, or may become, convertible into
Capital Stock; provided, however, that the term "New Securities" does not
include (i) the Warrant Shares; (ii) up to 150,000 shares of Common Stock
(subject to adjustment in the event of any stock splits, stock dividends or
other recapitalization of the Common Stock) issuable upon exercise of the
Warrants dated between March 1993 and October 1993 issued in connection with
private placements of Common Stock; (iii) up to 333,333 shares of Common Stock
(subject to adjustment in the event of any stock splits, stock dividends or
other recapitalization of the Common Stock) issuable upon exercise at $1.50 per
shares of an option granted to one investor in the Company's November 1, 1993
private placement of Common Stock; (iv) securities offered to the public
pursuant to a Registration Statement (as described in Article 7); (v) securities
issued for the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets of such corporation or another
reorganization resulting in the ownership by the Company of not less than a
majority of the voting power of such corporation; (vi) options to purchase not
more than 500,000 shares of Common Stock (subject to adjustment in the event of
any stock splits, stock dividends or other recapitalization of the Common Stock)
issued to directors or employees of or consultants to the Company pursuant to
the Company's Stock Option Incentive Plan of 1992 and, the Common Stock issuable
upon exercise thereof); or (vii) securities issued as a result of any stock
split, stock dividend or reclassification of Common Stock, distributable on a
pro rata basis to all holders of Common Stock.
(c) In the event the Company intends to issue New Securities,
it shall give Medtronic written notice of such intention, describing the type of
New Securities to be issued, the price thereof and the general terms upon which
the Company proposes to effect such issuance. Medtronic shall have thirty (30)
days from the date of receipt of such notice to agree to purchase all or part of
its pro rata share of such New Securities for the price and upon the general
terms and conditions specified in the Company's notice by giving written notice
to the Company stating the quantity of New Securities to be so purchased.
(d) In the event Medtronic fails to exercise the foregoing
right of first refusal with respect to any New Securities within such thirty
(30)-day period, the Company
Page -7-
may within ninety (90) days thereafter sell any or all of such New Securities
not agreed to be purchased by Medtronic, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the notice given to
Medtronic pursuant to paragraph (c) above. In the event the Company has not sold
such New Securities within such ninety (90)- day period, the Company shall not
thereafter issue or sell any New Securities without first offering such New
Securities to Medtronic in the manner provided above.
3.5 LEGENDS AND STOP TRANSFER ORDERS. The Company and the Shareholders
hereby agree that the following legend will promptly be added to each of the
certificates representing shares of Capital Stock heretofore or hereafter issued
to any Shareholder or acquired by any Shareholder, such legend to be and remain
upon such certificates, as well as any re-issuance thereof, until termination of
Medtronic's rights pursuant to Section 3.6 below:
"The securities represented by this certificate are subject to
an Investment Agreement dated April 29, 1994 among this
corporation, the registered owner of such securities, and
certain other persons listed in such agreement, and may not be
sold, transferred or otherwise disposed of except in
compliance with the terms of such agreement, a copy of which
is on file in the principal office of this corporation."
3.6 TERMINATION. Medtronic's rights under Section 3.1 through 3.5 shall
terminate on the earlier of,
(i) the three-year anniversary of this Agreement; and
(ii) the closing of the sale of the Company's Common
Stock in a firm commitment, underwritten public offering
registered under the Securities Act at a public offering price
of not less than $5.00 per share (prior to underwriter
commissions and expenses) of Common Stock (subject to
adjustment in the event of any stock splits, stock dividends
or other recapitalization of the Common Stock) and with
aggregate gross proceeds to the Company of not less than
$7,500,000 (after deduction of underwriter commissions and the
Company's expenses relating to the issuance, including without
limitation fees of the Company's counsel).
3.7 RIGHT TO DESIGNATE BOARD MEMBER.
(a) So long as Medtronic owns at least 100,000 issued and
outstanding shares of Common Stock (subject to adjustment for any stock splits,
stock dividends or other recapitalization of the Common Stock), the Company
shall permit Medtronic to designate one representative to the Company's Board of
Directors (the "Board") as a member of the Board or, if Medtronic so elects in
Medtronic's discretion, as a non-voting observer to the Board. Such designee may
be removed or replaced at any time by Medtronic as deemed reasonably necessary
or appropriate by Medtronic. Medtronic's designee shall receive all notices,
documents, and other information in the same time and manner as such information
is
Page -8-
supplied to members of the Board. The Company shall make reasonable efforts to
permit Medtronic's designee to participate or observe Board meetings by
telephone if such designee is unable to attend in person.
(b) Unless Medtronic elects to have its designee act as a
non-voting observer to the Board, the Board agrees to (i) initially expand the
number of members of the Board and elect Medtronic's designee to such vacancy,
and (ii) in connection with each meeting, or each written consent in lieu of a
meeting, of the Company's shareholders at which the Board is elected, to
nominate Medtronic's designee for election to the Board and to use its best
efforts to cause Medtronic's designee to be so elected.
(c) In any and all elections of directors of the Company
(whether at a meeting or by written consent in lieu of a meeting), each
Shareholder shall vote or cause to be voted all "Shares" (as defined below)
owned by him, or over which he has voting control, and otherwise use his
respective best efforts, so as to elect Medtronic's designee to the Board. The
Shareholders shall not vote to remove Medtronic's designee from the Board. For
purposes of this Section, "Shares" shall mean and include any and all shares of
Common Stock and/or shares of capital stock of the Company, by whatever name
called, which carry voting rights (including voting rights which arise by reason
of default) and shall include any shares now owned or subsequently acquired by a
Shareholder, however acquired, including without limitation stock splits and
stock dividends. Any transferee to whom Shares are transferred by a Shareholder,
whether voluntarily or by operation of law, shall be bound by the voting
obligations imposed upon the transferor under this Agreement, and shall be
entitled to the rights granted to the transferor under this Agreement, to the
same extent as if such transferee were a Shareholder hereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Medtronic as follows:
4.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so licensed
or qualified could have material adverse effect upon the Company or its
business. The Company has the corporate power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted, to execute, deliver and perform this Agreement, and to issue, sell
and deliver the Purchased Shares, the Warrant and the Warrant Shares. The
Company has no subsidiaries.
Page -9-
4.2 AUTHORIZATION OF AGREEMENT, ETC.
(a) The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder, and the
issuance, sale and delivery of the Purchased Shares, the Warrant and the Warrant
Shares have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or the By-laws of the Company, as
amended, or any provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(b) The Purchased Shares have been duly authorized and validly
issued, and are fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof and are free and clear of
all Liens imposed by or through the Company. The Warrant Shares have been duly
reserved for issuance and, when so issued, will be duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
Liens imposed by or through the Company. Neither the issuance, sale or delivery
of the Purchased Shares, the Warrant, or the Warrant Shares is subject to any
preemptive right of stockholders of the Company or to any right of first refusal
or other right in favor of any person that has not been complied with or duly
waived.
4.3 VALIDITY. This Agreement and the Warrant have been duly executed
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms, subject,
as to the enforcement of remedies, to the discretion of the courts in awarding
equitable relief and to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally.
4.4 FINANCIAL STATEMENTS. The Company has furnished to Medtronic the
audited balance sheet of the Company as of December 31, 1993 (the "Balance
Sheet") and the related statements of income, stockholders' equity and cash
flows of the Company for the year then ended. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial position of the Company
as of the dates thereof and the results of its operations for the periods then
ended. Since the date of the Balance Sheet, (i) there has been no change in the
assets, liabilities or financial condition of the Company from that reflected in
the Balance Sheet except for changes in the ordinary course of business which in
the aggregate have not been materially adverse and (ii) none of the business,
prospects, financial condition, operations, property or affairs of the Company
has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against.
4.5 LITIGATION; COMPLIANCE WITH LAW. There is no (i) action, suit,
claim, proceeding or investigation pending or, to the best of the Company's
knowledge,
Page -10-
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise, or (iii) governmental inquiry pending or, to the best
of the Company's knowledge, threatened against or affecting the Company
(including without limitation any inquiry as to the qualification of the Company
to hold or receive any license or permit), and there is no basis for any of the
foregoing. The Company has complied with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services. The Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted, and has no reason
to believe that the Company will not obtain the same with respect to its
business as proposed to be conducted, which, if not obtained, would have, either
individually or in the aggregate, a material adverse effect on the Company.
4.6 PROPRIETARY INFORMATION OF THIRD PARTIES. To the best of the
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his employment, non-competition or
nondisclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees.
4.7 TITLE TO PROPERTIES. The Company has good and marketable title to
its properties and assets reflected on the Balance Sheet or acquired by them
since the date of the Balance Sheet (other than properties and assets disposed
of in the ordinary course of business since the date of the Balance Sheet), and
all such properties and assets are free and clear of all Liens, except for liens
for or current taxes not yet due and payable and minor imperfections of title,
if any, not material in nature or amount and not materially detracting from the
value or impairing the use of the property subject thereto or impairing the
operations or proposed operations of the Company.
4.8 LEASEHOLD INTERESTS. Each lease or agreement to which the Company
is a party under which it is a lessee of any property, real or personal, is a
valid and existing agreement without any default of the Company thereunder and,
to the best of the Company's knowledge, without any default thereunder of any
other party thereto. No event has occurred and is continuing which, with due
notice or lapse of time or both, would constitute a default or event of default
by the Company under any such lease or agreement or, to the best of the
Company's knowledge, by any other party thereto.
4.9 TAXES. The Company has filed all tax returns, federal, state,
county and local, required to be filed by it, and the Company has paid all taxes
shown to be due by such returns as well as all other taxes, assessments and
governmental charges which have become due or payable, including without
limitation all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. All such taxes with respect to
which the Company has become obligated pursuant to elections made by the Company
in accordance with generally accepted practice have been paid and adequate
Page -11-
reserves have been established for all taxes accrued but not yet payable. The
federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened.
4.10 NO DEFAULTS. The Company, and to the best of the Company's
knowledge, each other party thereto, have in all material respects performed all
the obligations required to be performed by them to date, have received no
notice of default and are not in default (with due notice or lapse of time or
both) under any lease, agreement or contract now in effect to which the Company
is a party or by which it or its property may be bound. The Company has no
present expectation or intention of not fully performing all its obligations
under each such lease, contract or other agreement, and the Company has no
knowledge of any breach or anticipated breach by the other party to any contract
or commitment to which the Company is a party. The Company is in full compliance
with all of the terms and provisions of its Articles of Incorporation and
By-laws, as amended.
4.11 PATENTS, TRADEMARKS, ETC. To the best of the Company's knowledge,
the Company owns or possesses licenses or other rights to use all Intellectual
Property necessary or desirable to the conduct of its business as conducted and
as proposed to be conducted, and no claim is pending or threatened to the effect
that the operations of the Company infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property, and there is no
basis for any such claim. No claim is pending or threatened to the effect that
any such Intellectual Property owned or licensed by the Company, or which the
Company otherwise has the right to use, is invalid or unenforceable by the
Company, and there is no basis for any such claim (whether or not pending or
threatened). To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential.
4.12 BROKERS. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.13 TRANSACTIONS WITH AFFILIATES. No director, officer, employee or
stockholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm.
4.14 TERMS NO LESS FAVORABLE. The terms and provisions upon which
Medtronic is purchasing the Purchased Shares are no less favorable to Medtronic
than the terms and provisions upon which any other person has purchased Common
Stock pursuant to (i) the offering described in the November 1, 1993 Private
Placement Memorandum or (ii) any subsequent offering of Common Stock.
Page -12-
4.15 DISCLOSURE. Neither this Agreement, the Private Placement
Memorandum dated November 1, 1993, nor any other statements, documents,
certificates or other items prepared or supplied by the Company with respect to
the transactions contemplated hereby contains an untrue statement of a material
fact or omits a material fact necessary to make the statements contained therein
not misleading. There is no fact which the Company has not disclosed to
Medtronic and their counsel in writing and of which the Company is aware which
materially and adversely affects or could materially and adversely affect the
business, prospects, financial condition, operations, property or affairs of the
Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MEDTRONIC
Medtronic represents and warrants to the Company as follows:
5.1 PURCHASE OF SHARES. Medtronic is an "accredited investor" within
the meaning of Rule 501 under the Securities Act and was not organized for the
specific purpose of acquiring the Purchased Shares, the Warrant, or the Warrant
Shares. Medtronic has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of Medtronic's investment in
the Company and Medtronic is able financially to bear the risks thereof.
Medtronic has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management. The Purchased Shares and
the Warrant and, if purchased, the Warrant Shares, are being acquired for
Medtronic's own account for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof. Medtronic understands that
(i) the Purchased Shares, the Warrant, and the Warrant Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act,
(ii) the Purchased Shares, the Warrant, and the Warrant Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Purchased Shares,
the Warrant, and the Warrant Shares will bear a legend to such effect and (iv)
the Company will make a notation on its transfer books to such effect.
5.2 CORPORATE AUTHORITY. The execution, delivery and performance by
Medtronic of this Agreement and the transactions contemplated hereby has been
duly and validly authorized and approved by all requisite corporate action on
the part of Medtronic, and the execution and the delivery of this Agreement and
consummation of the transactions contemplated hereby and compliance with and
fulfillment of the terms and provisions hereof will not (i) conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under the Articles of Incorporation or Bylaws of Medtronic, or (ii)
require any affirmative approval, consent, authorization or other order or
action of any court, governmental authority, regulatory body, creditor or any
other person. Medtronic has all requisite power and authority to do and perform
all acts and things required to be done by it under this Agreement and the
agreements contemplated hereby. This Agreement constitutes the valid and binding
obligation of Medtronic enforceable in accordance with their terms
Page -13-
except as may be limited by laws affecting creditors' rights generally or by
judicial limitations on the right to specific performance.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
6.1 FINANCIAL STATEMENTS, REPORTS, ETC. So long as Medtronic is the
legal or beneficial owner of at least 50,000 issued and outstanding shares of
Common Stock (adjusted for any stock splits, stock dividends or other
recapitalization of the Common Stock), the Company shall famish to Medtronic.
(a) within ninety (90) days after the end of each fiscal year
of the Company, a balance sheet of the Company as of the end of such fiscal year
and the related consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with generally
accepted accounting principles and certified by a firm of independent public
accountants selected by the Board of Directors of the Company;
(b) within forty-five (45) days after the end of each fiscal
quarter in each fiscal year (other than the last fiscal quarter in each fiscal
year) a balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Financial Officer of the Company, such
consolidated balance sheet to be as of the end of such fiscal quarter and such
consolidated statements of income, stockholders' equity and cash flows to be for
such fiscal quarter and for the period from the beginning of the fiscal year to
the end of such fiscal quarter, in each case with comparative statements for the
corresponding period in the prior fiscal year;
(c) at the time of delivery of each quarterly statement
pursuant to Section 6.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) within thirty (30) days prior to the start of each fiscal
year, consolidated capital and operating expense budgets, cash flow projections
and income and loss projections for the Company and its subsidiaries in respect
of such fiscal year, all itemized in reasonable detail, and, promptly after
preparation, any significant revisions to any of the foregoing;
(e) promptly after the commencement thereof, notice of all
actions, suits, claims, proceedings, investigations and inquiries that could
materially adversely affect the Company;
(f) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that the Company
sends or makes available to its
Page -14-
stockholders or directors or files with the SEC, the NASD, or any national
securities exchange; and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and any subsidiaries as such Medtronic reasonably may
request.
6.2 RESERVE FOR WARRANT SHARES. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
such number of its duly authorized shares of Common Stock as shall be sufficient
to effect issuance of the Warrant Shares and otherwise to comply with the terms
of this Agreement.
