<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
IMAGE GUIDED TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
COLORADO 3829 84-1139082
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
</TABLE>
------------------------
5710-B FLATIRON PARKWAY
BOULDER, COLORADO 80301
(303) 447-0248
(Address, including zip code, and telephone number, including area code, of
business and principal executive offices)
------------------------------
PAUL L. RAY, CHIEF EXECUTIVE OFFICER
IMAGE GUIDED TECHNOLOGIES, INC.
5710-B FLATIRON PARKWAY
BOULDER, COLORADO 80301
(303) 447-0248
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
WILLIAM E. TANIS, ESQ. ROBERT S. BROWN, ESQ.
IRELAND, STAPLETON, PRYOR & PASCOE, BROCK, FENSTERSTOCK, SILVERSTEIN,
P.C. MCAULIFFE & WADE, LLC
1675 BROADWAY, 26TH FLOOR ONE CITICORP CENTER, 56TH FLOOR
DENVER, COLORADO 80202 NEW YORK, NEW YORK 10022-4614
(303) 623-2700 (212) 371-2000
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration 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
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
1,380,000
Common Stock, no par value.... shares(2) $6.00 $8,280,000 $2,855.17
Warrants to purchase Common
Stock(3)..................... 120,000 0.001 120 0.04
Common Stock underlying
warrants, no par value....... 120,000(4) 6.60 792,000 273.10
Total......................... -- -- 9,072,100 3,128.31
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) Includes 180,000 shares that the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.
(3) To be acquired by the Underwriters.
(4) Issuable upon exercise of the Underwriters' Warrants.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
[SUBJECT TO COMPLETION, DATED JULY 29, 1996]
PROSPECTUS
1,200,000 SHARES
LOGO HERE
IMAGE GUIDED
TECHNOLOGIES, INC.
COMMON STOCK
------------------
Image Guided Technologies, Inc. (the "Company") is offering 1,200,000 shares
(the "Shares") of common stock, no par value (the "Common Stock").
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that any such market will develop upon
completion of this offering or that, if developed, will be sustained. It is
currently anticipated that the initial public offering price will be between
$5.00 and $6.00 per share. The Company has applied to have the Shares quoted on
the Nasdaq SmallCap-TM- Market under the proposed symbol " ." For a
description of the factors considered in determining the initial public offering
price, see "Underwriting."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total (3)................................ $ $ $
</TABLE>
(1) Does not include additional consideration to be received by Hampshire
Securities Corporation, the representative (the "Representative") of the
several underwriters (the "Underwriters"), in the form of (a) a 3%
non-accountable expense allowance and (b) warrants entitling the
Representative to purchase up to 120,000 shares of the Common Stock (the
"Representative's Warrants"). The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses of the offering payable by the Company
of $ , including the Underwriters' non-accountable expense allowance,
assuming no exercise of the Representative's over-allotment option.
(3) The Company has granted the Representative an option, exercisable by the
Representative within 45 days after the date of this Prospectus, to purchase
up to an aggregate of 180,000 shares of Common Stock, solely to cover
over-allotments, if any. If the Representative exercises such option in
full, the Price to Public, Underwriting Discounts and Commissions, and
Proceeds to Company will be $ , $ , and $ , respectively. See
"Underwriting."
------------------------------
The Shares are being offered by the several Underwriters, subject to prior
sale, when, as, and if delivered to, and accepted by them, and subject to their
right to reject orders in whole or in part and to certain other conditions. It
is expected that delivery of certificates will be made against payment therefor
at the offices of Hampshire Securities Corporation on or about ,
1996.
------------------------
HAMPSHIRE SECURITIES CORPORATION
---------------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
Flashpoint-Registered Trademark-, Dynamic Reference
Frame-Registered Trademark- and Pixsys-TM- are trademarks of the Company.
------------------------
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as it
may determine to furnish or as may be required by law, including Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
[A photograph appears on this page which depicts the Company's FlashPoint
product and the use of such product in a medical application. From top to
bottom, the photograph shows (i) an overhead mounted sensor assembly, (ii) a
small square picture of the Company's sensor assembly, dynamic reference frame,
handheld probe and host computer, (iii) a handheld probe with light emitting
diodes overlapping the top left hand corner of a square picture of the Company's
optical localizer in an operating microscope setting with the words "Operating
Microscope Application" beneath such picture and the word
"FLASHPOINT-Registered Trademark-" above such picture and (iv) a small picture
of the Company's dynamic reference frame with the words "Dynamic Reference
Frame-Registered Trademark-" immediately to the right at the bottom of such
picture. Depictions of a human skull, a human body and three doctors standing
over an operating room table are superimposed onto the background of the
photograph in addition to scattered words and numbers such as those that appear
on an radiological image.
Another photograph appears on the inside of the back cover of the Prospectus
which depicts the Company's Pixsys product and the use of such product in
commercial applications. From top to bottom, the photograph shows (i) a small
square picture of the Company's sensor assembly, dynamic reference frame,
handheld probe and host computer with the word "PIXSYS-TM-" immediately to the
left of such picture, (ii) a rectangular picture of a hand holding a probe with
light emitting diodes and using such probe in, as the caption beneath describes,
a "Product Design Application", (iii) a handheld probe with light emitting
diodes and (iv) a small square picture of a sensor array mounted on a tripod
with a hand holding a probe and using such probe in, as the caption beneath
describes, an "Inspection Application." Depictions of two automobiles and a
motorcycle are superimposed onto the background of the photograph.]
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS DOES NOT GIVE EFFECT TO (I) THE EXERCISE OF THE REPRESENTATIVE'S
OVER-ALLOTMENT OPTION, (II) THE REPRESENTATIVE'S WARRANTS, (III) UP TO 710,840
SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF OPTIONS GRANTED UNDER THE
COMPANY'S 1994 STOCK OPTION PLAN (THE "PLAN"), OR (IV) UP TO 50,000 SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE OF WARRANTS OUTSTANDING AS OF THE DATE
HEREOF. IN ADDITION, UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS GIVES EFFECT TO THE CONVERSION OF 83,332 SHARES OF SERIES A PREFERRED
STOCK OF THE COMPANY INTO 380,363 SHARES OF COMMON STOCK, AS ADJUSTED FOR
CERTAIN ANTI-DILUTION PROVISIONS, UPON THE CLOSING OF THIS OFFERING.
THE COMPANY
Image Guided Technologies, Inc. (the "Company") designs, develops,
manufactures and markets products for real-time, precise, free-hand,
localization of points in three dimensional ("3D") space. The Company's optical
localizers, typically consisting of a number of custom-manufactured light
emitting diodes ("LEDs") mounted on a device or instrument to be tracked in 3D
space, a relative position dynamic reference device connected to the measured
object, a multi-camera array for detecting the LED emissions, a proprietary
microprocessor-based control system, and proprietary software to calculate the
digital coordinate location of the LEDs, have both medical and industrial
applications. The Company manufactures its FlashPoint localizer for medical uses
and its Pixsys localizer for industrial uses.
MEDICAL APPLICATIONS. The Company's FlashPoint localizer is a key
component of the anatomical image display workstation used by physicians to
perform image guided surgery, a specialty procedure in the field of
minimally invasive surgery. When the FlashPoint localizer is combined with
the imaging software provided by the Company's customers, such as Carl Zeiss
("Zeiss"), GE Medical Systems ("GEMS"), Surgical Navigation Technologies,
Inc./Sofamor Danek Group ("SNT/Sofamor Danek") and DeeMed International
("DeeMed"), all of whom use the Company's FlashPoint product, the location
of specially designed surgical instruments can be tracked in relation to the
patient's anatomy during surgical procedures by display as an overlay on
medical images (such as magnetic resonance imaging ("MRI") and computerized
tomography ("CT")). The Company believes that the ability of the surgeon to
track the relative location of specially designed surgical instruments on
the image display workstation can result in less invasive procedures that
lead to shorter hospital stays and improved patient outcomes.
INDUSTRIAL APPLICATIONS. The Company's Pixsys localizer is used in
various industrial applications to measure the position or shape of objects
in 3D space. Illustrative uses include inspection of parts by
Harley-Davidson, Inc., detection of surface deformities in car bodies during
manufacture by Daimler-Benz and as a 3D navigation aid in its zero-gravity
chamber by the United States National Aeronautic and Space Administration
("NASA").