6.3 INSPECTION, CONSULTATION AND ADVICE. The Company shall permit and
cause any Affiliates of the Company to permit Medtronic and such persons as it
may designate, at such Medtronic's expense, to visit and inspect any of the
properties of the Company and its Affiliates, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its Affiliates with their officers, employees and public accountants
(and the Company hereby authorizes said accountants to discuss with Medtronic
and such designees such affairs, finances and accounts), and consult with and
advise the management of the Company and its Affiliates as to their affairs,
finances and accounts, all at reasonable times and upon reasonable notice. All
such information shall be subject to Section 9.1 hereof.
6.4 TRANSACTIONS WITH AFFILIATES. Except for transactions contemplated
by this Agreement or as otherwise approved by the Board of Directors, neither
the Company nor any of its subsidiaries shall enter into any transaction with
any director, officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the Company or any of
its subsidiaries, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, except for transactions
on customary terms related to such person's employment.
6.5 BOARD OF DIRECTORS MEETINGS. The Company shall use its best efforts
to ensure that meetings of its Board of Directors are held at least four (4)
times each year and at least once each quarter.
6.6 PROPRIETARY INFORMATION AND EMPLOYEE INVENTIONS AGREEMENTS. The
Company and the Shareholders shall use their best efforts to obtain
confidentiality and assignment of inventions agreements from all officers, key
employees and other employees, consultants or independent contractors who will
have access to confidential information of the Company.
6.7 COMPLIANCE WITH LAWS. The Company shall comply, and cause each
Affiliates to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
Page -15-
6.8 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall keep,
and cause each Affiliate to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
6.9 USE OF MEDTRONIC NAME. The Company shall not, except with the
written consent of Medtronic, use Medtronic's name or disclose Medtronic's
status as a shareholder except to the extent the Company is required to disclose
the list of all of the Company's shareholders.
ARTICLE 7
REGISTRATION RIGHTS
7.1 REQUESTED REGISTRATION.
(a) Demand. If at any time after the closing of the Company's
first underwritten public offering of Common Stock pursuant to a Registration
Statement and prior to the five (5)-year anniversary of the date of this
Agreement, the Company shall receive from Initiating Holders a written request
that the Company effect any registration, qualification or compliance with
respect to a proposed sale of Registrable Securities, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other
Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance
(including, without limitation, appropriate qualification
under applicable Blue Sky or other state securities laws and
appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental
requirements or regulations) as may be so requested and would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by
the Company within 20 days after receipt of such written
notice from the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 7.1:
(A) in any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification or compliance unless the Company is already
subject
Page -16-
to service in such jurisdiction and except as may be required
by the Securities Act;
(B) during the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of,
and ending on the date ninety (90) days immediately following
the effective date of, any registration statement pertaining
to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(C) after the Company has effected one such
registration pursuant to this Section 7.1(a), and such
registration has been declared or ordered effective; or
(D) with respect to the Registrable Securities owned
by any particular Holder if, in the opinion of counsel
satisfactory to the Company and the particular Holder, the
sale of all Registrable Securities owned by such Holder may
then be made in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and
from the comparable requirements of the applicable state
securities laws so that any transfer restrictions may be
removed upon the consummation of such sale.
Subject to the foregoing clauses (A) through (D), the Company shall file a
Registration Statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 7.1 is for a registered public offering involving an underwriting on a
firm basis, the Company shall so advise the Holders as part of the notice given
pursuant to Section 7.I(a)(i). In such event, the right of any Holder to
registration pursuant to Section 7.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 7.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders but subject to the Company's
approval, which approval shall not be unreasonably withheld. Notwithstanding any
other provision of this Section 7.1, if the managing underwriter advises the
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the number of shares of Common Stock which may
be included in the underwriting shall be allocated among all such Holders in
proportion (as nearly as practicable) to the amount of Registrable Shares of the
Company owned by each such Holder. If the managing underwriter does not limit
the number of Registrable Shares to be underwritten, the Company or other
holders of securities of the Company who have registration rights similar to
those set forth in Section 7.3 hereof may include Common Stock
Page -17-
for their respective accounts in such registration if the managing underwriter
states that such inclusion would not adversely affect the offering of
Registrable Shares for any reason and if the number of Registrable Shares which
would otherwise have been included in such registration and underwriting will
not thereby be limited or reduced.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of such registration, or such other
shorter period of time as the underwriters may require.
7.2 "PIGGY-BACK" REGISTRATION.
(a) Notice of Registration. If at any time or from time to time prior
to the five (5)-year anniversary of the date of this Agreement the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders, other than (i) a registration relating
solely to employee benefit plans, or (ii) a registration relating solely to a
Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under Blue Sky laws or other compliance) and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
within twenty (20) days after receipt of such written notice
from the Company by any Holder.
(b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting on a firm basis,
the Company shall so advise the Holders as part of the written notice given
pursuant to Section 7.2(a)(i). In such event, the right of any Holder to
registration pursuant to Section 7.2 shall be conditioned upon such Holder's
participation in such underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and any other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 7.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration. The Company shall so
advise all Holders and other holders distributing their securities through such
underwriting and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders and such other holders having registration rights granted prior to the
date of this Agreement in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders and securities
with registration rights held by such other holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder or holder to the nearest 100 shares.
Page -18-
If any Holder or holder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 7.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
(d) State Qualification. The Company shall use its best efforts to
qualify the sale of Registrable Securities to be included in any registration
pursuant to this Section 7.2 under the Blue Sky or other applicable laws of such
jurisdictions as a Holder may reasonably request.
7.3 REGISTRATION ON FORM S-3. If prior to the five (5)-year anniversary
of the date of this Agreement any Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for the sale of shares of the Registrable Securities, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such sales, the Company shall use its best efforts to cause such Registrable
Securities to be registered for the offering on such form and to cause such
Registrable Securities to be qualified in such jurisdictions as the Holder or
Holders may reasonably request; provided, however, that the Company shall not be
required to effect more than one registration pursuant to this Section 7.3 in
any six-month period. The substantive provisions of Section 7.1(b) shall be
applicable to each registration initiated under this Section 7.3.
7.4 LIMITATIONS ON ADDITIONAL REGISTRATION RIGHTS. From and after the
date hereof, the Company shall not enter into any agreement granting any holder
or prospective holder of any securities of the Company registration rights with
respect to such securities unless such new registration rights, including
standoff obligations, are subordinate to the registration rights granted Holders
hereunder.
7.5 EXPENSES OF REGISTRATION.
(a) All Registration Expenses incurred in connection with any
registration pursuant to Sections 7.1 or 7.2 shall be home by the Company;
provided that the Initiating Holders shall reimburse the Company for up to
$30,000 of the Registration Expenses reasonably incurred by the Company in a
registration pursuant to Section 7.1(a). Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of such securities pro rata on the basis of the number of
shares so registered.
(b) All Registration Expenses and Selling Expenses reasonably
incurred in connection with a registration pursuant to Section 7.3 shall be
borne pro rata by the Holder
Page -19-
or Holders requesting the registration on Form S-3 according to the number of
Registrable Securities included in such registration.
7.6 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Article 7,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion thereof
At its expense the Company will:
(a) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective until the distribution
described in the Registration Statement has been completed, but in no event
shall the Company be obligated to maintain the effectiveness of such
registration statement for more than 180 days after the effective date; and
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for the period described in subsection (a)
above; and
(c) as expeditiously as possible furnish to each selling
Holder such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities owned by the selling Holder.
If the Company has delivered preliminary or final prospectuses to the
selling Holders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly notify
the selling Stockholders and, if requested, the selling Holders shall
immediately cease making offers of Registrable Securities and return all
prospectuses to the Company. The Company shall promptly provide the selling
Holders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Holders shall be free to resume making offers of the
Registrable Securities.
7.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Article 7, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in
Page -20-
light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who reasonably
incurred in connection with the investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect hereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such other Holders, such directors, officers, persons, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited in an amount
equal to the initial public offering price of the shares sold by such Holder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Each party entitled to indemnification under this Section
7.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 7.7 unless
Page -21-
the failure to give such notice is materially prejudiced to an Indemnifying
Party's ability to defend such action; and provided further, that the
Indemnifying Party shall not assume the defense for matters as to which there is
a conflict of interest or separate and different defenses in which case the
Indemnified Party's costs of defense including reasonable fees of separate legal
counsel shall be borne by the Indemnifying Party. No Indemnifying Party in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
7.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Article 7.
7.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may at any time permit the sale of
the Registrable Securities to the public without registration, after such time
as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(i) make and keep public information available, as
those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date that the
Company becomes subject to the reporting requirements of the
Securities Act or the Exchange Act;
(ii) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting
requirements); and
(iii) so long as Medtronic owns any Registrable
Securities, furnish to Medtronic forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 (at any time after
ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of
its securities to the general public) and of the Securities
Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other
information in the possession of or reasonably obtainable by
the Company as Medtronic may reasonably request in availing
itself of any rule or regulation of the SEC allowing Medtronic
to sell any such securities without registration.
Page -22-
7.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted Medtronic under Sections 7.1, 7.2 and 7.3 may be
assigned, in whole or in part, to a subsidiary of Medtronic or to such business
organization which shall succeed to substantially all the assets and business of
Medtronic, or to another transferee or assignee in connection with any transfer
or assignment of Registrable Securities by Medtronic provided that such transfer
may otherwise be effected in accordance with applicable securities laws;
provided that, Medtronic shall not, without the Company's written consent,
assign its registration rights under Section 7.1, 7.2 or 7.3 to any person or
entity who is, at the time of such proposed assignment, a competitor of the
Company with respect to the Company's then existing or planned products.
7.11 MERGER OR REORGANIZATION. Without limitation of the Company's
other rights or obligations under this Agreement, the Company shall not,
directly or indirectly, enter into any merger, consolidation or reorganization
(other than a merger, consolidation or reorganization in which the Company shall
be the surviving corporation) unless the proposed surviving corporation shall,
prior to the proposed merger, consolidation or reorganization, agree in writing
to assume the obligations of the Company under this Article 7; in the event of
such assumption, "Registrable Securities" shall refer to the securities which
Holders would be entitled to receive in exchange for Registrable Securities in
such merger, consolidation or reorganization.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION OF MEDTRONIC. The Company shall indemnify, defend
and hold harmless Medtronic and each of its subsidiaries, officers, directors
and stockholders (Medtronic and such other indemnitees referred to in this
Article 8 as "Medtronic") from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of any breach of any representation, warranty,
covenant or agreement of the Company contained in this Agreement or any
agreement, certificate or document executed and delivered by the Company
pursuant hereto or in connection with any of the transactions contemplated by
this Agreement.
8.2 INDEMNIFICATION OF THE COMPANY AND THE SHAREHOLDERS. Medtronic
shall indemnify, defend and hold harmless the Company and each of its
subsidiaries, officers, directors and stockholders (the Company and such other
indemnitees referred to in this Article 8 as "the Company") from and against and
in respect of any and an demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, interest and penalties, costs and
expenses (including, without limitation reasonable legal fees and disbursements
incurred in connection therewith and in seeking indemnification therefor,
Page -23-
and any amounts or expenses required to be paid or incurred in connection with
any action, suit, proceeding, claim, appeal, demand, assessment or judgment),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of any breach of any representation, warranty,
covenant or agreement of Medtronic contained in this Agreement or any agreement,
certificate or document executed and delivered by Medtronic pursuant hereto or
in connection with the transactions contemplated by this Agreement.
8.3 THIRD-PARTY CLAIMS. If a claim by a third party is made against an
indemnified party and if the indemnified party intends to seek indemnity with
respect thereto under this Article 8, such indemnified party shall promptly
notify the indemnifying party of such claim; provided, however, that failure to
give timely notice shall not affect the rights of the indemnified party so long
as the failure to give timely notice does not adversely affect the indemnifying
party's ability to defend such claim against a third party. The indemnified
party shall not settle such claim without the consent of the indemnifying party,
which consent shall not be unreasonably withheld or delayed. If the indemnifying
party acknowledges in writing its indemnity obligations for Indemnifiable Losses
resulting therefrom, the indemnifying party may participate at its own cost and
expense in the settlement or defense of any claim for which indemnification is
sought; provided that such settlement or defense shall be controlled by the
indemnified party.
8.4 COOPERATION AS TO INDEMNIFIED LIABILITY. Each party hereto shall
cooperate fully with the other parties with respect to access to books, records,
or other documentation within such party's control, if deemed reasonably
necessary or appropriate by any party in the defense of any claim which may give
rise to indemnification hereunder.
ARTICLE 9
OTHER PROVISIONS
9.1 NON-DISCLOSURE. Each party agrees not to disclose or use (except as
permitted or required for performance by the party receiving such Confidential
Information of its rights or duties hereunder) any Confidential Information of
the other party obtained during the during the term of this Agreement until the
expiration of three (3) years after the date of this Agreement. Each party
further agrees to take appropriate measures to prevent any such prohibited
disclosure by its present and future employees, officers, agents, subsidiaries,
or consultants during such period.
9.2 FURTHER ASSURANCES. At such time and from time to time on and after
the date hereof upon request by Medtronic, the Company and the Shareholders will
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, certificates and assurances
that may be required for the better conveying, transferring, assigning,
delivering, assuring and conforming to Medtronic, or to its respective
successors and assigns, all of the Purchased Shares and the Warrants or to
otherwise carry out the purposes of this Agreement.
9.3 COMPLETE AGREEMENT. The Schedules and Exhibits to this Agreement
shall be construed as an integral part of this Agreement to the same extent as
if they had
Page -24-
been set forth verbatim herein. This Agreement and the Schedules and Exhibits
hereto constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto.
9.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, covenants and agreements contained herein shall
survive the purchase of the Purchased Shares and remain in full force and
effect. No independent investigation of the Company by Medtronic, its counsel,
or any of its agents or employees shall in any way limit or restrict the scope
of the representations and warranties made by the Company in this Agreement.
9.5 WAIVER, DISCHARGE, AMENDMENT, ETC. The failure of any party hereto
to enforce at any time any of the provisions of this Agreement shall not, absent
an express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of the party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach. This Agreement may be amended by the Company, the
Shareholders and Medtronic, by mutual action approved by their respective Boards
of Directors or their respective officers authorized by such Board of Directors,
at any time prior to the Closing Date. Any amendment to this Agreement shall be
in writing and signed by the Company, the Shareholders and Medtronic.
9.6 NOTICES. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered personally or by
telecopy (receipt confirmed) to such party (or, in the case of an entity, to an
executive officer of such party) or shall be sent by a reputable express
delivery service or by certified mail, postage prepaid with return receipt
requested, addressed as follows:
if to Medtronic to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Attention: Michael D. Ellwein, Vice President Corporate
Development and Associate General Counsel
FAX (612) 572-5404
if to the Company to:
Surviva Link Corporation
2975 - 84th Lane N.E.
Minneapolis, Minnesota 55449
Attention: Byron Gilman, Chief Executive Officer
FAX (612) 780-2786
Page -25-
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by telecopy) or on the day shown on the return
receipt (if delivered by mail or delivery service).
9.7 PUBLIC ANNOUNCEMENT. In the event any party proposes to issue any
press release or public announcement concerning any provisions of this Agreement
or the transactions contemplated hereby, such party shall so advise the other
parties hereto, and the parties shall thereafter use their best efforts to cause
a mutually agreeable release or announcement to be issued. Neither party will
publicly disclose or divulge any provisions of this Agreement or the
transactions contemplated hereby without the other parties' written consent,
except as may be required by applicable law or stock exchange regulation, and
except for communications to employees.