The Company's business strategy is to systematically enhance the performance
of its optical localizers while expanding the market for such products. With
respect to enhancing its products, the Company is seeking to increase the
products' accuracy, enlarge the field-of-view, increase the sample/ frame rate
(throughput) and improve the customer computer interface. With regard to market
expansion, the Company is seeking to identify additional measurement
applications for its products.
The Company was founded in 1986, and was incorporated in Colorado in
February 1990. The Company's place of business is at 5710-B Flatiron Parkway,
Boulder, Colorado 80301, and its telephone number is (303) 447-0248.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......... 1,200,000 shares
Common Stock outstanding:
Before the Offering....................... 2,084,699(1)
After the Offering........................ 3,284,699(1)(2)
</TABLE>
- ------------------------
(1) Excludes up to (i) 710,840 shares of Common Stock issuable upon the exercise
of options granted under the Plan and (ii) 50,000 shares of Common Stock
issuable upon the exercise of warrants outstanding as of the date hereof.
(2) Excludes the exercise of (i) the Representative's over-allotment option and
(ii) the Representative's Warrants.
<TABLE>
<S> <C>
Risk Factors................................ The purchase of the shares of Common Stock of-
fered hereby involves a high degree of risk
and immediate substantial dilution.
Prospective investors should carefully review
and consider the information set forth under
"Risk Factors" and "Dilution."
Use of Proceeds............................. Repayment of indebtedness, research and
development, marketing and technical support,
working capital and other general corporate
purposes. See "Use of Proceeds."
Proposed SmallCap Market Trading Symbol.....
Proposed Stock Exchange Trading
Symbol.....................................
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements and the Notes thereto
included elsewhere in this Prospectus. The statement of operations data for the
years ended December 31, 1994 and 1995, and the balance sheet data at December
31, 1995, are derived from, and should be read in conjunction with, the
Company's Financial Statements and the Notes thereto audited by Price Waterhouse
LLP, independent accountants, included elsewhere in this Prospectus. The
statement of operations data for the six month periods ended June 30, 1995 and
1996, and the balance sheet data at June 30, 1996, have been derived from
unaudited interim financial statements and include, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the results of operations for such periods. The
operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year or any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------ ----------------------------
1994 1995 1995 1996
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................. $ 908,146 $ 1,883,802 $ 496,865 $ 1,746,657
Gross Profit........................................ 405,521 1,090,180 237,956 1,012,854
Operating Expenses.................................. 1,448,599 1,990,533 974,913 849,367
Income (Loss) from Operations....................... (1,043,078) (900,353) (736,957) 163,487
Net Income (Loss)................................... $ (1,060,255) $ (1,051,949) $ (725,851) $ 125,834
Pro forma Net Income (Loss) per Common Share (1).... $ (0.50) $ 0.04
Pro forma Weighted Average Number of Common Shares
Outstanding (2).................................... 2,118,549 2,825,613
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------
PRO FORMA AS
DECEMBER 31, 1995 ACTUAL ADJUSTED (3)
----------------- -------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents..................................... $ 31,822 $ 137,851 $ 4,076,551
Working Capital (Deficit)..................................... (695,147) (296,840) 4,503,160
Total Assets.................................................. 858,615 1,455,840 5,394,540
Notes Payable................................................. 775,000 775,000 --
Accumulated Deficit........................................... (3,380,855) (3,255,021) (3,255,021)
Shareholder's Equity (Deficit)................................ (603,672) (140,338) 4,659,662
</TABLE>
- ------------------------
(1) Supplemental pro forma net income (loss) per share for the year ended
December 31, 1995 and the six-month period ended June 30, 1996, assuming the
notes payable were retired at the beginning of the period using the net
proceeds of the offering, are $(0.45) and $0.06, respectively. See "Use of
Proceeds", "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and Note 1 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
calculation of the pro forma weighted average number of common shares
outstanding.
(3) Pro forma as adjusted to give effect to the sale of the Shares offered by
the Company at an assumed initial public offering price of $5.00 per Share,
after the deduction of underwriting discounts and commissions and estimated
offering expenses and giving effect to the anticipated application of the
net proceeds therefrom. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY IS HIGHLY SPECULATIVE, INVOLVES A
HIGH DEGREE OF RISK AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT
DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
HEREIN, INCLUDING THE FINANCIAL STATEMENTS AND THE NOTES THERETO, THE RISK
FACTORS SET FORTH BELOW:
LIMITED HISTORY OF PROFITABILITY; POTENTIAL FLUCTUATIONS IN OPERATING
RESULTS. The Company has experienced significant operating losses since its
inception, had an accumulated deficit of $3,380,855 at December 31, 1995 and
$3,255,021 at June 30, 1996 and had a net tangible book value deficit of
$603,672 at December 31, 1995 and $140,338 at June 30, 1996. While the Company
has been profitable during the six months ended June 30, 1996, there can be no
assurance that the Company will ever generate sufficient revenues to attain
profitability on an annual basis. In addition, because the Company generally
ships its products on the basis of purchase orders, operating results in any
quarter are highly dependent on orders booked and shipped in that quarter and,
accordingly, may fluctuate materially from quarter to quarter. The Company's
operating expense levels are based on the Company's internal forecasts of future
demand and not on firm customer orders. Failure by the Company to achieve these
internal forecasts could result in expense levels which are inconsistent with
actual revenues, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, the Company's
quarterly results may also be affected by fluctuating demand for the Company's
products, declines in the average selling prices for its products, and by
increases in the costs of the components and subassemblies acquired by the
Company from vendors. See "Management's Discussion and Analysis of Financial
Condition and Results Of Operations."
DEPENDENCE ON A SINGLE TYPE OF PRODUCT. Substantially all the Company's
revenues are derived from sales of its optical localizers. Although the Company
is currently seeking to expand the markets for its localizers, there can be no
assurance that it will be successful. Unless the Company can expand its product
line or develop additional applications for its products, the Company will be
subject to all the risks inherent in a single product enterprise, including
increased risk of technological obsolescence. See "Risk Factors--Uncertainty of
Market Acceptance."
UNCERTAINTY OF MARKET ACCEPTANCE. The market for optical localizers has
only recently commenced to develop. Two of the Company's largest medical device
customers, Zeiss and SNT/Sofamor Danek, only began commercial sale of their
image guided surgery products in 1996. If the market for optical localizers
fails to continue to develop, develops more slowly than the Company anticipates
or ceases, the Company's business, financial condition and results of operations
would be materially and adversely affected. Demand for optical localizers could
be affected by numerous factors outside the Company's control, including, among
others, market acceptance by medical and industrial customers, changes in
governmental regulation and the introduction of new or superior competing
technologies. See "Business."
RAPID TECHNOLOGICAL CHANGE. The market for localizers is characterized by
rapid and significant technological change. There can be no assurance that the
Company's competitors will not succeed in developing or marketing products or
technologies that are more effective and/or less costly and which render the
Company's products obsolete or non-competitive. In addition, new technologies
and procedures could be developed for medical and other industries that replace
or reduce the value of the Company's products. The Company's success will depend
in part on its ability to respond quickly to technological changes through the
development and improvement of its products. Accordingly, the Company has
estimated that approximately $1,000,000 (20.8%) of the estimated net proceeds of
this offering, assuming an initial public offering price of $5.00 per Share,
will be allocated to fund further research and development activities, and the
Company believes that a substantial amount of capital will be required to be
allocated to such activities in the future. There can be no assurance that the
Company's product development efforts will be successful. The failure by the
Company to improve its
6
<PAGE>
existing products and develop new products could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Research and Development" and "Business--Competition."
CUSTOMER CONCENTRATION; PATENTS ON SYSTEMS THAT UTILIZE LOCALIZERS. For the
year ended December 31, 1995 and the six months ended June 30, 1996, the three
largest customers of the Company accounted for approximately 70% and 88%,
respectively, of the revenues of the Company. The loss of, or the substantial
diminution of purchases from the Company by, any of these customers could have a
material adverse effect on the Company. None of these customers has entered into
any long-term minimum purchase agreements with the Company. Accordingly,
purchases from the Company by such customers in any prior period may not be
indicative of orders or purchases in any future period. See "Risk
Factors--Uncertainty of Market Acceptance," "Risk Factors--Rapid Technological
Change," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--Customers and Use" and "Business--Backlog."
There are a number of patents that utilize a localizer as part of the
invention, several of which relate to the medical industry. One of the patents
relating to the medical industry is a patent granted to St. Louis University on
January 24, 1995 (the "SLU Patent"), and subsequently licensed to Surgical
Navigation Technologies, Inc. ("SNT"), one of the Company's major customers. In
general, the SLU Patent covers a particular technique for determining the
position of a surgical probe within a patient's body on an historical image of
that body. The Company is not in a position to evaluate whether its customers
may be infringing the SLU Patent or any of the other patents. If any
infringement claim is brought or threatened against any of the Company's
customers, it could have a material adverse effect on orders of the Company's
products from these customers. See "Business--Intellectual Property."
ABSENCE OF PATENT PROTECTION. While the Company has been issued one U.S.
patent and has five U.S. patent applications pending, the Company primarily
relies on a combination of trade secret and copyright laws, together with
nondisclosure agreements to protect its know-how and proprietary rights. There
can be no assurance that such measures will provide adequate protection for the
Company's intellectual property rights, that disputes with respect to the
ownership of its intellectual property rights will not arise, that the Company's
trade secrets or proprietary technology will not otherwise become known or be
independently developed by competitors or that the Company can otherwise
meaningfully protect its intellectual property rights. Furthermore, there can be
no assurance that others will not develop similar products or software,
duplicate the Company's products or software or that third parties will not
assert intellectual property infringement claims against the Company. The
Company believes that the manufacture and sale of its FlashPoint localizer will
not infringe the SLU Patent, since a localizer is only a component part in the
system patented by SLU and since the Company's FlashPoint localizer has
substantial non-infringing uses. Moreover, 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 meaningful competitive
advantages to the Company or that any of the Company's pending or future patent
applications will be issued. The failure of the Company to protect its
proprietary rights could have a material adverse effect on its business,
financial condition and results of operations. See "Business--Intellectual
Property."
Litigation may be necessary to protect the Company's intellectual property
rights and trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement or invalidity
(including, without limitation, claims brought by parties whose technology such
as that which may be the basis of the SLU Patent, utilize a localizer). Such
litigation could also result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business and financial
condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may be required to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be
7
<PAGE>
available to the Company on reasonable terms or at all. In addition, should the
Company determine to litigate such claims, such litigation could also result in
substantial costs and diversion of resources and could materially and adversely
affect the Company's business, financial condition and results of operations,
regardless of the outcome of the litigation. See "Business--Intellectual
Property."
COMPETITION. The Company's primary competitor in the medical market
currently is Northern Digital, Inc. ("NDI"). In addition, companies with
substantially greater financial, technical, marketing, manufacturing and human
resources, as well as name recognition, than the Company may also enter the
market. Competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and to devote substantially
greater resources to the development, marketing and sale of their products than
the Company. The Company's customers may determine to develop their own
localizers to insure control over their localizer technology or for other
reasons. Furthermore, such competitors may develop technology other than that
based on infrared optics that is more effective or economical than the
technology of the Company in localizing a point in space. Any failure by the
Company to develop products that compete favorably in the marketplace would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Competition."
POSSIBLE NEED FOR ADDITIONAL FINANCING. Based on the Company's operating
plan, the Company believes that the net proceeds of this offering, together with
funds from operations, will be sufficient to satisfy its capital requirements
and finance its plans for expansion for at least the next 18 months. Such belief
is based on certain assumptions, and there can be no assurance that such
assumptions are correct. In addition, contingencies or opportunities may arise
which would require the Company to obtain additional capital. Accordingly, there
can be no assurance that such resources will be sufficient to satisfy the
Company's capital requirements for such period. After such 18-month period, the
Company may require additional financing. Such financing may take the form of
the issuance of common or preferred stock or debt securities, or may involve
bank financing. There can be no assurance that the Company will be able to
obtain such additional capital on a timely basis, on favorable terms or at all.
GOVERNMENT REGULATION. The Company's FlashPoint localizer is incorporated
into medical devices that are subject to extensive regulation by the FDA and, in
some instances, by foreign and state governments. The FDA regulates the clinical
testing, manufacture, labeling, sale, distribution, and promotion of medical
devices. Before a new device can be introduced into the market, the manufacturer
must obtain market clearance through either the 510(k) premarket notification
process or the lengthier and more costly premarket approval ("PMA") application
process. 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
premarket clearance or premarket approval for devices, 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.
The Company believes that the FlashPoint localizer is a medical device
component not subject to the full panoply of the FDA medical device regulations,
including the market clearance requirements. The medical equipment manufacturers
that incorporate the FlashPoint localizer into their products are, however,
required to obtain market clearance from the FDA for such products.
Modifications to such products manufactured by the medical equipment
manufacturers will require additional clearances or approvals, if such
modifications could significantly effect the safety and effectiveness of the
devices or establish a new intended use for the devices. There can be no
assurance that the Company's customers have complied or will be able to comply
with all applicable market clearance requirements. Failure on the part of the
Company's customers to comply with such requirements could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Government Regulation."
8
<PAGE>
There can be no assurance that the FDA will not require, or change its
interpretations or regulations so as to require, the Company to obtain 510(k)
clearance for its FlashPoint localizer apart from or in addition to any market
clearances obtained by its medical device customers. Failure of the Company to
comply with such market clearance requirements could have a material adverse
affect on the Company's business, financial condition and results of operations.
See "Business--Government Regulation."
Products manufactured by the Company and its medical device customers that
incorporate the Company's products are subject to continuing regulation by the
FDA. FDA enforcement policy strictly prohibits the promotion of products for any
uses other than those for which clearance or approval was obtained. The
Company's manufacturing facilities and those of its medical device customers
that incorporate its products may also be subject to periodic inspection for
compliance with good manufacturing practices ("GMP") and other regulatory
requirements by the FDA and comparable state agencies. In addition,
international sales of medical devices are subject to foreign regulatory
requirements, which vary from country to country. Violations of regulatory
requirements of the FDA or foreign or state regulatory agencies or changes in
such regulations or interpretations of such regulations, could have a material
adverse affect on the Company's business, financial condition and results of
operations. See "Business--Government Regulation."
HEALTH CARE REFORM. The health care industry is undergoing fundamental
changes as a result of political, economic and regulatory influences. In the
United States, comprehensive programs have been proposed that seek to increase
access to health care for the uninsured, control the escalation of health care
expenditures within the economy and use health care reimbursement policies to
help control the federal deficit. The Company anticipates that Congress and
state legislatures will continue to review and assess alternative health care
delivery systems and methods of payment and public debate of these issues will
likely continue. Due to uncertainties regarding the outcome of reform
initiatives and their enactment and implementation, the Company cannot predict
which, if any, of such reform proposals will be adopted or when they might be
adopted. Other countries are also considering health care reform. Significant
changes in health care systems could have a substantial impact on the manner in
which the Company conducts its business and could have a material adverse effect
on the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends in significant
part on the continued contribution of certain key management and technical
personnel, including: Paul L. Ray, Chairman of the Board and Chief Executive
Officer of the Company; Robert E. Silligman, President and Chief Operating
Officer of the Company; Waldean Schulz, Vice President, Technology and Secretary
of the Company; and Jeffrey J. Hiller, Vice President, Finance and Chief
Financial Officer of the Company. Although the Company has employment contracts
with Mr. Silligman through November 30, 1997 and each of the other three
individuals through December 31, 1997, the loss of services of any of these
individuals could have a material adverse effect on the Company. The Company has
obtained, owns and is the sole beneficiary of key man life insurance policies in
the amount of $1,000,000 on the lives of each of Mr. Ray and Mr. Silligman. The
Company's growth and profitability also depend on its ability to attract and
retain other management and technical personnel. See "Management."
RISK OF PRODUCT LIABILITY CLAIMS. The Company faces an inherent business
risk of exposure to product liability claims in the event that the use of its
products is alleged to have resulted in adverse effects. To date, no product
liability claims have been asserted against the Company. The Company maintains a
product liability and commercial general liability insurance policy with
coverage of $1,000,000 per occurrence and an annual aggregate maximum coverage
of $2,000,000 ($1,000,000 for lawsuits outside the United States, Canada and
Puerto Rico). The Company's product liability and general liability policy is
provided on an occurrence basis and is subject to annual renewal. There can be
no assurance that liability claims will not exceed the coverage limits of such
policy or that such
9
<PAGE>
insurance will continue to be available on commercially reasonable terms or at
all. If the Company does not or cannot maintain sufficient liability insurance,
its ability to market its products could be significantly impaired. See
"Business--Product Liability Insurance."