9.8 EXPENSES. The Company and Medtronic shall each pay their own
expenses incident to this Agreement and the preparation for, and consummation
of, the transactions provided for herein.
9.9 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Minnesota, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws.
9.10 TITLES AND HEADINGS; CONSTRUCTION. The titles and headings to the
Articles and Sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement. This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.
9.11 BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
9.13 PARTIES IN INTEREST. All representations, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting
Medtronic shall inure to the benefit of any and all subsequent holders from time
to time of the Purchased Shares or the Warrant Shares.
Page -26-
IN WITNESS WHEREOF, each of the parties has caused this Investment
Agreement to be executed in the manner appropriate for each, and to be dated as
of the date first abovewritten.
SURVIVA LINK CORPORATION
(Corporate Seal) By: /s/ Byron L. Gilman
Its: Chief Executive Officer
MEDTRONIC, INC.
(No Corporate Seal) By: /s/ Michael D. Ellwein
Its: Vice President
/s/ Byron L. Gilman
/s/ Karl J.F. Kroll
/s/ Kenneth C. Maki
/s/ Mark W. Kroll
Page -27-
THIS WARRANT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE REOFFERED OR SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO (1) REGISTRATION OR
(2) AN OPINION OF COUNSEL FOR THE COMPANY OR OTHER COUNSEL REASONABLY ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
To Purchase 75,000
Shares of Common Stock of
SURVIVA LINK CORPORATION
April 29, 1994
Surviva Link Corporation, a Minnesota corporation (the "Company"), for
value received, hereby certifies that Medtronic, Inc., a Minnesota corporation
("Medtronic"), or its registered assigns (the "Holder"), is entitled, subject to
the terms set forth below, upon exercise of this Warrant to purchase from the
Company, at any time or from time to time on or after the date of issuance and
on or before 5:00 p.m. (Minneapolis, Minnesota time) on April 29, 1999, up to
seventy-five thousand (75,000) shares of Common Stock, no par value, of the
Company ("Common Stock"), at a purchase price per share of one dollar and fifty
cents ($1.50) (subject to adjustment in accordance with Section 4 hereof). The
shares issuable upon exercise or conversion of this Warrant, and the purchase
price per share, each as adjusted from time to time pursuant to the provisions
of this Warrant, are hereinafter referred to as the "Warrant Shares" and the
"Exercise Price," respectively.
This Warrant is being issued in connection with the execution and
delivery of an Investment Agreement dated as of the date hereof between the
Company and Medtronic (the "Investment Agreement").
This Warrant is further subject to the following provisions, terms and
conditions:
1. EXERCISE OF WARRANT. This Warrant may be exercised by the Holder, in
whole or in part (but not as to any fraction of a share of Common Stock), by
surrendering this Warrant, with the Exercise Form attached hereto as Exhibit A
filled-in and duly executed by such Holder or by such Holder's duly authorized
attorney, to the Company at its principal office accompanied by payment of the
Exercise Price in the form of a cashier's or certified check or wire transfer in
the amount of the Exercise Price multiplied by the number of shares as to which
the Warrant is being exercised.
Page -1-
2. CONVERSION OF WARRANT.
(a) The Holder shall also have the right (the "Conversion Right") to
convert all or any portion of this Warrant into such number of shares (rounded
to the nearest whole share) of Company Common Stock equal to the quotient
obtained by dividing (i) the "Aggregate Warrant Spread" as of the close of
business on the date the Conversion Right is exercised, by (ii) Market Price of
the Common Stock as of the close of business on the date the Conversion Right is
exercised, The Conversion Right shall be exercisable at any time or from time to
time prior to expiration of this Warrant by surrendering this Warrant with the
Conversion Form attached hereto as Exhibit B filled-in and duly executed by such
Holder or by such Holder's duly authorized attorney to the Company at its
principal office,
(b) For purposes of this Section 2, the "Aggregate Warrant Spread" of
all or a portion of this Warrant as of a particular date shall equal (i) the
Market Price of the Common Stock multiplied by the number of shares of Common
Stock purchasable upon exercise of all or such portion of this Warrant on such
date, minus (ii) the Exercise Price multiplied by the number of shares of Common
Stock purchasable upon exercise of all or such portion of this Warrant on such
date. For purposes of this Section 2, the "Market Price of the Common Stock" as
of a particular date shall equal: (i) if the Common Stock is traded on an
exchange or is quoted on the Nasdaq National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) trading days
immediately preceding such date, or (ii) if the Common Stock is not traded on an
exchange or on the Nasdaq National Market but is traded on the Nasdaq Small-Cap
Market, then the average of the mid-points between the closing bid and asked
prices reported for the ten (10) trading days immediately preceding such date,
or (iii) if the Common Stock is not traded on an exchange, the Nasdaq National
Market, or the Nasdaq Small-Cap Market but is traded in the local
over-the-counter market, then the average of the mid-points between highest bid
and lowest asked quotations for each of the ten (10) trading days immediately
preceding such date.
3. Effective Date of Exercise or Conversion. Each exercise or
conversion of this Warrant shall be deemed effective as of the close of business
on the day on which this Warrant is surrendered to the Company as provided in
Section 1 or Section 2(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise or conversion shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates. Within ten (10)
days after the exercise or conversion of this Warrant in full or in part, the
Company will, at its expense, cause to be issued in the name of and delivered to
the Holder or such other person as the Holder may (upon payment by such Holder
of any applicable transfer taxes) direct: (i) a certificate or certificates for
the number of full Warrant Shares to which such Holder is entitled upon such
exercise or conversion, and (ii) unless this Warrant has expired, a new Warrant
or Warrants (dated the date hereof and in form identical hereto) representing
the right to purchase the remaining number of shares of Common Stock, if any,
with respect to which this Warrant has not then been exercised or converted,
Page -2-
4. ADJUSTMENTS TO EXERCISE PRICE. The above provisions are, however,
subject to the following:
(a) If the Company shall at anytime hereafter subdivide or combine the
outstanding shares of Common Stock or declare a dividend payable in Common
Stock, the Exercise Price in effect immediately prior to the subdivision,
combination or record date for such dividend payable in Common Stock shall
forthwith be proportionately increased, in the case of combination, or
decreased, in the case of subdivision or dividend payable in Common Stock, and
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be changed to the number determined by dividing the then current Exercise
Price by the Exercise Price as adjusted after the subdivision, combination, or
dividend payable in Common Stock.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall hereafter have the right to
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of the Common Stock of the Company into which
this Warrant was immediately theretofore exercisable or convertible, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock into which this Warrant was immediately
theretofore exercisable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of Holder to
the end that the provisions hereof (including without limitation provisions for
adjustments of the Exercise Price and of the number of shares purchasable upon
exercise or conversion of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the conversion hereof. The Company shall not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed to the registered holder hereof at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities or assets
into which, in accordance with the foregoing provisions, such holder may be
entitled to convert this Warrant.
(c) If the Company distributes to all holders of Common Stock any
assets (excluding ordinary cash dividends), debt securities, or any rights or
warrants to purchase debt securities, assets or other securities (including
Common Stock), the Exercise Price shall be adjusted in accordance with the
formula:
E1 = [E x (O x M) - F] / (O x M)
Page -3-
where:
E1 = the adjusted Exercise Price.
E = the current Exercise Price.
M = the average market price of Common Stock for the 30
consecutive trading days commencing 45 trading days
before the record date mentioned below.
O = the number of shares of Common Stock outstanding on
the record date mentioned below.
F = the fair market value on the record date of the
aggregate of all assets, securities, rights or
warrants distributed. The Company's Board of
Directors shall determine the fair market value in
the exercise of its reasonable judgment.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
(d) If the Company issues or sells any shares of Common Stock (other
than dividends payable in shares of Common Stock) or any options, warrants,
convertible securities and other rights to subscribe to or otherwise acquire
Common Stock (such rights referred to as "Options") for a consideration per
share less than the Exercise Price then in effect, then the Exercise Price in
effect immediately prior to such issuance or sale shall be reduced so as to
equal such per share consideration. If the Exercise Price is adjusted as the
result of the issuance of any Options, no further adjustments of such Exercise
Price shall be made at the time of the exercise or conversion of such Options.
The consideration per share for any issuance of Common Stock or Options shall
equal a fraction, the numerator of which is equal to the sum of (i) the total
amount received or receivable by the Company as consideration for such issuance,
plus (ii) the minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise, conversion or exchange of any Options included in
such issuance, and the denominator of which is equal to the total number of
shares of Common Stock issued, or issuable upon the exercise, conversion or
exchange of Options issued, in such issuance. If the Company issues or sells any
shares of Common Stock or any Options for consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the Board of
Directors of the Company.
(e) Notwithstanding Section 4(d) above, no adjustment of the Exercise
Price shall be made pursuant to Section 4(d) above as a result of issuances,
sales or grants of: (i) up to 150,000 shares of Common Stock issuable upon
exercise of the Warrants dated between March 1993 and October 1993 issued in
connection with private placements of Common
Page -4-
Stock; (ii) securities issued for the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets of such corporation
or another reorganization resulting in the ownership by the Company of not less
than a majority of the voting power of such corporation; or (iii) options to
purchase not more than 350,000 shares of Common Stock (such number being subject
to adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company) issued to directors
or employees of or consultants to the Company pursuant to the Company's Stock
Option Incentive Plan of 1992 and, the Common Stock issuable upon exercise
thereof).
(f) Upon any adjustment of the Exercise Price, then and in each such
case, the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares for which this Warrant may be exercised, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5. COMMON STOCK. As used herein, the term "Common Stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends or in the distribution,
dissolution or winding up of the Company.
6. NO VOTING RIGHTS. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a shareholder of the Company unless and
until exercised or converted pursuant to the provisions hereof.
7. EXERCISE OR TRANSFER OF WARRANT OR RESALE OF COMMON STOCK. The
holder of this Warrant, by acceptance hereof, agrees to give written notice to
the Company before transferring this Warrant, in whole or in part, or
transferring any shares of Common Stock issued upon the exercise or conversion
hereof, of such holder's intention to do so, describing briefly the manner of
any proposed transfer. Such notice shall include an opinion of counsel
reasonably satisfactory to the Company that (i) the proposed exercise or
transfer may be effected without registration or qualification under the
Securities Act of 1933, as amended (the "Act") and any applicable state
securities or blue sky laws, or (ii) the proposed exercise or transfer has been
registered under such laws. Upon delivering such notice, such Holder shall be
entitled to transfer this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered by such holder to the Company, provided that
an appropriate legend may be endorsed on the certificates for such shares
respecting restrictions upon transfer thereof necessary or advisable in the
opinion of counsel to the Company to prevent further transfer which would be in
violation of Section 5 the Act and applicable state securities or blue sky laws.
If in the opinion of counsel to the Company or other counsel reasonably
acceptable to the Company the proposed transfer or disposition of this Warrant
or the Warrant Shares described in the written notice given pursuant to this
Section 7 may not be effected without registration of this Warrant or the
Warrant Shares, the Company shall promptly give written
Page -5-
notice thereof to the Holder within 10 days after the Company receives such
notice, and such holder will limit its activities in respect to such as, in the
opinion of such counsel, is permitted by law.
8. COVENANTS OF THE COMPANY. The Company covenants and agrees that all
shares which may be issued upon conversion of this Warrant will, upon issuance,
be duly authorized and issued, fully paid, nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company further
covenants and agrees that the Company will at all times have authorized, and
reserved for the purpose of issue upon exercise hereof, a sufficient number of
shares of its Common Stock to provide for the exercise of this Warrant.
9. CERTAIN NOTICES. The Holder shall be entitled to receive from the
Company immediately upon declaration thereof and at least thirty (30) days prior
to the record date for determination of shareholders entitled thereto or to vote
thereon (or if no record date is set, prior to the event), written notice of any
event which could require an adjustment pursuant to Section 4 hereof or of the
dissolution or liquidation of the Company. All notices hereunder shall be in
writing and shall be delivered personally or by telecopy (receipt confirmed) to
such party (or, in the case of an entity, to an executive officer of such party)
or shall be sent by a reputable express delivery service or by certified mail,
postage prepaid with return receipt requested, addressed as follows:
if to Holder to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Attention: Michael D. Ellwein, Vice President Corporate
Development and Associate General Counsel
FAX (612) 572-5404
if to the Company to:
Surviva Link Corporation
2975 - 84th Lane N.E.
Minneapolis, Minnesota 55449
Attention: Byron Gilman, Chief Executive Officer
FAX (612) 780-2786
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by telecopy) or on the day shown on the return
receipt (if delivered by mail or delivery service).
Page -6-
10. REGISTRATION RIGHTS. The Holders of this Warrant and the Warrant
Shares are entitled to the benefits of all of the terms, provisions and
conditions of Article 7 of the Investment Agreement.
11. MISCELLANEOUS.
(a) No amendment, modification or waiver of any provision of this
Warrant shall be effective unless the same shall be in writing and signed by the
holder hereof.
(b) This Warrant shall be governed by and construed in accordance with
the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its authorized officers and dated as of the date stated above.
SURVIVA LINK CORPORATION
By: /s/ Byron L. Gilman
Its: Chief Executive Officer
Page -7-
Exhibit A
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the Registered Holder
in Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase, for cash pursuant to Section 1 thereof, ______ shares of
Common Stock issuable upon the exercise of such Warrant. The undersigned
requests that certificates for such shares be issued in the name of
____________________. If this Warrant is not fully exercised, the undersigned
requests that a new Warrant to purchase the balance of shares remaining
purchasable hereunder be issued in the name of
Date: __________ 199_ __________________________________________
[name of registered Holder]
__________________________________________
[signature]
__________________________________________
[street address]
__________________________________________
[city, state, zip]
__________________________________________
[Tax identification number]
Page -8-
Exhibit B
NOTICE OF CONVERSION OF WARRANT -- To Be Executed by the Registered Holder
in Order to Convert the Warrant on a
Cashless Basis
The undersigned hereby irrevocably elects to convert, on a cashless
basis, a total of __________ shares of Common Stock otherwise purchasable upon
exercise of the attached Warrant into such lesser number of shares of Common
Stock as determined by Section 2 of the Warrant. The undersigned requests that
certificates for such shares be issued in the name of
_____________________________. If this Warrant is not fully converted, the
undersigned requests that a new Warrant to purchase the balance of shares
remaining purchasable hereunder be issued in the name of
____________________________________.
Date: __________ 199_ __________________________________________
[name of registered Holder]
__________________________________________
[signature]
__________________________________________
[street address]
__________________________________________
[city, state, zip]
__________________________________________
[Tax identification number]
Page -9-
STOCK PURCHASE AGREEMENT
DATE: May 29, 1994
PARTIES: SurViva Link Corporation, a Minnesota corporation (the "Company")
_________________________________ (the "Investor")
RECITALS:
A. The Company has agreed to sell to a group of investors (the "Investor
Group") an aggregate of up to 333,333 shares of Common Stock of the
Company and Warrants for an aggregate of up to 125,000 additional shares
of Common Stock, for an aggregate purchase price of up to $500,000.00.
B. The Investor desires to purchase a portion of such shares and Warrants,
on the terms and conditions set forth in this Agreement.