IMMEDIATE AND SUBSTANTIAL DILUTION. At June 30, 1996, the Company has a pro
forma net tangible book value per share of ($0.07). Investors purchasing the
Shares will therefore incur immediate, substantial dilution of $3.58 per share
of Common Stock (at an assumed initial public offering price of $5.00 per Share
and after underwriting discounts and estimated offering expenses payable by the
Company). See "Dilution."
ARBITRARY OFFERING PRICE. The public offering price of the Shares has been
determined by negotiation between the Company and the Representative. Among the
factors considered in such negotiations were (i) an assessment of the Company's
future prospects, (ii) the experience of the Company's management, (iii) the
current financial position of the Company, (iv) the prevailing conditions in the
securities markets, including the market value of the publicly traded common
stock of companies in similar industries, (v) the market conditions for new
offerings of securities and (vi) the demand for similar securities of comparable
companies. See "Underwriting."
NO PRIOR MARKET FOR THE COMMON STOCK. Prior to this offering, there has
been no public market for the Common Stock, and there can be no assurance that
an active trading market therefore will develop or, if any such market develops,
that it will be sustained. Accordingly, purchasers of the Common Stock may
experience difficulty selling or otherwise disposing of their shares of Common
Stock.
DIVIDENDS. The Company has not paid any dividends on the Common Stock since
inception and does not intend to pay any dividends to its shareholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. See "Dividend Policy" and
"Description of Securities--Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE. The sale, or availability for sale, of a
substantial number of shares of Common Stock in the public market subsequent to
this offering pursuant to Rule 144 under the Securities Act ("Rule 144") or
otherwise could materially adversely affect the market price of the Common Stock
and could impair the Company's ability to raise additional capital through the
sale of its equity securities or debt financing. The availability of Rule 144 to
the holders of restricted securities of the Company would be conditioned on,
among other things, the availability of certain public information concerning
the Company. All of the 2,084,699 shares of Common Stock outstanding immediately
prior to the closing of this offering are "restricted securities" as that term
is defined in Rule 144 and may, under certain circumstances, be sold without
registration under the Securities Act. Ordinarily, any shares issuable upon
exercise of options, pursuant to Rule 701 under the Securities Act, could be
sold publicly commencing 90 days after the Company becomes a reporting Company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Holders of substantially all of the outstanding shares of Common Stock,
including all executive officers and directors of the Company, have agreed,
however, not to sell or otherwise dispose of any securities of the Company for a
period of 18 months from the date of this Prospectus without the
Representative's prior written consent.
The holders of the Representative's Warrants will have certain demand and
"piggy back" registration rights with respect to such warrants and the shares of
Common Stock underlying such warrants (the "Warrant Shares") commencing one year
after the date hereof. If the Representative should exercise its registration
rights to effect a distribution of the Representative's Warrants or the Warrant
Shares, the Representative, prior to and during such distribution, will be
unable to make a market in the Company's securities, which may therefore be
limited. If the Representative ceases making a market in the Common Stock, the
market and market prices for the Common Stock may be materially adversely
affected, and holders thereof may be unable to sell or otherwise dispose of
shares of Common Stock. See "Shares Eligible For Future Sale" and
"Underwriting."
10
<PAGE>
SUBSTANTIAL OPTIONS AND WARRANTS RESERVED; CONTINGENT ISSUANCES OF COMMON
STOCK. The Company has reserved 800,000 shares of Common Stock for issuance
pursuant to the Company's 1994 Stock Option Plan (the "Plan"). To date options
to purchase an aggregate of 710,840 shares of Common Stock have been granted
pursuant to the Plan and warrants to purchase an additional 50,000 shares of
Common Stock are outstanding, although the holders of all of such options and
warrants have agreed not to sell any shares of Common Stock issuable upon
exercise of such options and warrants for a period of 18 months from the date of
this Prospectus. The Company will also sell to the Representative in connection
with this offering, for nominal consideration, the Representative's Warrants to
purchase an aggregate of 120,000 shares of Common Stock at a price per share
equal to 110% of the initial public offering price per share, subject to
adjustment as provided therein. The Company has agreed that, under certain
circumstances, it will register under federal and state securities laws the
Representative's Warrants and/or the Warrant Shares. The existence of the
Representative's Warrants, the outstanding options issued under the Plan, and
such other warrants may prove to be a hindrance to future financings, since the
holders of such warrants and options may be expected to exercise them at a time
when the Company would otherwise be able to obtain additional equity capital on
terms more favorable to the Company. See "Management" and "Underwriting--
Representative's Warrants."
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
may be highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new products by the
Company or its competitors, FDA and international regulatory actions,
developments with respect to patents or proprietary rights, changes in health
care policy in the United States or internationally, changes in stock market
analyst recommendations regarding the Company, other companies selling
components to the medical device industry and general market conditions may have
a significant effect on the market price of the Common Stock. In addition, the
stock market has from time to time experienced significant price and volume
fluctuations that are unrelated to operating performance of particular
companies. These broad market fluctuations may adversely affect the market price
of the Common Stock.
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS. The Company's Articles of
Incorporation authorizes the Board of Directors to issue up to 2,500,000 shares
of preferred stock. The preferred stock may be issued in one or more series, the
terms of which may be determined at the time of issuance by the Board of
Directors, without further action by shareholders, and may include, among other
things, voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights, and sinking fund provisions. At the date hereof, there are outstanding
83,332 Shares of Series A Preferred Stock which will be mandatorily converted
into an aggregate of 380,363 Shares of Common Stock upon the closing of this
offering. The Company has no present plans for the issuance of any additional
preferred stock. However, the issuance of any such preferred stock could
materially adversely affect the rights of holders of Common Stock and,
therefore, could reduce the value of the Common Stock. In addition, specific
rights granted to future holders of preferred stock could be used to restrict
the Company's ability to merge with, or sell its assets to, a third party. The
ability of the Board of Directors to issue preferred stock could discourage,
delay or prevent a takeover of the Company, thereby preserving control of the
Company by the current shareholders. See "Description of Securities."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,200,000 Shares
offered hereby are estimated to be approximately $4,800,000 (approximately
$5,583,000 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $5.00 per Share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The Company presently intends to use the net proceeds of this
offering as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET
APPLICATION OF NET PROCEEDS AMOUNT PROCEEDS
- -------------------------------------------------------------- ------------- -------------------------
<S> <C> <C>
Repayment of indebtedness(1).................................. $ 875,690 18.2%
Research and Development...................................... 1,000,000 20.8%
Marketing and Technical Support(2)............................ 600,000 12.5%
General Corporate and Working Capital purposes(3)............. 2,324,310 48.5%
------------- -----
$ 4,800,000 100.0%
------------- -----
------------- -----
</TABLE>
- ------------------------
(1) The Company intends to repay approximately $875,690, consisting of $775,000
in principal on outstanding loans plus $100,690 in interest accrued through
August 30, 1996. These loans were made in 1995 and used for working capital
and other general corporate purposes. The loans bear interest at 11% per
annum and mature upon the earlier of the closing of a public offering with
gross proceeds of at least $5,000,000 or June 30, 1997. See "Certain
Transactions".
(2) Includes product literature costs and salaries and associated costs of
additional marketing and technical support personnel.
(3) The balance of the estimated net proceeds will be used for general corporate
and working capital purposes. The Company may also utilize a portion of the
proceeds of this offering to acquire or license technology. While the
Company is currently evaluating various technologies, it has no agreements,
arrangements or undertakings with any third party for any acquisitions or
licenses. There can be no assurance that any new technology will be acquired
or licensed or that, if consummated, any acquisition or license will be
successful. See "Business--Research and Development."
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the sale of the Shares based upon the Company's currently
contemplated operations, the Company's business plan and current economic and
industry conditions and is subject to reapportionment among the categories
listed above or to new categories in response to, among other things, changes in
its plans, economic and industry conditions and future revenues and
expenditures. The amount and timing of expenditures will vary depending on a
number of factors, including changes in the Company's contemplated operations or
business plan and changes in economic and industry conditions.
Based on the Company's business plan, the Company believes that the net
proceeds of this offering, together with funds generated by continuing
operations, will be sufficient to permit the Company to conduct its operations
as currently contemplated for at least the next 18 months. Such belief is based
on certain assumptions, and there can be no assurance that such resources will
be sufficient for such purpose. The Company may be required to raise substantial
additional capital in the future in order to expand operations. In addition,
contingencies may arise which may require the Company to obtain additional
capital. There can be no assurance that the Company will be able to obtain such
capital from any other sources on favorable terms or at all. See
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Pending the use of the net proceeds for the above purposes, the Company
intends to invest such funds in short-term, investment-grade securities,
including government obligations and money market instruments.
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock since its
inception, and does not expect to pay cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business.
12
<PAGE>
CAPITALIZATION
The following table sets forth the short term debt and capitalization of the
Company at June 30, 1996 (i) on an actual basis, (ii) on a pro forma basis to
reflect the mandatory conversion of the 83,332 shares of outstanding Series A
Preferred Stock into 380,363 shares of Common Stock upon the closing of this
offering and (iii) on a pro forma, as adjusted basis to reflect such conversion
and to give effect to the application by the Company of the estimated net
proceeds from the sale of the Shares, assuming an initial public offering price
of $5.00 per Share. See "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------------- -------------- --------------
<S> <C> <C> <C>
Short Term Notes Payable (1)...................................... $ 775,000 $ 775,000 $ --
-------------- -------------- --------------
-------------- -------------- --------------
Shareholders' Equity (Deficit):
Series A Convertible Preferred Stock, no par value; 2,500,000
shares authorized, 83,332 issued and outstanding; 2,416,668
shares authorized; none issued and outstanding pro forma or pro
forma as adjusted.............................................. 999,960 -- --
Common Stock, no par value; 10,000,000 shares authorized;
1,704,336 shares issued and outstanding actual, 2,084,699
shares issued and outstanding pro forma, 3,284,699 shares
issued and outstanding pro forma as adjusted................... 2,114,723 3,114,683 7,914,683
Accumulated Deficit............................................. (3,255,021) (3,255,021) (3,255,021)
-------------- -------------- --------------
Total Shareholders' Equity (Deficit)............................ (140,338) (140,338) 4,659,662
-------------- -------------- --------------
Total Capitalization.......................................... $ (140,338) $ (140,338) $ 4,659,662
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
- ------------------------
(1) See Notes 5 and 9 of Notes to Financial Statements for information
concerning the Company's indebtedness.
13
<PAGE>
DILUTION
The pro forma net tangible book value (Deficit) of the Company at June 30,
1996, was $(140,338), or $(0.07) per share of Common Stock. Pro forma net
tangible book value per share of Common Stock represents the tangible assets
(total assets less intangible assets) less total liabilities, divided by the
number of shares of Common Stock outstanding assuming conversion of all
outstanding shares of the Company's Preferred Stock. After giving effect to the
sale of the Shares offered hereby at an assumed initial public offering price of
$5.00 per Share and the application of the net proceeds therefrom, the net
tangible book value of the Common Stock at June 30, 1996 would have been
approximately $4,659,662 or $1.42 per share. This represents an immediate
increase in net tangible book value of $1.49 per share to existing shareholders
and an immediate dilution to new investors of $3.58 per share.
<TABLE>
<CAPTION>
PER SHARE
-----------
<S> <C> <C>
Assumed initial public offering price.............................................. $ 5.00
Pro forma net tangible book value at June 30, 1996................................. $ (0.07)
Increase attributable to new investors............................................. $ 1.49
Pro forma net tangible book value after this offering (1).......................... $ 1.42
-----
Dilution to new investors.......................................................... $ 3.58
-----
-----
</TABLE>
The following table sets forth, as of the date of this Prospectus, the
number of shares of Common Stock purchased from the Company, the percentage of
total shares of Common Stock purchased, the total consideration paid, and the
average price per share of Common Stock paid by the investors in this offering
and the current shareholders of the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION (2)
------------------------ --------------------------
NUMBER PERCENT AMOUNT PERCENT AVERAGE PER SHARE
----------- ----------- ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders....................... 2,084,699 63.5% $ 2,966,524 33.1% $ 1.42
New Investors (3)........................... 1,200,000 36.5% $ 6,000,000 66.9% $ 5.00(4)
----------- ----- ------------- -----
Total....................................... 3,284,699 100.0% $ 8,966,524 100.0%
----------- ----- ------------- -----
----------- ----- ------------- -----
</TABLE>
- ------------------------
(1) After deducting underwriting discounts and commissions and offering expenses
of approximately $1,200,000 payable by the Company.
(2) Before deducting underwriting discounts and commissions and offering
expenses payable by the Company.
(3) In the event of the exercise in full of the Representative's over-allotment
option, the number of shares of Common Stock purchased, the percentage of
total shares of Common Stock purchased, the total consideration paid, the
percentage of total consideration paid, and the average price per Share of
Common Stock paid by the investors in this offering would be 1,380,000,
39.8%, $6,900,000, and 68.9%, respectively, and the percentage of total
shares of Common Stock purchased and the percentage of total consideration
paid by existing investors would be 60.2% and 31.1%, respectively.
(4) Assumed initial public offering price.
Other than as noted above, the foregoing computations exclude (i) 710,840
shares of Common Stock issuable upon exercise of stock options and 50,000 Shares
of Common Stock issuable upon the exercise of warrants outstanding as of June
30, 1996, at a weighted average exercise price of approximately $1.05 per share
and (ii) 89,160 shares reserved for future grants under the Company's Stock
Option Plan. Assuming that all of these options and warrants were deemed to be
exercised and proceeds were received therefrom, dilution to new investors would
be $3.65 per share. See "Management--1994 Stock Option Plan," "Description of
Securities" and Note 7 of Notes to Financial Statements.
14
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements and Notes thereto included
elsewhere in this Prospectus. The statement of operations data for the years
ended December 31, 1994 and 1995, and the balance sheet data at December 31,
1994 and 1995, are derived from, and should be read in conjunction with the
Company's Financial Statements and Notes thereto audited by Price Waterhouse
LLP, independent accountants, and included elsewhere in this Prospectus. The
statement of operations data for the six months ended June 30, 1995 and 1996 and
the balance sheet data at June 30, 1996 have been derived from unaudited interim
financial statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results of operations for such periods. The operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year or for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------ ---------------------------
1994 1995 1995 1996
-------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue.............................................. $ 908,146 $ 1,883,802 $ 496,865 $ 1,746,657
Cost of Goods Sold................................... 502,625 793,622 258,909 733,803
-------------- -------------- ------------ -------------
Gross Profit......................................... 405,521 1,090,180 237,956 1,012,854
-------------- -------------- ------------ -------------
Operating Expenses:
Research and Development........................... 291,461 627,266 384,812 328,442
Selling and Marketing.............................. 605,745 767,664 353,223 224,541
General and Administrative......................... 551,393 595,603 236,878 296,384
-------------- -------------- ------------ -------------
Total Operating Expenses......................... 1,448,599 1,990,533 974,913 849,367
-------------- -------------- ------------ -------------
Income (Loss) from Operations........................ (1,043,078) (900,353) (736,957) 163,487
Other Income (expense)............................... (17,177) (151,596) 11,106 (37,653)
-------------- -------------- ------------ -------------
Net Income (Loss).................................... $ (1,060,255) $ (1,051,949) $ (725,851) $ 125,834
-------------- -------------- ------------ -------------
-------------- -------------- ------------ -------------
Pro forma Net Income (Loss) per share (1)............ $ (0.50) $ 0.04
-------------- -------------
-------------- -------------
Pro forma Weighted Average Number of Common Shares
Outstanding (2)..................................... 2,118,549 2,825,613
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995 JUNE 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash and Cash Equivalents......................................... $ 92,406 $ 31,822 $ 137,851
Working Capital (Deficit)......................................... 244,537 (695,147) (296,840)
Total Assets...................................................... 570,882 858,615 1,455,840
Notes Payable..................................................... 775,000 775,000
Accumulated Deficit............................................... (2,328,906) (3,380,855) (3,255,021)
Shareholders' Equity (Deficit).................................... 316,544 (603,672) (140,338)
</TABLE>
- ------------------------
(1) Supplemental pro forma net income (loss) per share for the year ended
December 31, 1995 and the six-month period ended June 30, 1996, assuming the
notes payable were retired at the beginning of the period using the net
proceeds of the offering, are $(0.45) and $0.06, respectively. See "Use of
Proceeds", "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and Note 1 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
calculation of the pro forma weighted average number of common shares
outstanding.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company designs, develops, manufactures and markets products for
real-time, precise, free-hand, localization of points in three-dimensional
space. The Company's optical localizers typically consist of a number of
custom-manufactured LEDs mounted to the device or instrument to be tracked in 3D
space, a relative position dynamic reference device connected to the measured
object, a multi-camera array for detecting the LED emissions, a proprietary
microprocessor-based control system and proprietary software. The Company
shipped its first product in 1992. It introduced its current products, the
FlashPoint 5000 and the Pixsys 5000, in the spring of 1995.