AGREEMENT:
In consideration of the respective covenants and commitments of the Company and
the Investor set forth herein, the parties hereby agree as follows:
1. PURCHASE OF COMMON STOCK AND WARRANT.
a. Purchase and Sale of Shares and Warrants; Purchase Price. The Investor
hereby agrees to purchase from the Company, and the Company hereby
agrees to issue and sell to the Investor, the number of shares of Common
Stock (the "Purchased Shares") set forth below and a Warrant for the
number of shares of Common Stock set forth below, such Warrant entitling
the Investor to purchase shares of Common Stock at a purchase price of
$1.50 per share exercisable until the five-year anniversary of the date
of this Agreement. The form of Warrant is attached hereto as Appendix A.
Number of Purchased Shares...................... ______________ Shares
Number of Shares subject to Warrant
(37.5% x No. of Purchased Shares)........ ______________ Shares
Aggregate Purchase Price
($1.50 x No. of Purchased Shares)........ $____________________
b. Payment for Purchased Shares and Warrants. The Investor is enclosing a
check payable to "SurViva Link Corporation" in payment of the purchase
price for the Purchased Shares and Warrants.
Page -1-
c. Anti-Dilution Adjustment. The Company hereby agrees as follows:
i. If, within 180 days after the date hereof, the Company issues,
sells, or contracts to issue and sell shares of Common Stock or
options, warrants or other rights to acquire shares of Common
Stock (the "Later-Issued Shares") for a consideration per share
less than $1.50 (subject to adjustment in the event of any stock
splits, stock dividends or other recapitalization of the Common
Stock), then the Company shall issue such number of additional
shares of Common Stock to the Investor so that the average per
share purchase price of the Purchased Shares plus any additional
shares previously issued to the Investor pursuant to this
Section plus the additional shares to be issued hereunder
(determined by dividing the Aggregate Purchase Price set forth
in Section 1.a by the sum of the number of Purchased Shares set
forth in Section 1.a plus any additional shares previously
issued to the Investor pursuant to this Section plus the number
of such additional shares) is equal to the lowest price per
share received or to be received by Company for the Later-Issued
Shares.
ii. Notwithstanding any contrary provision contained herein, this
Section shall not apply to, and no additional shares of Common
Stock shall be issued to the Investor as a result of, issuances,
sales or grants of: (A) the shares issuable upon exercise of the
Warrants (the "Warrant Shares"); (B) up to 150,000 shares of
Common Stock (subject to adjustment in the event of any stock
splits, stock dividends or other recapitalization of the Common
Stock) issuable upon exercise of the Warrants dated between
March 1993 and October 1993 issued in connection with private
placements of Common Stock; (C) 200,000 shares of Common Stock
(subject to adjustment in the event of any stock splits, stock
dividends or other recapitalization of the Common Stock) issued
to an investor in April 1994 and 75,000 shares of Common Stock
(subject to adjustment in the event of any stock splits, stock
dividends or other recapitalization of the Common Stock)
issuable upon exercise of Warrants granted to such investor; (D)
securities issued for the acquisition of another corporation by
the Company by merger, purchase of substantially all the assets
of such corporation or another reorganization resulting in the
ownership by the Company of not less than a majority of the
voting power of such corporation; (E) options to purchase not
more than 500,000 shares of Common Stock (subject to adjustment
in the event of any stock splits, stock dividends or other
recapitalization of the Common Stock) issued to directors or
employees of or consultants to the Company pursuant to the
Company's Stock Option Incentive Plan of 1992 (and the Common
Stock issuable upon exercise thereof); or (F) securities issued
as a result of any stock split, stock dividend or
reclassification of Common Stock, distributable on a pro rata
basis to all holders of Common Stock.
iii. Upon any adjustment contemplated by this Section 1.c, the
Company shall give written notice thereof to the Investor, which
notice shall state the number of shares to be issued as a result
of such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation
is based.
Page -2-
2. RIGHT OF FIRST REFUSAL AND BOARD DESIGNEE.
a. Right of First Refusal on New Issuances.
i. The Company hereby grants to the Investor a right of first
refusal to purchase all or part of his pro rata share of any New
Securities (as defined below) which the Company may, from time
to time, propose to sell and issue, subject to the terms and
conditions set forth below. The Investor's pro rata share, for
purposes of this Section 2.a, shall equal a fraction, the
numerator of which is the number of issued and outstanding
shares of Common Stock then held by the Investor, and the
denominator of which is the total number of shares of Common
Stock then issued and outstanding.
ii. "New Securities" shall mean any capital stock whether now
authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever which are,
or may become, convertible into or exercisable for capital
stock; provided, however, however that the term "New Securities"
does not include (A) the Warrant Shares; (B) up to 150,000
shares of Common Stock (subject to adjustment in the event of
any stock splits, stock dividends or other recapitalization of
the Common Stock) issuable upon exercise of the Warrants dated
between March 1993 and October 1993 issued in connection with
private placements of Common Stock; (C) 200,000 shares of Common
Stock (subject to adjustment in the event of any stock splits,
stock dividends or other recapitalization of the Common Stock)
issued to an investor in April 1994 and 75,000 shares of Common
Stock (subject to adjustment in the event of any stock splits,
stock dividends or other recapitalization of the Common Stock)
issuable upon exercise of Warrants granted to such investor; (D)
securities offered to the public pursuant to a Registration
Statement (as described in Section 6); (E) securities issued for
the acquisition of another corporation by the Company by merger,
purchase of substantially all the assets of such corporation or
another reorganization resulting in the ownership by the Company
of not less than a majority of the voting power of such
corporation; (F) options to purchase not more than 500,000
shares of Common Stock (subject to adjustment in the event of
any stock splits, stock dividends or other recapitalization of
the Common Stock) issued to directors or employees of or
consultants to the Company pursuant to the Company's Stock
Option Incentive Plan of 1992 (and the Common Stock issuable
upon exercise thereof); or (G) securities issued as a result of
any stock split, stock dividend or reclassification of Common
Stock, distributable on a pro rata basis to all holders of
Common Stock.
iii. In the event the Company intends to issue New Securities, it
shall give the Investor written notice of such intention,
describing the type of New Securities to be issued, the price
thereof and the general terms upon which the Company proposes to
effect such issuance. The Investor shall have thirty (30) days
from the date of receipt of such notice to agree to purchase all
or part of its pro rata share of such New Securities for the
price and upon the general terms and conditions specified in the
Company's notice by giving written notice to the Company stating
the quantity of New Securities to be so purchased.
Page -3-
iv. In the event the Investor fails to exercise the foregoing right
of first refusal with respect to any New Securities within such
thirty (30)-day period, the Company may within ninety (90) days
thereafter sell any or all of such New Securities not agreed to
be purchased by the Investor, at a price and upon general terms
no more favorable to the purchasers thereof than specified in
the notice given to the Investor pursuant to paragraph (c)
above. In the event the Company has not sold such New Securities
within such ninety (90)-day period, the Company shall not
thereafter issue or sell any New Securities without first
offering such New Securities to the Investor in the manner
provided above.
b. Termination. The Investor's rights under Section 2.a shall terminate on
the earlier of:
i. the three-year anniversary of this Agreement; and
ii. the closing of the sale of the Company's Common Stock in a firm
commitment, underwritten public offering registered under the
Securities Act at a public offering price of not less than $5.00
per share (prior to underwriter commissions and expenses) of
Common Stock (subject to adjustment in the event of any stock
splits, stock dividends or other recapitalization of the Common
Stock) and with aggregate gross proceeds to the Company of not
less than $7,500,000 (after deduction of underwriter commissions
and the Company's expenses relating to the issuance, including
without limitation fees of the Company's counsel).
c. Right to Designate Board Member.
i. So long as the Investor Group owns in the aggregate at least
100,000 issued and outstanding shares of Common Stock (subject
to adjustment in the event of any stock splits, stock dividends
or other recapitalization of the Common Stock), the Company
shall permit the Investor Group to designate one representative
to the Company's Board of Directors (the "Board") as a member of
the Board or, if the Investor Group so elects in the Investor
Group's discretion, as a non-voting observer to the Board. Such
designee shall be reasonably acceptable to the Company. Such
designee may be removed or replaced at any time by the Investor
Group as deemed reasonably necessary or appropriate by the
Investor Group. The Investor Group's designee shall receive all
notices, documents, and other information in the same time and
manner as such information is supplied to members of the Board.
The Company shall make reasonable efforts to permit the Investor
Group's designee to participate or observe Board meetings by
telephone if such designee is unable to attend in person.
ii. Unless the Investor Group elects to have its designee act as a
non-voting observer to the Board, the Board agrees to (A)
initially expand the number of members of the Board and elect
the Investor Group's designee to such vacancy, and (B) in
connection with each meeting, or each written consent in lieu of
a meeting, of the Company's shareholders at which the Board is
elected, to nominate the Investor Group's designee for election
to the Board and to use its best efforts to cause the Investor
Group's designee to be so elected.
Page -4-
3. TERMS NO LESS FAVORABLE. The Company represents and warrants to the Investor
that the terms and provisions upon which the Investor is purchasing the
Purchased Shares are no less favorable to the Investor than the terms and
provisions upon which any other person has purchased Common Stock pursuant to
(i) the offering described in the November 1, 1993 Private Placement Memorandum
or (ii) any subsequent offering of Common Stock.
4. REPRESENTATIONS OF INVESTOR. In connection with the sale of the shares to the
Investor, the Investor hereby acknowledges and represents to the Company as
follows:
a. Information About the Company. The Investor acknowledges that the
Company has a limited operating history. The Investor has obtained such
information about the Company as the Investor believes relevant to his
decision to purchase the shares. The Investor has also had the
opportunity to ask questions of, and receive answers from, the Company,
or an agent or a representative of the Company, concerning the business
and affairs of the Company and to obtain any additional information
necessary to verify such information, and the Investor has received such
additional information concerning the Company as the Investor considers
necessary or advisable in order to form a decision concerning the
Investor's purchase of shares pursuant to this Agreement.
b. Sophistication of Investor. The Investor is experienced and
knowledgeable in financial and business matters, capable of evaluating
the merits and risks of investing in the shares, and does not need or
desire the assistance of a knowledgeable representative to aid in the
evaluation of such risks.
c. Investment Risk. The Investor understands that an investment in the
shares is highly speculative and involves a high degree of risk. The
Investor believes the investment is suitable for him based on his
investment objectives and financial needs. The Investor has adequate
means for providing for his current financial needs and personal
contingencies and has no need for liquidity of investment with respect
to the shares. The Investor can bear the economic risk of an investment
in the shares for an indefinite period of time and can afford a complete
loss of such investment.
d. Status as an Accredited Investor: [CHECK EACH ITEM THAT IS APPLICABLE]
|_| i. The Investor has a net worth, or a joint net worth
together with his spouse, in excess of $1,000,000. [In
calculating net worth, you may include equity in personal
property and real estate, including your principal
residence, cash, short-term investments, stock and
securities. Equity in personal property and real estate
should be based on the fair market value of such property
minus debt secured by such property.]
|_| ii. The Investor had an individual income in excess of
$200,000 in each of the prior two years and reasonably
expects an income in excess of $200,000 in the current
year; or the Investor had joint income with his spouse in
excess of $300,000 in each of the prior two years and
reasonably expects joint income in excess of $300,000 in
the current year.
Page -5-
e. Residence. The Investor is a bona fide resident of the State of
____________________.
f. Additional Information. The Investor agrees to furnish any additional
information that the Company or its counsel deem necessary in order to
verify the responses set forth above.
5. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER OF SHARES. The Investor
represents as follows:
a. No Present Intent to Resell. The Investor represents and warrants that
he is purchasing the shares for his own account, for long term
investment and without the intention of reselling or redistributing the
shares. The Investor has made no agreement with others regarding any of
the shares, and his financial condition is such that it is not likely
that it will be necessary for him to dispose of any of the shares in the
foreseeable future. The shares are being purchased by the Investor in
his own name and solely for his own beneficial interest, and not as
nominee for, on behalf of, for the beneficial interest of, or with the
intention to transfer to, any other person, trust, or organization.
b. Unregistered Shares. The Investor understands that the shares have not
been registered under the Securities Act of 1933, as amended (the "1933
Act"), or under applicable state securities laws (the "State Laws"), and
are offered pursuant to exemptions from registration under the 1933 Act
and the State Laws. The Investor understands that the Company's reliance
on such exemptions is predicated in part on his representations to the
Company contained herein. The Investor understands that (i) the
transferability of the shares is restricted; (ii) the shares may be sold
by the Investor only pursuant to registration under the 1933 Act and the
State Laws, or an opinion of counsel acceptable to the Company that such
registration is not required; and (iii) any sale, transfer, pledge or
other disposition of the shares by him will be further restricted by
legend placed on the certificate(s) representing the shares as set forth
in paragraph c.
c. Restrictive Legend. The Investor understands that a restrictive legend
containing substantially the following language will be placed on the
certificate(s) representing the shares purchased under this Agreement:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. No transfer of such shares or
any interest therein may be made except pursuant to registration
under said laws unless the Company has received an opinion of
counsel acceptable to the Company stating that such transfer does
not require registration under said laws."
6. REGISTRATION RIGHTS. The members of the Investor Group (the "Holders")
shall have the following registration rights with respect to the Purchased
Shares and the Warrant Shares (the "Registrable Securities").
a. Requested Registration.
Page -6-
i. Demand. If at any time after the closing of the Company's first
underwritten public offering of Common Stock pursuant to a
Registration Statement and prior to the five (5)-year
anniversary of the date of this Agreement, the Company shall
receive from Holders owning a majority of the Registrable
Securities (the "Initiating Holders") a written request that the
Company effect any registration, qualification or compliance
with respect to a proposed sale of Registrable Securities, the
Company will:
(1) promptly give written notice of the proposed
registration, qualification or compliance to all other
Holders, and to any other holders of securities with
registration rights who are entitled to receive notice
of such proposed registration; and
(2) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance
(including, without limitation, appropriate
qualification under applicable Blue Sky or other state
securities laws and appropriate compliance with
applicable regulations issued under the Securities Act
and any other governmental requirements or regulations)
as may be so requested and would permit or facilitate
the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request,
together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such
request as are specified in a written request received
by the Company within 20 days after receipt of such
written notice from the Company;
provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or
compliance pursuant to this Section 6.a:
(A) in any particular jurisdiction in which the Company
would be required to execute a general consent to
service of process in effecting such registration,
qualification or compliance unless the Company is
already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(B) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and
ending on the date ninety (90) days immediately
following the effective date of, any registration
statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145
transaction or with respect to an employee benefit
plan), provided that the Company is actively employing
in good faith all reasonable efforts to cause such
registration statement to become effective;
(C) after the Company has effected one such registration
pursuant to this Section 6.a.i, and such registration
has been declared or ordered effective; or
(D) with respect to the Registrable Securities owned by any
particular Holder if, in the opinion of counsel
satisfactory to the Company and the particular Holder,
the sale of all Registrable Securities owned by such
Holder may then be made in a transaction exempt from the
registration and prospectus delivery
Page -7-
requirements of the Securities Act and from the
comparable requirements of the applicable state
securities laws so that any transfer restrictions may be
removed upon the consummation of such sale.
Subject to the foregoing clauses (A) through (D), the Company
shall file a Registration Statement covering the Registrable
Securities so requested to be registered as soon as practicable,
after receipt of the request or requests of the Initiating
Holders.
ii. Underwriting. In the event that a registration pursuant to
Section 6.a is for a registered public offering involving an
underwriting on a firm basis, the Company shall so advise the
Holders as part of the written notice given pursuant to Section
6.a.i(1). In such event, the right of any Holder to registration
pursuant to Section 6.a shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this
Section 6.a, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.