The following table sets forth for the periods indicated certain line items
derived from the Company's statement of operations as a percentage of the
Company's revenues:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------ ------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue................................................. 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold...................................... 55.3% 42.1% 52.1% 42.0%
----------- ----------- ----------- -----------
Gross Profit.......................................... 44.7% 57.9% 47.9% 58.0%
----------- ----------- ----------- -----------
Operating Expenses:
Research and Development.............................. 32.1% 33.3% 77.4% 18.8%
Selling and Marketing................................. 66.7% 40.8% 71.1% 12.9%
General and Administrative............................ 60.7% 31.6% 47.7% 16.9%
----------- ----------- ----------- -----------
Total Operating Expenses............................ 159.5% 105.7% 196.2% 48.6%
----------- ----------- ----------- -----------
Income (loss) from Operations........................... (114.8)% (47.8)% (148.3)% 9.4%
Other Income (expense).................................. (1.9)% (8.0)% 2.2% (2.2)%
----------- ----------- ----------- -----------
Net Income (loss)....................................... (116.7)% (55.8)% (146.1)% 7.2%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenue increased by $1,249,800, or approximately 252%, to $1,746,700 for
the six months ended June 30, 1996, as compared to $496,900 for the six months
ended June 30, 1995. Such increase was primarily attributable to the addition of
Zeiss as a customer and increased purchases by SNT/Sofamor Danek and GEMS.
Cost of goods sold increased by $474,900, or approximately 183%, to $733,800
for the six months ended June 30, 1996, compared to $258,900 for the six months
ended June 30, 1995. Cost of goods sold as a percentage of revenue decreased to
42% for the six months ended June 30, 1996, as compared to 52% for the six
months ended June 30, 1995. The increase in cost of goods sold was attributable
to increased sales volume and the decrease in cost of goods sold as a percentage
of revenue was primarily attributable to the resulting economies of scale from
higher production volume.
Gross profit increased by $774,900, or approximately 326%, to $1,012,900 for
the six months ended June 30, 1996, as compared to $238,000 for the six months
ended June 30, 1995. Such increase was primarily attributable to the increase in
sales volume.
Research and development expenses decreased by $56,400, or approximately
15%, to $328,400 for the six months ended June 30, 1996, as compared to $384,800
for the six months ended June 30, 1995. This decrease was principally due to the
reduction of costs associated with the completion of the FlashPoint 5000 and
Pixsys 5000, which products were released during the second quarter of 1995.
16
<PAGE>
Selling and marketing expenses decreased by $128,700, or approximately 36%,
to $224,500 for the six months ended June 30, 1996, as compared to $353,200 for
the six months ended June 30, 1995. Such decrease was primarily attributable to
the decision to focus its sales and marketing efforts on selling its FlashPoint
product to medical device companies.
General and administrative expenses increased by $59,500, or approximately
25%, to $296,400 for the six months ended June 30, 1996, as compared to $236,900
for the six months ended June 30, 1995. Such increase was primarily attributable
to additional personnel and associated costs.
Operating income increased by $900,500, or approximately 122%, to $163,500
for the six months ended June 30, 1996, as compared to an operating loss of
$737,000 for the six months ended June 30, 1995. This increase was primarily
attributable to increased revenue, improved gross margin and decreased total
operating expenses.
Net other income (expense) decreased by $48,800 to ($37,700) for the six
months ended June 30, 1996 from $11,100 for the six months ended June 30, 1995.
This change was primarily due to interest expense of $44,100 incurred in
connection with the funds borrowed by the Company during 1995. See "Certain
Transactions."
As a result of the foregoing, net income increased to $125,800 for the six
months ended June 30, 1996, as compared to a net loss of $725,900 for the six
months ended June 30, 1995.
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109. Due to the Company's history of pre-tax losses and
uncertainty surrounding the timing of realizing the benefits of net operating
loss carryforwards, the Company has recorded a valuation allowance against all
of its net deferred tax assets as of June 30, 1996. In reaching the Company's
determination of the need to provide a deferred tax valuation allowance, the
Company considered all available evidence, both positive and negative, as well
as the weight and importance given to such evidence. Management concluded that a
valuation allowance against deferred tax assets was appropriate at the current
time, in accordance with Statement of Financial Accounting Standards No. 109.
Specifically, the Company has had annual losses in each of the two years ended
December 31, 1994 and 1995, and has only had net income for the six months ended
June 30, 1996.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenue increased by $975,700, or approximately 107%, to $1,883,800 for the
year ended December 31, 1995, as compared to $908,100 for the year ended
December 31, 1994. Such increase was primarily attributable to the introduction
and sale of the FlashPoint 5000 and Pixsys 5000 products.
Cost of goods sold increased by $291,000, or approximately 58%, to $793,600
for the year ended December 31, 1995, compared to $502,600 for the year ended
December 31, 1994. Cost of goods sold as a percentage of revenue decreased to
42% for the year ended December 31, 1995, as compared to 55% for the year ended
December 31, 1994. The increase in cost of goods sold was primarily attributable
to the increased revenue during the year ended December 31, 1995 and the
decrease in cost of goods sold as a percentage of revenue was primarily
attributable to the resulting economies of scale from higher production volume.
Gross profit increased by $684,700, or approximately 169%, to $1,090,200 for
the year ended December 31, 1995, as compared to $405,500 for the year ended
December 31, 1994. Such increase was principally a result of the increase in
revenue.
Research and development expenses increased by $335,800, or approximately
115%, to $627,300 for the year ended December 31, 1995, as compared to $291,500
for the year ended December 31, 1994. This increase was principally due to
development of the FlashPoint 5000 and Pixsys 5000 products, which were
commercially introduced during the second quarter of 1995.
Selling and marketing expenses increased by $162,000, or approximately 27%,
to $767,700 for the year ended December 31, 1995, as compared to $605,700 for
the year ended December 31, 1994. Such increase was primarily a result of the
Company's plan to sell SNT's ear, nose and throat system, which effort ended in
the fourth quarter of 1995. See "Business--Intellectual Property."
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General and administrative expenses increased by $44,200, or approximately
8%, to $595,600 for the year ended December 31, 1995, as compared to $551,400
for the year ended December 31, 1994. Such increase was attributable to the
addition of personnel and related expenses.
Operating loss decreased by $142,700, or approximately 14%, to $900,400 for
the year ended December 31, 1995, as compared to an operating loss of $1,043,100
for the year ended December 31, 1994. This decrease was primarily attributable
to increased revenue.
Net other expenses, comprised principally of interest expense, increased by
$134,400 (781%) to $151,600 for the year ended December 31, 1995 from $17,200
for the year ended December 31, 1994 due to additional borrowings in 1995.
As a result of the foregoing, net loss decreased by $8,400, or approximately
1%, to $1,051,900 for the year ended December 31, 1995, as compared to
$1,060,300 for the year ended December 31, 1994.
Income tax benefits were not recognized on the Company's 1994 and 1995 net
operating losses due to the uncertainty surrounding the future utilization of
such net operating losses. As of December 31, 1995, the Company's net operating
loss carryforwards were approximately $2,788,000 which expire from the years
2006 to 2010. The Company's ability to use the net operating loss carryforwards
are limited due to certain changes in ownership as defined by the Internal
Revenue Code. Due to the Company's history of pre-tax losses and the uncertainty
surrounding the timing of realizing the benefits of net operating loss
carryforwards, the Company has placed a valuation allowance against its deferred
tax assets. See Note 6 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, the Company used $154,400 in cash
for operating activities, principally to fund increased accounts receivable and
inventories. The Company also used $77,100 in cash for investing activities
during the six month period ended June 30, 1996 to purchase property and
equipment. Also during the six month period ended June 30, 1996, $337,500 in
cash was provided by the exercise by certain warrantholders of their warrants to
purchase 337,500 shares of Common Stock. See "Certain Transactions."