The Company shall (together with all Holders and any other
holders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such
underwriting by a majority in interest of the Initiating Holders
but subject to the Company's approval, which approval shall not
be unreasonably withheld. Notwithstanding any other provision of
this Section 6.a, if the managing underwriter advises the
Holders and other holders in writing that marketing factors
require a limitation of the number of shares to be underwritten,
then the number of shares of Common Stock which may be included
in the underwriting shall be allocated (A) first among all
Holders and such other holders having registration rights
granted prior to the date of this Agreement in proportion (as
nearly as practicable) to the respective amounts of Registrable
Securities held by each such Holder and securities with
registration rights held by such other holders at the time of
filing the registration statement and (B) then among other
holders (if any) having registration rights granted after the
date of this Agreement. To facilitate the allocation of shares
in accordance with the above provisions, the Company may round
the number of shares allocated to any Holder or holder to the
nearest 100 shares.
If the managing underwriter does not limit the number of
Registrable Shares to be underwritten, the Company or other
holders of securities of the Company who have registration rights
similar to those set forth in Section 6.a or 6.b hereof may
include Common Stock for their respective accounts in such
registration if the managing underwriter states that such
inclusion would not adversely affect the offering of Registrable
Shares for any reason and if the number of Registrable Shares
which would otherwise have been included in such registration and
underwriting will not thereby be limited or reduced.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom
by written notice to the Company, the
Page -8-
managing underwriter and the Initiating Holders. The Registrable
Securities so withdrawn shall not be transferred in a public
distribution prior to ninety (90) days after the effective date
of such registration, or such other shorter period of time as the
underwriters may require.
b. "Piggy-back" Registration.
i. Notice of Registration. If at any time or from time to time
prior to the five (5)-year anniversary of the date of this
Agreement the Company shall determine to register any of its
securities, either for its own account or the account of a
security holder or holders, other than (A) a registration
relating solely to employee benefit plans, or (B) a registration
relating solely to a Rule 145 transaction, the Company will:
(1) promptly give to each Holder written notice thereof; and
(2) include in such registration (and any related
qualification under Blue Sky laws or other compliance)
and in any underwriting involved therein, all the
Registrable Securities specified in a written request or
requests, made within twenty (20) days after receipt of
such written notice from the Company by any Holder.
ii. Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an
underwriting on a firm basis, the Company shall so advise the
Holders as part of the written notice given pursuant to Section
6.b.i(1). In such event, the right of any Holder to registration
pursuant to Section 6.b shall be conditioned upon such Holder's
participation in such underwriting arrangements required by this
Section 6.b, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.
All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and any other
holders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section
6.b, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company
shall so advise all Holders and other holders distributing their
securities through such underwriting, and the amount of
Registrable Securities and other securities with registration
rights that may be included in the registration and underwriting
shall be allocated (A) first among all Holders and such other
holders having registration rights granted prior to the date of
this Agreement in proportion (as nearly as practicable) to the
respective amounts of Registrable Securities held by each such
Holder and securities with registration rights held by such
other holders at the time of filing the registration statement
and (B) then among other holders (if any) having registration
rights granted after the date of this Agreement. To facilitate
the allocation of shares in accordance with the
Page -9-
above provisions, the Company may round the number of shares
allocated to any Holder or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred
in a public distribution prior to 90 days after the effective
date of the registration statement relating thereto, or such
other shorter period of time as the underwriters may require.
iii. Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it
under this Section 6.b prior to the effectiveness of such
registration whether or not any Holder has elected to include
securities in such registration.
iv. State Qualification. The Company shall use its best efforts to
qualify the sale of Registrable Securities to be included in any
registration pursuant to this Section 6.b under the Blue Sky or
other applicable laws of such jurisdictions as a Holder may
reasonably request.
c. Registration on Form S-3. If prior to the five (5)-year anniversary of
the date of this Agreement any Holder or Holders request that the
Company file a registration statement on Form S-3 (or any successor form
to Form S-3) for the sale of shares of the Registrable Securities, and
the Company is a registrant entitled to use Form S-3 to register the
Registrable Securities for such sales, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the
offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as the Holder or Holders may reasonably
request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 6.c in any
six-month period. The substantive provisions of Section 6.a.ii shall be
applicable to each registration initiated under this Section 6.c.
d. Expenses of Registration. Expenses incurred in connection with any
registration, including all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for
the Company, "Blue Sky" fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid
in any event by the Company) and the reasonable fees and disbursements
of one counsel for all Holders (collectively, "Registration Expenses"),
and underwriting discounts, selling commissions and stock transfer taxes
applicable to the securities registered by the Holders and, except as
included in Registration Expenses, all reasonable fees and expenses of
counsel for any Holder (collectively, "Selling Expenses"), shall be
borne by the parties as follows:
i. All Registration Expenses incurred in connection with any
registration pursuant to Sections 6.a or 6.b shall be borne by
the Company; provided that the Initiating Holders shall
reimburse the Company for up to $30,000 of the Registration
Expenses reasonably incurred by Company in a registration
pursuant to Section 6.a.i. (except
Page -10-
that, if the amount of Registrable Securities of the Holders
included in a registration pursuant to Section 6.a.1 is reduced
because other holders having registration rights granted prior
to the date of this Agreement elect to distribute their
securities through such registration, the amount for which the
Holders shall reimburse the Company shall be reduced by the same
proportion as the amount of Registrable Securities of the
Holders included in such registration is reduced). Unless
otherwise stated, all Registration Expenses payable by the
Holders and all Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the
Holders of such securities pro rata on the basis of the number
of shares so registered.
ii. All Registration Expenses and Selling Expenses reasonably
incurred in connection with a registration pursuant to Section
6.c shall be borne pro rata by the Holder or Holders requesting
the registration on Form S-3 according to the number of
Registrable Securities included in such registration.
e. Registration Procedures. In the case of each registration, qualification
or compliance effected by the Company pursuant to this Section 6, the
Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
i. prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for
at least one-hundred eighty (180) days or until the distribution
described in the Registration Statement has been completed; and
ii. as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration
Statement effective for the period described in Section 6.e.i,
above; and
iii. as expeditiously as possible furnish to each selling Holder such
reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as the selling
Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities owned by
the selling Holder.
If the Company has delivered preliminary or final prospectuses to the
selling Holders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall
promptly notify the selling Stockholders and, if requested, the selling
Holders shall immediately cease making offers of Registrable Securities
and return all prospectuses to the Company. The Company shall promptly
provide the selling Holders with revised prospectuses and, following
receipt of the revised prospectuses, the selling Holders shall be free
to resume making offers of the Registrable Securities.
f. Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such
information regarding such Holder or
Page -11-
Holders, the Registrable Securities held by them and the distribution
proposed by such Holder or Holders as the Company may request in writing
and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 6.
7. OTHER PROVISIONS.
a. Non-Disclosure. Each party agrees not to disclose or use (except as
permitted or required for performance by the party receiving such
Confidential Information of its rights or duties hereunder) any
Confidential Information of the other party obtained during the during
the term of this Agreement until the expiration of three (3) years after
the date of this Agreement. Each party further agrees to take
appropriate measures to prevent any such prohibited disclosure by its
present and future employees, officers, accents, subsidiaries, or
consultants during such period.
b. Further Assurances. At such time and from time to time on and after the
date hereof upon request by the Investor, the Company will execute,
acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, certificates and
assurances that may be required for the better conveying, transferring,
assigning, delivering, assuring and confirming to the Investor, or to
its respective successors and assigns, all of the Purchased Shares and
the Warrants or to otherwise carry out the purposes of this Agreement.
c. Complete Agreement. The Schedules and Exhibits to this Agreement shall
be construed as an integral part of this Agreement to the same extent as
if they had been set forth verbatim herein. This Agreement and the
Schedules and Exhibits hereto constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and
supersede all prior agreements whether written or oral relating hereto.
d. Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements contained herein
shall survive the purchase of the Purchased Shares and remain in full
force and effect. No independent investigation of the Company by the
Investor, its counsel, or any of its accents or employees shall in any
way limit or restrict the scope of the representations and warranties
made by the Company in this Agreement.
e. Waiver, Discharge, Amendment, Etc. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall not,
absent an express written waiver signed by the party making such waiver
specifying the provision being waived, be construed to be a waiver of
any such provision, nor in any way to affect the validity of this
Agreement or any part thereof or the right of the party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent
breach. This Agreement may be amended by the Company and the Investor,
by mutual action approved by their respective Boards of Directors or
their respective officers authorized by such Board of Directors, at any
time prior to the Closing Date. Any amendment to this Agreement shall be
in writing and signed by the Company and the Investor.
Page -12-
f. Notices. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered
personally or by telecopy (receipt confirmed) to such party (or, in the
case of an entity, to an executive officer of such party) or shall be
sent by a reputable express delivery service or by certified mail,
postage prepaid with return receipt requested, addressed as follows:
If to the Investor: To the address set forth on the signature page of
this Agreement.
If to the Company: SurViva Link Corporation
2975 - 84th Lane N.E.
Minneapolis, Minnesota 55449
Attention: Byron L. Gilman, Chief Executive Officer
FAX: (612) 780-2786
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein
prescribed. All notices shall be deemed given on the day when actually
delivered as provided above (if delivered personally or by telecopy) or
on the day shown on the return receipt (if delivered by mail or delivery
service).
g. Governing Law. This Agreement shall be construed and interpreted in
accordance with substantive Minnesota law applicable to agreements
executed in Minnesota.
Page -13-
IN WITNESS WHEREOF, the Company and the Investor have each executed this
Agreement as of the date first set forth above.
COMPANY: SURVIVA LINK CORPORATION
By ____________________________________
Byron L. Gilman
Chief Executive Officer
INVESTOR:
_______________________________________
(Signature)
_______________________________________
Name (Please print or type)
_______________________________________
Street Address
_______________________________________
City, State & Zip Code
_______________________________________
Social Security Number
[Please complete Sections 4.d-e on pages 5-6]
Page -14-
APPENDIX A
FORM OF STOCK WARRANT
THIS WARRANT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE REOFFERED OR SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO (1) REGISTRATION OR
(2) AN OPINION OF COUNSEL FOR THE COMPANY OR OTHER COUNSEL REASONABLY ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
To Purchase _______
Shares of Common Stock of
SURVIVA LINK CORPORATION
May 23, 1994
SurViva Link Corporation, a Minnesota corporation (the "Company"), for
value received, hereby certifies that ___________________________________, or
its registered assigns (the "Holder"), is entitled, subject to the terms set
forth below, upon exercise of this Warrant to purchase from the Company, at any
time or from time to time on or after the date of issuance of this Warrant and
on or before 5:00 p.m. (Minneapolis, Minnesota time) on May 23, 1999, up to
__________________________ (_______) fully paid and nonassessable shares of
Common Stock, no par value, of the Company ("Common Stock") at a purchase price
of One Dollar and Fifty Cents ($1.50) per share (subject to adjustment in
accordance with Section 4 hereof). The shares issuable upon exercise or
conversion of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Exercise Price," respectively.
This Warrant is being issued in connection with the execution and
delivery of a Stock Purchase Agreement dated as of the date hereof between the
Company and the Holder (the Stock Purchase Agreement").
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE OF WARRANT. This Warrant may be exercised by the Holder, in
whole or in part (but not as to any fraction of a share of Common Stock), by
surrendering this Warrant, with the Exercise Form attached hereto as Exhibit A
filled in and duly executed by such Holder or by such Holder's duly authorized
attorney, to the Company at its principal office, accompanied by payment of the
Exercise Price in the form of a cashier's or certified check or wire transfer in
the amount of the Exercise Price multiplied by the number of shares as to which
the Warrant is being exercised.
2. CONVERSION OF WARRANT.
Page -1-
(a) The Holder shall also have the right (the "Conversion Right") to
convert all or any portion of this Warrant into such number of shares (rounded
to the nearest whole share) of Company Common Stock equal to the quotient
obtained by dividing (i) the "Aggregate Warrant Spread" as of the close of
business on the date the Conversion Right is exercised, by (ii) Market Price of
the Common Stock as of the close of business on the date the Conversion Right is
exercised. The Conversion Right shall be exercisable at any time or from time to
time prior to expiration of this Warrant by surrendering this Warrant with the
Conversion Form attached hereto as Exhibit B filled in and duly executed by such
Holder or by such Holder's duly authorized attorney to the Company at its
principal office.
(b) For purposes of this Section 2, the "Aggregate Warrant Spread" of
all or a portion of this Warrant as of a particular date shall equal (i) the
Market Price of the Common Stock multiplied by the number of shares of Common
Stock purchasable upon exercise of all or such portion of this Warrant on such
date, minus (ii) the Exercise Price multiplied by the number of shares of Common
Stock purchasable upon exercise of all or such portion of this Warrant on such
date. For purposes of this Section 2, the "Market Price of the Common Stock" as
of a particular date shall equal: (i) if the Common Stock is traded on an
exchange or is quoted on the Nasdaq National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) trading days
immediately preceding such date, or (ii) if the Common Stock is not traded on an
exchange or on the Nasdaq National Market but is traded on the Nasdaq SmallCap
Market, then the average of the mid-points between the closing bid and asked
prices reported for the ten (10) trading days immediately preceding such date,
or (iii) if the Common stock is not traded on an exchange, the Nasdaq National
Market, or the Nasdaq Small-Cap Market but is traded in the local
over-the-counter market, then the average of the mid-points between highest bid
and lowest asked quotations for each of the ten (10) trading days immediately
preceding such date.
3. EFFECTIVE DATE OF EXERCISE OR CONVERSION. Each exercise or
conversion of this Warrant shall be deemed effective as of the close of business
on the day on which this Warrant is surrendered to the Company as provided in
Section 1 or Section 2(a) above. At such time, the persons or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise or conversion shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates. Within ten (10)
days after the exercise or conversion of this Warrant in full or in part, the
Company will, at its expense, cause to be issued in the name of and delivered to
the Holder or such other person as the Holder may (upon payment by such Holder
of any applicable transfer taxes) direct: (i) a certificate or certificates for
the number of full Warrant Shares to which the Holder is entitled upon such
exercise or conversion, and (ii) unless this Warrant has expired, a new Warrant
or Warrants (dated the date hereof and in form identical hereto) representing
the right to purchase the remaining number of shares of Common Stock, if any,
with respect to which this Warrant has not then been exercised or converted.
Page -2-
4. ADJUSTMENT OF EXERCISE PRICE. The above provisions are, however,
subject to the following:
(a) If the Company shall at anytime hereafter subdivide or combine the
outstanding shares of Common stock or declare a dividend payable in Common Stock
or in securities convertible into Common Stock: (i) the Exercise Price in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in Common Stock or in securities convertible into Common Stock
shall forthwith be proportionately increased, in the case of combination, or
decreased, in the case of subdivision or dividend payable in Common Stock or in
securities convertible into Common Stock, by multiplying the then current
Exercise Price by a fraction, the numerator of which is the number of shares of
Common Stock outstanding (assuming the conversion of all securities convertible
into Common Stock) immediately before such subdivision, combination or record
date, and the denominator of which is the number of shares of Common Stock
outstanding (assuming the conversion of all securities convertible into Common
Stock) after such subdivision, combination or record date; and (ii) the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
changed to the number determined by multiplying the then current number of
shares of Common Stock issuable upon exercise of this Warrant by a fraction, the
numerator of which is the number of shares of Common Stock outstanding (assuming
the conversion of all securities convertible into Common Stock) after such
subdivision, combination or record date, and the denominator of which is the
number of shares of Common Stock outstanding (assuming the conversion of all
securities convertible into Common Stock) immediately before such subdivision,
combination or record date.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Holder hereof shall hereafter have the right to
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of the Common Stock of the Company into which
this Warrant was immediately theretofore exercisable or convertible, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock into which this Warrant was immediately
theretofore exercisable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of Holder to
the end that the provisions hereof (including without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable upon
exercise or conversion of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the conversion hereof. The Company shall not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed to the registered holder hereof at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities or assets
into
Page -3-
which, in accordance with the foregoing provisions, such holder may be entitled
to convert this Warrant.
(c) If the Company distributes to all holders of Common Stock any
assets (excluding ordinary cash dividends), debt securities, or any rights or
warrants to purchase debt securities, assets or other securities (including
Common Stock), the Exercise Price shall be adjusted in accordance with the
formula:
E1 = [E x (O x M) - F] / (O x M)
where:
E1 = the adjusted Exercise Price.
E = the current Exercise Price.
M = the average market price of Common Stock
for the 30 consecutive trading days
commencing 45 trading days before the record
date mentioned below.
O = the number of shares of Common stock
outstanding on the record date mentioned
below.
F = the fair market value on the record date
of the aggregate of all assets, securities,
rights or warrants distributed. The
Company's Board of Directors shall determine
the fair market value in the exercise of its
reasonable judgment.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
(d) If the Company issues or sells any shares of Common Stock (other
than dividends payable in shares of Common Stock) or any options, warrants,
convertible securities and other rights to subscribe to or otherwise acquire
Common Stock (such rights referred to as "Options") for a consideration per
share less than the Exercise Price then in effect, then the Exercise Price in
effect immediately prior to such issuance or sale shall be reduced so as to
equal such per share consideration. If the Exercise Price is adjusted as the
result of the issuance of any Options, no further adjustments of such Exercise
Price shall be made at the time of the exercise or conversion of such Options.
The consideration per share for any issuance of Common Stock or Options shall
equal a fraction, the numerator of which is equal to the sum of (i) the total
amount received or receivable by the Company as consideration for such issuance,
plus (ii) the minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise, conversion or exchange of any Options included in
such issuance, and the denominator of which is equal to the total number of
shares of Common Stock issued, or issuable upon the exercise, conversion or
exchange of Options issued, in such issuance. If the Company issues or sells any
shares of Common Stock or any Options for consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the Board of
Directors of the Company.
Page -4-
(e) Notwithstanding Section 4(d) above, no adjustment of the Exercise
Price shall be made pursuant to Section 4(d) above as a result of issuances,
sales or grants of: (i) up to 150,000 shares of Common Stock issuable upon
exercise of the Warrants dated between March 1993 and October 1993 issued in
connection with private placements of Common Stock, (ii) securities issued for
the acquisition of another corporation by the Company by merger, purchase of
substantially all the assets of such corporation or another reorganization
resulting in the ownership by the Company of not less than a majority of the
voting power of such corporation; or (iii) options to purchase not more than
500,000 shares of Common Stock (such number being subject to adjustment of any
stock dividend, stock split, subdivision, combination or other recapitalization
of the Common Stock of the Company) issued to directors or employees of or
consultants to the Company pursuant to the Company's Stock Option Incentive Plan
of 1992 (and the Common Stock issuable upon exercise thereof).
(f) Upon any adjustment of the Exercise Price, then and in each such
case, the Company shall give written notice thereof, by First Class mail,
postage prepaid, addressed to the Holder of this Warrant at the address of such
Holder as shown on the books of the Company, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares for which this Warrant may be exercised, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5. COMMON STOCK. As used herein, the term "Common Stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution, or winding up of the
Company.
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company unless and until
exercised or converted pursuant to the provisions hereof.
7. TRANSFER OF WARRANT OR RESALE OF COMMON STOCK. The Holder, by
acceptance hereof, agrees to give written notice to the Company before
transferring this Warrant in whole or in part, or transferring any Warrant
Shares, of such Holder's intention to do so, describing briefly the manner of
any proposed transfer. Such notice shall include an opinion of counsel
reasonably satisfactory to the Company that (i) the proposed transfer may be
effected without registration or qualification under the Securities Act of 1933,
as amended (the "Act") and any applicable state securities or blue sky laws, or
(ii) the proposed transfer has been registered under such laws. Upon delivering
such notice, such Holder shall be entitled to transfer this Warrant or such
Warrant Shares, all in accordance with the terms of the notice delivered by such
Holder to the Company, provided that an appropriate legend may be endorsed on
this Warrant or the certificates for such Warrant Shares respecting restrictions
upon transfer thereof necessary or advisable in the opinion of counsel to the
Company to prevent further transfers which would be in violation of Section 5 of
the Act and applicable state securities or blue sky laws.
Page -5-
If in the opinion of counsel to the Company or other counsel reasonably
acceptable to the Company the proposed transfer or disposition of this Warrant
or such Warrant Shares described in the written notice given pursuant to this
Section 7 may not be effected without registration of this Warrant or the
Warrant Shares, the Company shall promptly give written notice thereof to the
Holder within ten (10) days after the Company receives such notice, and the
Holder will limit its activities in respect to such transfer or disposition as,
in the opinion of both such counsel, are permitted by law.
8. COVENANTS OF THE COMPANY. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that the Company will at
all times have authorized and reserved for the purpose of issue upon exercise of
this Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
9. CERTAIN NOTICES. The Holder shall be entitled to receive from the
Company immediately upon declaration thereof and at least thirty (30) days prior
to the record date for determination of shareholders entitled thereto or to vote
thereon (or if no record date is set, prior to the event), written notice of any
event which could require an adjustment pursuant to Section 4 hereof or of the
dissolution or liquidation of the Company. All notices hereunder shall be in
writing and shall be delivered personally or by telecopy (receipt confirmed) to
such party (or, in the case of an entity, to an executive officer of such party)
or shall be sent by a reputable express delivery service or by certified mail,
postage prepaid with return receipt requested, addressed as follows:
If to Holder: __________________________
__________________________
__________________________
__________________________
Telecopier: (612) ___-____
If to the Company: SurViva Link Corporation
2975 - 84th Lane N.E.
Minneapolis, Minnesota 55449
Attention: Byron Gilman, Chief Executive
Officer
Telecopier: (612) 780-2786
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the date when actually delivered as
provided above (if delivered personally or by telecopy) or on the day shown on
the return receipt (if delivered by mail or delivery service).
10. REGISTRATION RIGHTS. The Holders of this Warrant and the Warrant
Shares are entitled to the benefits of all of the terms, provisions and
conditions of Section 6 of the Stock Purchase Agreement.
Page -6-
11. MISCELLANEOUS.
(a) No amendment, modification or waiver of any provision of this
Warrant shall be effective unless the same shall be in writing and signed by the
holder hereof.
(b) This Warrant shall be governed by and construed in accordance with
the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its authorized officer and dated as of the date stated above.
"Company"
SURVIVA LINK CORPORATION
By _______________________________________
Its ______________________________________
Page -7-
Exhibit A
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the Registered Holder in
Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash, pursuant to Section 1 thereof, ________________
shares of Common Stock issuable upon the exercise of such Warrant. The
undersigned requests that certificates for such shares be issued in the name of
___________________________________________. If such Warrant is not fully
exercised, the undersigned requests that a new Warrant to purchase the balance
of shares remaining purchasable thereunder be issued in the name of
_______________________.
Dated: ___________, 199__ _________________________________________
[Name of registered Holder]
__________________________________________
[Signature]
__________________________________________
[Street Address]
__________________________________________
[City, State, Zip]
__________________________________________
[Tax Identification Number]
Page -8-
Exhibit B
NOTICE OF CONVERSION OF WARRANT -- To Be Executed by the Registered Holder in
Order to Convert the Warrant on a Cashless
Basis
The undersigned hereby irrevocably elects to convert, on a cashless
basis, a total of ______________ shares of Common Stock, otherwise purchasable
upon exercise of the attached Warrant, into such lesser number of shares of
Common Stock as determined by Section 2 of the Warrant. The undersigned requests
that certificates for such shares be issued in the name of
______________________________________. If such Warrant is not fully exercised,
the undersigned requests that a new Warrant to purchase the balance of shares
remaining purchasable thereunder be issued in the name of
_____________________________________.
Dated: ___________, 199__ _________________________________________
[Name of registered Holder]
__________________________________________
[Signature]
__________________________________________
[Street Address]
__________________________________________
[City, State, Zip]
__________________________________________
[Tax Identification Number]
Page -9-
Exhibit C
ASSIGNMENT OF WARRANT -- To Be Executed by the Registered Holder in
Order to Transfer the Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
_________________________________________
[Name of registered Holder]
__________________________________________
[Signature]
__________________________________________
[Street Address]
__________________________________________
[City, State, Zip]
__________________________________________
[Tax Identification Number]
the right to purchase ____________ of the shares of Common Stock of SurViva Link
Corporation to which this Warrant relates and appoints
_______________________________ attorney, with full power of substitution, to
transfer said right on the books of Surviva Link Corporation.
Dated: __________, 199__ __________________________________________
[Name of registered Holder]
__________________________________________
[Signature]
Page -10-
SurVivaLink Corporation
SUPPLEMENT TO SUBSCRIPTION AGREEMENT
SurVivaLink Corporation
5420 Feltl Road
Minneapolis, MN 55343
Attention: Byron L. Gilman
Gentlemen:
SurVivaLink Corporation, a Minnesota corporation (the "Company") has
prepared a Confidential Private Placement Memorandum, dated June 14, 1995, (the
"Memorandum") relating to the offer and sale of up to 400,000 shares of Common
Stock, without par value, of the Company (the "Shares") at a price of $5.00 per
share, and has reserved the right to increase the number of Shares offered to
600,000 Shares. The undersigned, The Vertical Group, has submitted to the
Company a Subscription Agreement dated September __, 1995 (the "Subscription
Agreement"), for the purchase of 250,000 Shares at a price of $3.00 per share,
or an aggregate purchase price of $750,000. The Subscription Agreement is hereby
modified and amended as set forth in this Supplement and is subject to the terms
and conditions set forth in this Supplement.
1. Purchase Price; Size of Offering.
a. The purchase price of the Shares purchased by the undersigned or offered
and sold to others pursuant to the Memorandum shall be $3.00 per share,
rather than $5.00 per share. All references in the undersigned's
Subscription Agreement, the Memorandum or related documents to $5.00 per
share are hereby amended to be $3.00 per share. The undersigned
understands and agrees that the purchase price paid by all other persons
who purchase Shares pursuant to the Memorandum will also be adjusted from
$5.00 to $3.00 per share.
b. The aggregate offering price of Shares offered pursuant to the Memorandum
($2,000,000, subject to increase to up to $3,000,000) shall not be
changed. The total number of shares offered pursuant to the Memorandum
shall be changed from 400,000 Shares (subject to increase to 600,000
Shares) at a price of $5.00 per share, to 666,666 Shares (subject to
increase to 1,000,000 Shares) at a price of $3.00 per share.
c. If, prior to the sale of Shares having an aggregate purchase price of at
least $2,000,000 (including the Shares purchased by the undersigned):
(1) the purchase price of Shares offered pursuant to the Memorandum is
further reduced to a price less than $3.00 per share after Shares
are issued to the undersigned pursuant to its Subscription
Agreement, the Company shall issue additional Shares to the
undersigned, without any additional payment by the undersigned, so
that the total number of Shares issued to the undersigned is equal
to the quotient of (i) $750,000, divided by (ii) the purchase price
per share in effect after any such further reduction; or
(2) any securities are sold by the Company to any purchaser on terms
more favorable to such purchaser than the terms of the undersigned's
purchase of Shares, the Shares purchased by the undersigned shall be
amended and/or increased, as the case may be, such that the Shares
purchased by the undersigned shall have the same terms and
conditions as the securities sold to such purchaser.
2. Board of Directors.
a. During the period commencing with the issuance of Shares to the
undersigned pursuant to its Subscription Agreement and ending at the time
the Company determines, by vote of its Board of Directors, to undertake a
further offering of securities, the undersigned shall have the right to be
represented at each meeting of the Board of Directors of the Company by up
to two observers. The Company shall give to the undersigned, or at the
direction of the undersigned shall give directly to such observers, the
same notice of each meeting of the Board of Directors as is given to the
members of the Board of Directors.
Page 1
b. The undersigned shall have the right to nominate one person to serve as a
director of the Company, and the Company shall use its best efforts to
cause such nominee to be elected to the Board of Directors. This right
shall commence upon the issuance of Shares to the undersigned pursuant to
its Subscription Agreement and shall continue until such time as the
undersigned's percentage ownership of total shares outstanding of the
Company is reduced by fifty percent (50%) from the percentage which it
owns upon the completion of the offering of Shares pursuant to the
Memorandum (including as outstanding, for such purposes, any shares
issuable pursuant to the exercise of options and warrants outstanding at
the completion of the offering, or pursuant to options thereafter granted
under the Company's stock option plan). Upon the election of the
undersigned's nominee as a director of the Company, the number of
observers who may represent the undersigned at meetings of the Board of
Directors as provided in section 2.a hereof shall be reduced to one.
c. For purposes of section 2.b hereof, the Company hereby represents that, as
of the date hereof, the total number of shares outstanding or issuable
upon the exercise of options and warrants outstanding at the date hereof
(including warrants issuable to providers of bridge loans) or reserved for
issuance under the Company's stock option plan is approximately 3,465,000
shares. Such number of shares does not include the Shares offered to the
undersigned or other investors pursuant to the Memorandum.
d. The Company agrees that, during the period the undersigned is entitled to
nominate a person to serve as a director of the Company pursuant to
section 2.b hereof, the Company will not increase the size of its Board of
Directors without the consent of the undersigned. The person nominated by
the undersigned to serve as a director shall have authority to grant or
withhold such consent on behalf of the undersigned, unless otherwise
stated in a written notice from the undersigned to the Company.
Except as expressly modified and amended by this Supplement, the terms and
conditions of the Subscription Agreement shall remain in full force and effect
according to their terms.
THE VERTICAL FUND ASSOCIATES, L.P.
Dated: September 6, 1995. By THE VERTICAL FUND GROUP, L.P.
By /s/ Richard B. Emmitt
Its General Partner
ACCEPTED AND AGREED TO:
SURVIVALINK CORPORATION
By /s/ Byron L. Gilman
Its Chief Executive Officer
Dated: September 11, 1995.
Page 2
DEALER SALES AGREEMENT
between
SURVIVALINK CORPORATION
5420 Feltl Road
Minneapolis, Minnesota 55343
Ph. (612) 939-4181
and
DEALER:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
DEALER SALES AGREEMENT
This Agreement is between SurVivaLink Corporation ("SVL") and the above named
dealer. SVL is a Minnesota corporation. This Agreement shall be governed by the
laws of the State of Minnesota.
1. APPLICATION AND ACCEPTANCE.
This document, upon being appropriately signed in duplicate by Dealer,
shall constitute an application for appointment as Dealer of SVL under
all the terms and conditions herein set out. At such time as this
document is accepted and signed by SVL and a Copy signed by SVL is
returned to Dealer, the Dealership will then be established.
Dealer's non-exclusive territory and the SVL product line which Dealer
agrees to sell and support in such territory are described in Exhibit A
and Exhibit B.
This Agreement, including Exhibits, defines the responsibilities of the
parties and constitutes the entire agreement between them. This
Agreement supersedes any and all prior agreements and trade practices
between the parties and may be modified only in writing signed by both
parties.
2. HANDLING OF ORDERS.
All orders are subject to acceptance by SVL at such place as it shall
direct, with the approval of SVL's Credit Manager. Dealer's failure to
furnish updated, accurate financial information upon request
constitutes a breach hereunder. Financial information includes full
information pertaining to the ownership and management of Dealer and
the Dealer's source of financial support.