During 1995, the Company issued $775,000 in promissory notes, all of which
are scheduled to mature in June 1997. In connection with the issuance of such
notes (and the warrants coupled therewith), the Company recorded a debt discount
of $131,700 in 1995. As of June 30, 1996, $86,300 in interest had accrued on
these notes. The Company intends to pay the principal amount of and accrued and
unpaid interest on these notes in full with a portion of the proceeds of this
offering. See "Certain Transactions" and "Use of Proceeds."
As of June 30, 1996, the Company had a working capital deficit of $296,800
compared to a working capital deficit of $695,100 at December 31, 1995 (which
includes $861,300 and $818,200, respectively, of principal and interest owed on
the loans which are to be repaid in connection with this offering). See "Use of
Proceeds". The improvement in working capital was primarily the result of
increases in accounts receivable, inventories and cash resulting from the
Company's 1996 net income and the exercise of the warrants. Historically,
working capital required to finance the Company's growth has been provided by
short-term borrowings and private placement stock offerings. As of June 30,
1996, the Company did not have a line of credit.
Based on the Company's business plan, the Company believes that the net
proceeds of this offering, together with funds generated by continuing
operations, will be sufficient to permit the Company to conduct its operations
as currently contemplated for at least the next 18 months. Such belief is based
on certain assumptions, and there can be no assurance that such resources will
be sufficient for such purpose. The Company may be required to raise substantial
additional capital in the future in order to expand operations. In addition,
contingencies may arise which may require the Company to obtain additional
capital. There can be no assurance that the Company will be able to obtain such
capital from any other sources on favorable terms or at all. See "Use of
Proceeds".
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BUSINESS
GENERAL
The Company designs, develops, manufactures and markets products for
real-time, precise, free-hand, localization of points in 3D space. The Company's
optical localizers, typically consisting of a number of custom-manufactured LEDs
mounted on a device or instrument to be tracked in 3D space, a relative position
dynamic reference device connected to the measured object, a multi-camera array
for detecting the LED emissions, a proprietary microprocessor-based control
system, and proprietary software to calculate the digital coordinate location of
the LEDs, have both medical and industrial applications.
MEDICAL APPLICATIONS. The Company's FlashPoint localizer is a key
component of the anatomical image display workstation used by physicians to
perform image guided surgery, a specialty procedure in the field of
minimally invasive surgery. When the FlashPoint localizer is combined with
the imaging software provided by the Company's customers (such as Zeiss,
GEMS, SNT/Sofamor Danek and DeeMed), the location of specially designed
surgical instruments can be tracked in relation to the patient's anatomy
during surgical procedures by display as an overlay on the MRI or CT image.
The Company believes that the ability of the surgeon to track the location
of specially designed surgical instruments on the image display workstation
can result in less invasive procedures that lead to shorter hospital stays
and improved patient outcomes.
INDUSTRIAL APPLICATIONS. The Company's Pixsys localizer is used in
various industrial applications to measure the position or shape of objects
in 3D space. Illustrative uses include inspection of parts by
Harley-Davidson, Inc., detection of surface deformities in car bodies during
manufacture by Daimler Benz, and as a 3D navigation aid in its zero gravity
chamber by NASA.
The Company's business strategy is to systematically enhance the performance
of its optical localizers while expanding the market for such products. With
respect to enhancing its products, the Company is seeking to increase the
products' accuracy, enlarge the field-of-view, increase the sample/ frame rate
(throughput) and improve the customer computer interface. With regard to market
expansion, the Company is seeking to identify additional measurement
applications for its products.
IMAGE GUIDED SURGERY
In image guided surgery, a surgeon tracks the location of specially designed
surgical instruments on the medical image (such as CT or MRI). Image guided
surgery requires a method for registering (i.e., mapping) the points in the
medical image onto the patient's anatomical physical space and a method for
localizing (i.e., determining the position in 3D space of) the surgical probe or
pointer.
Localization determines the position in 3D space of the registration points
and the surgical probe or pointer. The Company's FlashPoint product is used as a
localizer for medical applications. Surgical position is key to the successful
completion of a surgical procedure.
Until registered, the medical image is only a picture of the relevant
anatomy and not a map. By registering the image space with the physical space
itself, the image is said to have been registered. By registering the image
space with the physical space, medical images become true, point-to-point maps
available for precise surgical guidance. The imaging software provided by the
Company's medical customers, registers the medical image with the physical
space.
Traditionally, pre-operative medical images (such as CT or MRI) were
available as pictures that were used for surgical guidance only insofar as the
judgment, skill and experience of the surgeon permitted. Prior to surgery, the
surgeon arranged the patient's CT or MRI scans (images) upon a light box and
carefully reviewed them. Upon commencement of the surgical procedure, the
surgeon, based upon his or her memory of the information displayed on such
images, performed the surgical procedure.
Image guided surgery, by allowing the patient's CT, MRI or other medical
image to be used as a map, provides the surgeon with a real-time visual
representation of the surgical probe or pointing
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device on the interactive medical image. It allows the spatial position of the
probe or pointer to be tracked during the surgical procedure and to be displayed
as an overlay on the medical image shown on the work station. The medical image
may either be historical (i.e., pre-operative) as in the products currently
being sold by Zeiss, SNT/Sofamor Danek and DeeMed, or real-time (i.e.,
intraoperative) as in the product being developed by GEMS. See
"Business--Customers and Use."
Image guided surgery couples recent advances in imaging with the instruments
used in the course of surgery. The result, the Company believes, can be smaller,
less invasive procedures that lead to shorter hospital stays and improved
patient outcomes. While image guided surgery has been most extensively used in
neurosurgery, the Company anticipates that image guided surgery will provide
benefits for ear, nose and throat surgery, needle biopsies, orthopedics (e.g.,
hip replacement surgery), maxillofacial surgery and radiosurgery.
PRODUCTS
The FlashPoint and Pixsys localizers consist of a number of markers (LEDs)
mounted on a pointer device or surgical instrument, a relative position dynamic
reference device ("Dynamic Reference Frame") connected to the measured object (a
patient in a medical application or a part in an industrial application), a
multi-camera array for detecting the X, Y and Z positions of the LEDs, a
proprietary microprocessor based control system, and a proprietary, internally
developed, software package. The Company's optical localizer is an input
subsystem providing real-time mathematical coordinates to a host computer. The
Company's optical localizer determines the position of the hand-held probe or
surgical instrument and the patient reference device by tracking the X, Y and Z
coordinates of each infrared light emitting diode mounted on the probe or
surgical instrument and reference device. It then communicates this position in
the form of X, Y and Z coordinates to the host computer.
DYNAMIC REFERENCE FRAME. The Dynamic Reference Frame, typically three LEDs
mounted on a fixed frame, allows the patient to be moved during an image guided
surgical procedure while maintaining registration between the scanned image, the
surgical instrument and the patient. Without this type of feature, the physician
would be unable to move the patient, or, if the patient was moved, the
registration process would have to be repeated, adding significant time to the
surgical procedure.
INSTRUMENTS. The Company, in conjunction with custom fabricators and
surgical instrument manufacturers, provides various probes and instruments
employing LEDs as component parts to its optical localizers. For medical
applications, the LED is placed on the handle, and the distance between the LED
and the tip of the probe is precisely calibrated. These instruments are designed
to be reused on a limited basis. Management plans to design and market other
instruments which will be disposable for use with its localizer.
MARKERS. The Company's present line of optical localizers utilize infra-red
LED markers, the positions of which are tracked by the FlashPoint and Pixsys
systems. Because the emission characteristics of each LED affects overall system
performance, the Company provides a custom-manufactured line of LEDs for its
products. The LEDs are consumable items and, depending upon the customer's
application, the life expectancy varies.
[A picture appears on this page depicting the Company's optical localizer
under the heading "IGT Optical Localizer," including a sensor assembly with text
above it which says "The sensor assembly, mounted overhead, tracks the position
of the instrument," a dynamic reference frame labeled "Dynamic Reference
Frame-Registered Trademark-," and a handheld instrument or probe equipped with
LEDs with text on the left of it which says "Handheld instrument or probe
equipped with LEDs," along with a square box labeled "Host Computer, Proprietary
Software."]