3. TERMS OF SALE.
All Sales to Dealer shall be at prices and upon terms established by
SVL and published in Dealer Price List. Dealer shall treat the Dealer
Price List as confidential. SVL shall have the right in its sole
discretion from time to time, to establish, change, alter or amend
prices, product lines, and other terms and conditions of sales with
thirty days prior written notice to the Dealer.
As between the Dealer and ultimate retail customer, Dealer may not
accept orders in SVL's name or make price quotations or delivery
promises on SVL's behalf. SVL shall deliver products sold hereunder to
Dealer F.O.B. shipping point and invoice dealer. Terms of sale will be
Net 30. All past due accounts will be subject to late fees or finance
charges established in the credit policy of SVL from time to time.
4. SVL RESPONSIBILITY.
SVL agrees to sell products to the Dealer as indicated in Section 3
preceding. SVL's responsibility shall include the following:
A) Warranties. The Company makes no representation or warranty as
to the products sold to Dealer, except those set forth in the
Company's warranty and limitation of warranty in effect at the
time of confirmation of order for such products, as such
warranty may be modified by the Company from time to time (the
"Warranty"). The Company's current warranty is set forth in
Exhibit C to this Agreement below. THE COMPANY'S WARRANTY RUNS
TO THE ORIGINAL END-USER ONLY. Dealer shall make no warranty
or other representation regarding products, express or
implied, other than the Warranty. If dealer makes, or if a
customer or other user of the products claims that the Dealer
has made, any warranty or representation inconsistent with or
in addition to the Warranty, Dealer shall, at its own expense,
defend, indemnify and hold harmless the Company from and
against any claim thereon of any nature whatsoever. Dealer
further agrees to indemnify and hold harmless the Company with
respect to any additional warranties made by Dealer by reason
of Dealer's failure to comply with any laws, statutes, rules
or ordinances in connection with the resale of the products.
EXCEPT AS EXPRESSLY PROVIDED IN THE COMPANY'S STANDARD
WARRANTY, THE COMPANY MAKES NO WARRANTY OF ANY KIND, EXPRESS
OR IMPLIED, WITH RESPECT TO ANY PRODUCT OR PORTION THEREOF,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
COMPANY SHALL UNDER NO CIRCUMSTANCES BE LIABLE TO DEALER OR
ANY THIRD PARTY FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES OF ANY NATURE WHATSOEVER, EVEN IF THE
COMPANY SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
B) Sales support. SVL will maintain sales support for the purpose
of actively promoting the use and sales of SVL products. SVL
will furnish literature, supporting professional papers, and
other support it deems necessary to help the Dealer
effectively promote its products.
5. DEALER RESPONSIBILITY.
A) Sales Representation. Dealer shall use its best efforts to
sell and promote the sale of SVL products in the assigned
territory. Dealer will promote and demonstrate SVL's products
whenever requested by the Dealers customers. Dealer will
require its sales personnel to carry, display and show SVL
products as SVL may reasonably request. Dealer shall maintain
proper customer relations.
B) Installation and Sales Training. Dealer will have sales people
in attendance at any initial product training program for the
Dealer or its representatives.
C) Inventory. Dealer agrees to maintain an inventory of the
product line at all times. Dealer will inventory at least one
demonstration defibrillator and at least one defibrillator for
retail sales.
D) Product Traceability. It is acknowledged by both parties that
it is essential that SVL at all times have full and complete
records indicating the sales of SVL products and full
identification of all purchasers from Dealer of SVL products.
Dealer shall accordingly maintain and furnish such information
regularly and accurately to SVL. Dealer agrees and shall abide
by all regulations and procudures promulgated by the U.S. Food
and Drug Administration or SVL regarding product traceability
E) Confidential Information. Dealer agrees not to make available
or accessible to any third party any confidential information
such as technical or commercial data or other information of a
competitive, special or confidential nature specified as such
transmitted to Dealer by SVL, and this undertaking shall
continue to be applicable for a three year period following
the termination of the Agreement for whatever cause. Dealer
agrees to maintain confidentiality of SVL marketing plans,
price lists, commission schedules, and like materials for a
period of one year following termination of the Agreement for
whatever cause.
F) Alterations. Dealer agrees not to alter the equipment sold
hereunder in any way and not to remove the SVL name or brand
or repaint such equipment.
G) SVL Name and Trademarks. The Dealer shall only use the name
SurVivaLink or trademarks for the duration of this Agreement
and only in a manner approved by SVL.
H) Notification of Proprietary Breaches. Dealer agrees to notify
SVL of competitive breaches or alleged breaches of SVL
patents, trademarks, and tradenames.
I) Sales Orders. Dealer shall issue a properly authorized
Purchase Order for the purchase of product from SVL.
J) Notification of Customer Complaints. Dealer shall notify SVL
of any and all complaints of customers concerning the
installation, service or performance of SVL products in a
timely matter.
K) Hold Harmless. Dealer agrees to hold SVL harmless of any
actions which are the responsibility of the Dealer, including,
but not limited to, responsibilities named in the agreement
herein, as well as negligence, fraud, misconduct, warranties,
or other actions caused or made by Dealer.
6. TERM AND TERMINATION OF THE AGREEMENT.
This Agreement shall extend for one year from the date it is accepted
by SVL. It will be automatically renewed on its anniversary date for
one additional year unless either party notifies the other in writing
not less that ninety (90) days prior to scheduled expiration that the
Agreement will not be renewed. Thereafter, the Agreement may be
extended from time to time by written extensions and signed by both
parties.
Termination of this Agreement may occur under the following causes:
A) For Material Breach. In the event of any material
breach of the Agreement by the other which remains
uncured for more than ten days after written
notification of the breach by the party seeking to
enforce the contract, either party may terminate this
Agreement.
B) By Mutual Consent. This Agreement may be terminated
by mutual consent.
C) For Payment Delinquency. SVL may terminate this
Agreement on ten days written notice to Dealer of
delinquent payment extending for ninety days or more.
Dealer is responsible for any and all collection
and/or attorney fees incurred by SVL to effect the
collection of past due accounts.
D) For Insolvency of Dealer or Other Cause. SVL may
terminate this Agreement upon the insolvency of the
Dealer or upon any sale, assignment or change in the
ownership or control of the active management of the
Dealer or upon any other substantial organizational
change.
E) Without Cause. SVL or Dealer may terminate this
relationship without cause upon ninety (90) days
notice to the other party.
7. UNDERTAKINGS RELATED TO TERMINATION OF AGREEMENT.
Upon termination of this Agreement from whatever cause:
A) Dealer agrees to return to SVL immediately after
termination all documentation, such as price
information, sales letters, technical data sheets,
instructions, and the like. This also refers to
quotation records, etc., necessary for SVL to resume
pending negotiations.
B) SVL shall have the option (but not the obligation) to
purchase from Dealer and Dealer agrees to sell to SVL
at the current dealer net cost (except for discounted
items), any or all SVL products, to which Dealer has
title upon said termination.
C) Dealer agrees that no obligation shall exist for SVL
to indemnify Dealer for damages of any kind
pertaining to Dealer's costs and expenses in the
promotion of SVL products, it being understood that
the dealer price permits a sufficient return to the
Dealer.
8. CONSTRUCTION OF AGREEMENT.
The terms of this Agreement are severable. Any variation between any
printed portion of this contract and any typed or handwritten portion
shall be resolved in favor of the typed or handwritten portion as
against the printed portion. Any variation between the terms of this
Agreement and the terms of the Attachments shall be resolved in favor
of the terms of the Attachments.
9. DISPUTES AND ARBITRATION.
The parties agree that any disputes or questions arising hereunder,
including the construction or application of this Agreement, shall be
settled by arbitration in accordance with the then existing rules of
the American Arbitration Association. The Decision of the arbitrator
shall be final and binding upon the parties both as to law and to fact
and shall not be appealable to any court in any jurisdiction. The
expenses of the arbitrator shall be shared equally by the parties,
unless the arbitrator determines the expenses shall be otherwise
assessed.
10. MISREPRESENTATION.
Any misrepresentation by Dealer at any time of any pertinent
information pertaining to Dealer's financial position or SVL-related
business activities shall give SVL a right to terminate this Agreement
forthwith by written notice.
11. INDEPENDENT CONTRACTOR.
Dealer is not an employee of SVL for any purpose whatsoever, but is an
independent contractor. SVL shall not have the right to require Dealer
to do anything which would jeopardize the relationship of independent
contractor status between SVL and Dealer. All expenses and
disbursements incurred by Dealer in connection with this Agreement
shall be borne wholly and completely by Dealer. Dealer does not have,
nor shall Dealer hold Dealer out as having any right, power, or
authority to create any contract or obligation, either express or
implied, on behalf or, in the name of, or binding upon SVL, unless SVL
shall consent thereto in writing.
12. INCORPORATION OF EXHIBITS.
Exhibits A through C are incorporated by reference as thought set out
in full. Each page of such exhibits shall be initialed by Dealer upon
delivery of this Agreement to SVL, and by SVL when it executes this
Agreement.
13. IDENTITY OF DEALER.
Trade Name:
Trade Address:
Phone:
Form of Organization: (indicate by check mark)
[ ] Partnership [ ] Sole Proprietorship [ ] Corporation
Fed ID #:
14. AUTHORITY TO EXECUTE.
The undersigned persons signing this document personally represent that
they have the authority to do so on behalf of their respective
organizations.
NAME OF DEALER:
Dated and Signed this day of , 19 .
By:
Title:
Printed Name:
SURVIVALINK CORPORATION
Dated and Signed this day of , 19 .
By:
Title: Chief Executive Officer
Printed Name: Byron L. Gilman
"EXHIBIT A"
Dealer is authorized to distribute SVL products as named below in this
exhibit on a non-exclusive basis as described the Exhibit B.
Products:
"EXHIBIT B"
Dealer is hereby authorized on a non-exclusive basis in the territory
named below in the exhibit all products named in Exhibit A.
Territory:
"EXHIBIT C"
MANUFACTURER REPRESENTATIVE AGREEMENT
between
SURVIVALINK CORPORATION
5420 Feltl Rd.
Minneapolis, MN 55343
Ph. (612) 939-4181
and
MANUFACTURER REPRESENTATIVE:
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
MANUFACTURER REPRESENTATIVE AGREEMENT
This agreement is between SURVIVALINK Corporation ("SVL") and the manufacturer
representative ("MR") named in Section 1 hereof.
1. PARTIES AND TERM.
1.1 SVL is a Minnesota corporation. SVL offices are located at
5420 Feltl Road, Minneapolis, MN 55343. SVL's telephone number
is (612) 939- 4181.
1.2 MR is:
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
Form of organization (check one):
( ) Corporation ( ) Partnership ( ) Sole Proprietor
If a corporation, names and addresses of stockholder,
directors and officers follow this paragraph. If a
partnership, names and addresses of the partners follow this
paragraph.
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
1.3 This Agreement shall extend for one year from the date it is accepted by
SVL. It will be automatically renewed on its anniversary date for one additional
year unless either party notifies the other in writing not less than sixty (60)
days prior to scheduled expiration that the Agreement will not be renewed.
Thereafter, the Agreement may be extended from time to time by written
extensions and signed by both parties.
2. APPLICATION AND ACCEPTANCE; AND NATURE OF PRESENTATION.
2.1 This agreement, upon being signed in duplicate by MR and
received by SVL, shall constitute an application for
appointment as an independent contractor of SVL pursuant to
the terms and conditions set forth herein, which SVL may, in
its sole discretion, accept or reject. At such time as this
document is signed by SVL in duplicate and an executed copy is
returned to MR, the agreement herein contained shall become
effective and MR's authority hereunder shall commence.
3. AUTHORIZED TERRITORY.
3.1 MR territory within which representative agrees to sell and
support SVL's products are described in Exhibit A.
4. AUTHORIZED PRODUCT.
4.1 MR is authorized to sell all products listed in Exhibit B per
the terms and conditions of this agreement and attached
exhibits.
5. HANDLING OF ORDERS.
5.1 All orders are subject to acceptance by SVL.
5.2 All orders must be on a properly authorized Purchase Order
from the customer to SVL.
6. MR'S RESPONSIBILITIES.
6.1 MR shall use its best efforts to sell and promote the sale of
SVL products in the assigned territory.
6.2 MR shall demonstrate SVL's products whenever so requested by
the MR's customer or by SVL.
6.3 MR shall maintain proper customer relations.
6.4 MR shall use such order forms, sales literature and other
items as are furnished to MR by SVL.
6.5 MR shall inform SVL of any and all complaints of customers
concerning the delivery, installation, service or performance
of the products.
6.6 MR shall furnish SVL with periodic written reports indicating
the MR's activity pertaining to SVL's products.
6.7 MR shall install all products sold in their territory that MR
is compensated for. MR shall train all customers in said
territory that will be using the product in accordance with
SVL authorized materials and policies.
6.8 MR shall not sell, offer for sale or solicit the sale of any
used SVL products without SVL's prior to written approval of
the sale and the terms and conditions thereof.
6.9 MR shall maintain complete confidentiality during the term of
this contract and for a period of three years thereafter with
respect to SVL new product development and trade secrets; and
for a period of one year thereafter with respect to prospect
lists, marketing plans, price lists, commission schedules and
like materials.
6.10 Upon termination of this agreement, MR shall return to SVL,
without keeping any copies in MR's possession, all of the
records, properties and materials related to MR's
representation of SVL, including without limitation customer
lists, promotional and advertising materials, sales aids,
demonstration equipment, orders in progress, tools and
commission schedules. Nothing under this subparagraph shall
prevent MR from retaining records and materials pertaining to
MR's conduct of business activities as an independent
contractor.
6.11 MR shall treat any demonstration material loaned to MR by SVL
as being held in trust; and will return the same to SVL on
demand in the same conditions when furnished to MR, reasonable
wear and tear accepted; and MR will make no act in which would
evidence any ownership by MR of such property.
6.12 MR shall conduct all transactions relating to this agreement
or SVL products as an independent contractor and not as an
agent of SVL. MR shall indicate in all correspondence and
other oral or written communications that MR is not acting as
an agent for SVL when appropriate.
6.13 MR shall not assign nor attempt to assign this Agreement, nor
delegate its duties hereunder without the written consent of
SVL.
6.14 MR shall not make any representations or warranties, express
or implied, that are not duly authorized by SVL in writing.
See section 7.2.
6.15 MR agrees to hold SVL harmless of any actions which are the
responsibility of the MR, including, but not limited to
responsibilities named in the agreement herein, as well as
negligence, fraud, misconduct, warranties caused or made by
MR.
7. SVL'S RESPONSIBILITY.
7.1 SVL shall produce and make available to MR products listed in
Exhibit B so long as said products are offered for sale in the
assigned territory noted in Section 3 herein.
7.2 SVL shall furnish customers with written warranties, such
written warranties shall constitute SVL's only warranties in
lieu of any other, express or implied. The Company makes no
representation or warranty as to the products sold to
Customer, except those set forth in the Company's warranty and
limitation of warranty in effect at the time of confirmation
of order for such products, as such warranty may be modified
by the Company from time to time (the "Warranty"). The
Company's current warranty is set forth in Exhibit D to this
Agreement below. THE COMPANY'S WARRANTY RUNS TO THE ORIGINAL
END-USER ONLY. MR shall make no warranty or other
representation regarding products, express or implied, other
than the Warranty. If MR makes, or if a customer or other user
of the products claims that the MR has made, any warranty or
representation inconsistent with or in addition to the
Warranty, MR shall, at its own expense, defend, indemnify and
hold harmless the Company from and against any claim thereon
of any nature whatsoever. MR further agrees to indemnify and
hold harmless the Company with respect to any additional
warranties made by MR by reason of MR's failure to comply with
any laws, statutes, rules or ordinances in connection with the
sale or resale of the products.
EXCEPT AS EXPRESSLY PROVIDED IN THE COMPANY'S STANDARD
WARRANTY, THE COMPANY MAKES NO WARRANTY OF ANY KIND, EXPRESS
OR IMPLIED, WITH RESPECT TO ANY PRODUCT OR PORTION THEREOF,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
COMPANY SHALL UNDER NO CIRCUMSTANCES BE LIABLE TO CUSTOMER OR
ANY THIRD PARTY FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES OF ANY NATURE WHATSOEVER, EVEN IF THE
COMPANY SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
7.3 SVL shall advertise nationally and provide promotional
programs in support of MR's sales efforts. SVL will seek to
maintain a high profile at selected national and regional
conventions and meetings. SVL will also conduct programs for
the generation of sales leads for the MR.
7.4 SVL shall maintain a national sales effort for the purpose of
actively promoting the use and sale of SVL products. SVL will,
where needed, assist the MR in calling on accounts and will
actively work to enable the MR to capitalize on sales
opportunities.
7.5 SVL shall pay commission on sales in accordance with
commission schedules set out in the attached Exhibit C and at
the times indicated thereon.
7.6 SVL shall establish customer accounts.
7.7 SVL shall ship and invoice the customer directly.
7.8 SVL shall facilitate customer support beyond the warranty
period in accordance with SVL's then-established practice and
cost schedules.
7.9 SVL will not be liable for delay or failure in shipment,
delivery, or other actions of or by SVL caused by
circumstances beyond the reasonable control of SVL, in whole
or in part, directly or indirectly, including, but not limited
to, any acts of God, weather, fires, strikes, embargoes,
insurrections, rebellions, civil disorders, war, declared or
otherwise, civil war, guerrillas warfare, shortages of labor,
material or transportation, or other conditions or causes
beyond SVL's control.
7.10 SVL shall provide MR with records of all invoices and payments
for sales generated in the assigned territory on a timely
basis.
7.11 SVL will add MR as additional named insured on SVL's product
liability insurance coverage.
8. TERM OF AGREEMENT AND TERMINATION.
8.1 This Agreement shall extend to the date specified in Section 1
hereof. It may be extended from time to time by written
extensions signed by both parties as indicated herein.
8.2 This Agreement may be terminated prior to the expiration date
as follows:
a) FOR MATERIAL BREACH. In the event of any
misrepresentation, deceit or other material breach of
this agreement, the party not in default may at
anytime thereafter on written notice, terminate this
Agreement.
b) FOR INSOLVENCY OF MR OR OTHER CAUSE. SVL may, on
written notice, terminate this Agreement upon the
insolvency of the MR: upon any sale, assignment or
change in the ownership or control of the MR; or upon
any other substantial change in MR's method of
conducting MR's business.
c) FOR CHANGE IN OWNERSHIP OR BUSINESS. In the event of
a change in SVL ownership through acquisition, sale,
merger or a change in SVL business strategy, SVL
shall not terminate this agreement until at least six
(6) months from the date of such change.
8.3 Upon termination, SVL agrees not to employ or contract any
direct or indirect affiliates of MR for a period of twelve
(12) months.
9. CONSTRUCTION OF AGREEMENT.
9.1 This Agreement shall be construed according to the laws of the
State of Minnesota. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Agreement shall be
construed as if the invalid, illegal or unenforceable
provision had never been contained herein. Any variation
between any printed portion of this contract and any typed or
handwritten portion shall be resolved in favor of the typed or
handwritten portion as against the printed portion. Any
variation between the terms of this Agreement and the terms of
the Exhibits shall be resolved in favor of the terms of the
Exhibits.
10. INDEPENDENT CONTRACTOR.
10.1 MR is not an employee of SVL for any purpose whatsoever, but
is an independent contractor. SVL shall not have the right to
require MR to do anything which would jeopardize the
relationship of independent contractor between SVL and MR. All
expenses and disbursements incurred by MR in connection with
this Agreement shall be borne wholly and completely by MR. MR
does not have, nor shall MR hold MR out as having, any right,
power or authority to create any contract or obligation,
either express or implied, on behalf of , in the name of, or
binding upon SVL, unless SVL shall consent thereto in writing.
11. DISPUTES AND ARBITRATION.
11.1 The parties agree that any disputes or questions arising
hereunder, including the construction or application of this
Agreement, shall be settled by arbitration in accordance with
the then-existing rules of the American Arbitration
Association. The decision of the arbitrator shall be final and
binding upon the parties both to law and to fact and shall not
be appealable to any court in any jurisdiction.
12. INCORPORATION OF EXHIBITS.
12.1 Exhibits A through D are incorporated by reference as though
set out in full. Each page of such exhibits shall be initialed
by MR when MR delivers this Agreement to SVL, and by SVL when
it executes this Agreement.
13. NOTICES.
13.1 Notices to MR should be given to MR at MR's principal place of
business as shown in Section 1 preceding. Notices to SVL shall
be given to SVL at SVL's principal place of business as shown
in Section 1. All notices shall be effective when deposited in
the U.S. Mail with postage thereon, via registered or
certified mail, return receipt requested.
14. MR'S PLAN.
14.1 At SVL's request, MR shall periodically provide to SVL reports
regarding MR's proposed business plans for sales goals
referred to in Exhibit B. Such plan shall not be effective
until reviewed, accepted, signed and dated by both parties to
this Agreement and physically affixed to it. Failure to submit
a plan or abide by its content will be cause for termination
of this agreement.
15. ENTIRE AGREEMENT.
15.1 This Agreement defines the responsibilities of the parties and
constitutes the entire agreement between them. This Agreement
supersedes any and all prior agreements and trade practices
between the parties and may be modified only in writing signed
by both parties.
16. AUTHORITY TO EXECUTE.
The undersigned persons signing this document personally represent that they
have the authority to do so on behalf of their respective organizations.
Dated and signed by MR this ______ day of _____________________________________
By: ____________________________________________
Printed Name: __________________________________
Title: _________________________________________
Dated and signed by SVL this ______ day of ____________________________________
By: _____________________________________
Printed Name: Byron L. Gilman
Title: Chief Executive Officer
MANUFACTURER REPRESENTATIVE AGREEMENT
EXHIBIT A
MR is hereby authorized to identify and support dealers, promote and
sell all SVL products in Exhibit B in the territory listed below.
TERRITORY ASSIGNMENT
SVL initials _______________________ Date _________________________
MR initials _______________________ Date _________________________
MANUFACTURER REPRESENTATIVE AGREEMENT
EXHIBIT B
PRODUCTS - QUOTAS - MARKETS
The MR identified in this agreement is authorized to and shall promote,
demonstrate and sell the following SurVivaLink products into the identifiable
market in accordance with the agreed upon quota for the term of this agreement:
PRODUCTS: QUOTAS:
MARKETS:
SVL initials _______________________ Date _________________________
MR initials _______________________ Date _________________________
MANUFACTURER REPRESENTATIVE AGREEMENT
EXHIBIT C
COMMISSION SCHEDULE
The MR identified in this agreement will receive commission for their sales as
defined herein. Commission will be paid once the customer pays their invoice in
full.
SVL initials _______________________ Date _________________________
MR initials _______________________ Date _________________________
MANUFACTURER REPRESENTATIVE AGREEMENT
EXHIBIT D
SVL LIMITED PRODUCT WARRANTY
LIMITED WARRANTY SUMMARY
SVL warrants that its products will be free from defects in material and
workmanship for one year from the date of original shipment. Exceptions are as
follows:
A) Electrodes are warranted as noted above only if unopened
(sealed in laminated outer wrap).
B) Repaired products are warranted for 90 days or the remainder
of the original limited warranty, whichever is longer.
LIMITED WARRANTY OBLIGATION
The obligation of SVL is limited to repair or replacement of defective parts;
the limited warranty does not cover any product or part damaged from misuse,
abuse, or neglect, and it does not cover indirect or consequential damages.
As the limited warranty may change from time to time, the limited warranty in
effect at the time of a sale will remain the limited warranty for that product.
The most current limited warranty will prevail in all sales.
THIS IS A SUMMARY OF THE LIMITED WARRANTY. THE ACTUAL TERMS, CONDITIONS, AND
DISCLAIMERS OF THE LIMITED WARRANTY ARE AVAILABLE UPON REQUEST.
SVL initials _______________________ Date _________________________
MR initials _______________________ Date _________________________
5420 Feltl Road
Minneapolis, MN 55343
Tel. 612 939-4181
Fax. 612 939-4191
SURVIVALINK
CORPORATION
This AGREEMENT AND UNDERTAKING, entered into this _____________ day
of _______________________ 1995, between:
SURVIVALINK CORPORATION (HEREINAFTER " SURVIVALINK ")
5420 Feltl Road
Minneapolis, MN 55343
and
________________________________________[hereinafter "RECIPIENT"]
_____________________________
_____________________________
_____________________________
WHEREAS, SURVIVALINK desires to disclose to RECIPIENT certain confidential
and proprietary information relating to SURVIVALINK'S proprietary electrode and
electrode packaging technology (hereinafter "CONFIDENTIAL INFORMATION") for the
purpose of consideration of a proposed technology licensing relationship between
RECIPIENT and SURVIVALINK concerning the proprietary technology, and
WHEREAS, RECIPIENT desires to review such CONFIDENTIAL INFORMATION to
consider the proposed relationship;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and
undertakings set forth herein, it is agreed that:
1. Any written disclosure of CONFIDENTIAL INFORMATION for which RECIPIENT
will be obligated shall be labeled "Confidential". Any oral disclosure of
CONFIDENTIAL INFORMATION to be subject to any obligation shall be identified as
being confidential at the time of disclosure.
2. RECIPIENT shall use the CONFIDENTIAL INFORMATION only for consideration
of the proposed relationship, will disclose the same only to such of its
employees and consultants, if any, who are necessary for such consideration and
who will be bound by the terms hereof, will take all necessary measures to
preserve the confidentiality of such information, and will not disclose such
information to any third party, except with the prior express written consent of
SURVIVALINK.
3. Upon written notice by SURVIVALINK, RECIPIENT will no longer use the
CONFIDENTIAL INFORMATION for any purpose and shall promptly deliver to
SURVIVALINK all materials written or otherwise recorded in a tangible medium,
which relate to the CONFIDENTIAL INFORMATION, and which are in the possession of
the RECIPIENT.
4. RECIPIENT'S obligations of confidentiality and nondisclosure herein will
terminate two (2) years from the date of this agreement.
5. Ownership of intellectual property.
(a) RECIPIENT will obtain no right of any kind to the CONFIDENTIAL
INFORMATION other than the right to use it for the specified purpose stated
herein, and all CONFIDENTIAL INFORMATION remains the property of SURVIVALINK.
(b) RECIPIENT hereby acknowledges and agrees that all right, title and
interest in and to the Confidential Information in the nature of patentable
subject matter, patents, copyrightable subject matter, copyrights, trademarks,
service marks, trade secrets, and the like, and all applications and
registrations therefor, are the legal and equitable property of SURVIVALINK.
(c) RECIPIENT agrees not to use the CONFIDENTIAL INFORMATION to oppose,
contest or engage in any interference procedure against any patent application
which is currently pending or which may later be filed by SURVIVALINK or any
patent issuing thereon.
6. The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties, and their respective successors in interest legal
representatives and assigns.
7. This Agreement shall be construed and interpreted in accordance with the
laws of the State of Minnesota.
8. This Agreement shall not be changed in its terms by any oral agreement
or representation, but only in writing and executed by both parties.
9. The provisions of this Agreement shall be severable.
10. Further conditions applicable in this agreement are as follows
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
IN WITNESS WHEREOF, SURVIVALINK and RECIPIENT have signed below.
RECIPIENT SURVIVALINK Corporation
_______________________ _________________________
Its ___________________ Its _________CEO_________
Dated: ________________ Dated: __________________
Exhibit 11.1
SURVIVALINK CORPORATION
STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 1,100,777 1,766,061 2,649,393 2,285,590 4,196,257
SAB No. 83 -- for stock issued
and options granted at exercise
price less than the initial
public offering price during the
12 months preceding the initial
public offering using the
treasury method 1,829,014 1,829,014 1,829,014 1,829,014 1,829,014
Total 2,929,791 3,595,075 4,478,407 4,114,604 6,025,271
Net loss $ (441,998) $(1,044,998) $(1,846,356) $ (433,230) $(1,018,901)
Net loss per share $ (.15) $ (.29) $ (.41) $ (.11) $ (.17)
FULLY DILUTED:
Average shares outstanding 1,100,777 1,766,061 2,649,393 2,285,590 4,196,257
SAB No. 83 -- for stock issued
and options granted at exercise
price less than the initial
public offering price during the
12 months preceding the initial
public offering using the
treasury method 1,829,014 1,829,014 1,829,014 1,829,014 1,829,014
Total 2,929,791 3,595,075 4,478,407 4,114,604 6,025,271
Net loss $ (441,998) $(1,044,998) $(1,846,356) $ (433,230) $(1,018,901)
Net loss per share $ (.15) $ (.29) $ (.41) $ (.11) $ (.17)
</TABLE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated April 9, 1996, in the
Registration Statement (Form S-1 No. 333- ) and related Prospectus of
SurVivaLink Corporation for the registration of 3,000,000 shares of its Common
Stock.
Ernst & Young LLP
Minneapolis, Minnesota
May 22, 1996
Exhibit 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Byron
L. Gilman and R. Eric Bosler, or either of them, such person's true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person and in such person's name, place and stead, in any and all
capacities, to sign and file with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"), the Registration
Statement on Form S-1 of SurVivaLink Corporation (the "Registration Statement"),
or any registration statement related to this offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act ("462(b)
Registration Statement") and any or all amendments (including post-effective
amendments) to the Registration Statement or a 462(b) Registration Statement,
with all exhibits thereto and other documents in connection therewith, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ BYRON L. GILMAN Chairman, Chief Executive May 20, 1996
Byron L. Gilman Officer, and Director
/S/ R. ERIC BOSLER Chief Financial Officer May 20, 1996
R. Eric Bosler
/S/ RICHARD B. EMMITT Director May 21, 1996
Richard B. Emmitt
/S/ DAVID S. GOLDSTEEN Director May 20, 1996
David S. Goldsteen
/S/ KARL J.F. KROLL Director May 19, 1996
Karl J.F. Kroll
/S/ MARK W. KROLL Director May 19, 1996
Mark W. Kroll
/S/ KENNETH C. MAKI Director May 20, 1996
Kenneth C. Maki
/S/ WARREN S. WATSON Director May 23, 1996
</TABLE>
Warren S. Watson
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,480,786
<SECURITIES> 0
<RECEIVABLES> 174,079
<ALLOWANCES> 0
<INVENTORY> 354,439
<CURRENT-ASSETS> 3,021,876
<PP&E> 663,809
<DEPRECIATION> 138,287
<TOTAL-ASSETS> 3,576,912
<CURRENT-LIABILITIES> 355,702
<BONDS> 0
0
0
<COMMON> 7,644,281
<OTHER-SE> (4,423,071)
<TOTAL-LIABILITY-AND-EQUITY> 3,576,912
<SALES> 434,321
<TOTAL-REVENUES> 434,321
<CGS> 408,301
<TOTAL-COSTS> 1,076,853
<OTHER-EXPENSES> (31,932)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,018,901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,018,901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,018,901)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