The FlashPoint and Pixsys localizers have a mean accuracy of better than 0.4
mm with a maximum error within a 1 meter sphere of less than 1 mm. This accuracy
is achieved both through the design of the product and through the use of a
highly accurate calibration process. The device used to
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calibrate the FlashPoint and Pixsys products is a Zeiss DB 900 4860-36 bridge
type, dual beam Coordinate Measuring Machine ("CMM"). The CMM is a measurement
device which has a linear displacement accuracy of: X axis = 0.0076 mm, Y axis =
0.0102 mm, Z axis = 0.0064 mm, and a volumetric performance of 0.0165 mm. The
CMM is routinely calibrated to, and the results are traceable to the appropriate
standards of, the National Institute of Science and Technology ("NIST"). See
"Business--Manufacturing Operations."
CUSTOMERS AND USE
MEDICAL APPLICATIONS.
The Company's FlashPoint product is used to determine the position in 3D
space of the surgical probe or instrument. The FlashPoint 5000 medical optical
localizer is currently being integrated into products of GEMs, Zeiss,
SNT\Sofamor Danek and DeeMed.
GE MEDICAL SYSTEMS, MILWAUKEE, WISCONSIN. In 1993, GEMS introduced its
magnetic resonance guided therapy ("MRT") system which provides direct physician
access to the patient during imaging, giving a real-time, internal view of
patients for procedures such as needle biopsies. MRT is currently used to plan,
guide and monitor surgical procedures in a minimally invasive manner. FlashPoint
is being used by GEMS for the guidance system in its MRT device. The initial
GEMS MRT system is at Harvard University's Brigham and Women's Hospital. GEMS is
currently shipping this system to clinical sites worldwide and is preparing its
submission to the FDA.
CARL ZEISS, OBERKOCHEN, GERMANY. The Company's FlashPoint product is an
integral and essential component of the Zeiss SMN Stereotactic System. By
combining imaging diagnostic data with powerful computers, precision optics and
finely crafted hand-held instrumentation, Zeiss has created a product
enhancement to its operating microscope line. In November 1995, Zeiss entered
into an OEM agreement with the Company under which the Company provides Zeiss
with its optical localizers. The SMN product is targeted as an enhancement to
Zeiss' worldwide installed base of surgical microscope systems.
SURGICAL NAVIGATION TECHNOLOGIES, INC., BROOMFIELD, COLORADO. SNT
integrates FlashPoint into its StealthStation-TM-, which offers precise
real-time positional information for free-hand stereotaxy in neurosurgical and
spinal applications. SNT is the system integrator for Sofamor Danek Group's
neuro-navigation system. Sofamor Danek is SNT's exclusive distributor for SNT's
StealthStation and acquired SNT in May 1996.
DEEMED INTERNATIONAL, GRENOBLE, FRANCE. DeeMed incorporates the FlashPoint
system into the Surgiscope, its surgical robot utilized for accurate positioning
of surgical microscopes. DeeMed first used the FlashPoint system in its initial
prototype in early 1993. The original system continues in operation at Necker
Hospital, Paris, France. DeeMed was acquired by Electa Instrument AB in July
1996.
INDUSTRIAL APPLICATIONS.
The Company's Pixsys product is used to determine the position or shape of
an object by rapidly collecting a large number of points on the object's
surface. To date, each of the Company's industrial customers has purchased no
more than several Pixsys products. The following sets forth several indicative
ways in which the Pixsys product is used in industrial applications:
Harley-Davidson uses such product to inspect parts; Daimler Benz uses such
product in its system for detecting surface deformities in car bodies during
manufacture; and NASA uses such product as a 3D navigation aid in its zero
gravity chamber.
The Company is seeking additional applications for its Pixsys product. For
example, Brewco, Inc., Central City, Kentucky ("Brewco") has contracted with the
Company for the Company to develop a proof of concept model of its Pixsys
product for use with Brewco's frame straightening machines for automobile
collision repair. If the concept proves viable, the parties contemplate entering
into an original equipment manufacturer ("OEM") agreement pursuant to which the
Company will supply
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its Pixsys product to Brewco and Brewco will incorporate the Pixsys into its
system to measure the distortion caused by the collision and the results of the
straightening operation. There can be no assurance, however, that any such
product will be developed, or if developed, be economical or accurate, or that
the parties will enter into an OEM agreement.
MARKETING AND SALES
The Company employs a marketing strategy focused on selling its localizer
under OEM agreements to a number of medical device companies. Since the
localizer is a key component in the OEM's image guided surgery system and since
the OEM has to design its system specifically to incorporate the localizer, the
OEM agreements are intended to assure the OEM that the Company will be a
reliable supplier. The Company anticipates that it will make available source
code escrow agreements to the OEM which, in appropriate circumstances, may grant
the OEM the license to manufacture the localizer using the Company's technology
for the purpose of incorporating it into OEM's product if the Company is
unwilling or unable to comply with its obligations under the OEM agreement. The
Company currently has OEM agreements with Zeiss and DeeMed; however, the Zeiss
OEM agreement expires on October 31, 1996 (though product has been ordered
through December, 1996) and there are no minimum purchase requirements in the
DeeMed OEM agreement. See "Business--Backlog."
The Company's marketing strategy includes selling to OEMs and value added
resellers ("VARs") who will include the Company's Pixsys product into their
systems for industrial applications. The Pixsys products used by Harley-Davidson
were sold to Computer Design, Inc. and integrated into its proprietary CAD
(computer aided design) software package. The Company also has a domestic sales
representation agreement with SANDAB, Inc. ("SANDAB") under which SANDAB has
been appointed the Company's exclusive representative to sell the Company's
products to non-medical users in the States of Michigan, Indiana, Ohio,
Pennsylvania and West Virginia and the Province of Ontario. This agreement can
be terminated on 90 days advance written notice by either party.
BACKLOG
At December 31, 1995, the Company's backlog was $1,832,700 and at June 30,
1996 it was $870,600. Since backlog fluctuates depending on how customers order
its products and over what period of time, the Company currently does not
consider backlog to be a meaningful indicator of future sales.
COMPETITION
Although 3D localization can be performed in a number of ways, the use of
LEDs as markers and optical sensor arrays as receivers in systems is currently
the technology of choice for manufacturers of image guided surgery systems.
Currently, two designs of optical localizers are available. The Company's
FlashPoint product, as well as the NDI OPTOTRAK-Registered Trademark-, use a
technical approach that employs three linear photo detectors, also known as
linear charge coupled devices ("CCDs"), in the camera assembly. Each of these
linear arrays has between 2000 and 5000 discrete CCD elements called pixels,
arrayed in a single line which can be quickly scanned to determine the location
of the light energy being detected. The second approach employs two
two-dimensional arrays having between 250 to 1000 elements (pixels) in each row
of a CCD that is arrayed in a matrix of equal length rows and columns. In this
configuration, the CCD array must be scanned sequentially through each row from
top to bottom, the same as a standard television camera, to measure the location
of the light energy being emitted. Since the linear array CCD has a greater
number of pixels than any row of the two-dimensional (matrix) CCD, there is an
increased resolution in the linear array which contributes to increased
accuracy. Additionally, since the linear array only needs to be scanned from end
to end to measure the light being detected and the 2D array must be scanned from
the beginning of the top row to the end of the bottom row in the matrix, the
linear array systems can provide faster throughput of measurements.
The Company's primary competitor in the medical OEM market is NDI. NDI
markets both the OPTOTRAK and the Polaris to the medical OEM marketplace. The
OPTOTRAK is a high performance 3D, infrared based optical localizer having a
selling price of approximately $60,000. Although the
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OPTOTRAK has been found useful in motion tracking, its physical size and cost
have generally limited its medical applications to proof-of-concept and research
applications. In April 1996, NDI introduced the Polaris, an infrared based
optical localizer using two two-dimensional CCD cameras. Preliminary feedback
from the marketplace indicates the Polaris has reduced performance compared to
the OPTOTRAK and has an approximate selling price of $25,000, which is
comparable to the Company's list price for its FlashPoint product. Other
companies, such as Phillips Medical Systems, Radionics, Inc. and BrainLab GmbH
have developed two camera optical localization devices for their prototype image
guided surgery systems.
Companies have also attempted to use other mediums as localization devices
for medical applications. For example, much of the early technical work relative
to medical applications involved the use of tracking sound marker systems. The
inherent characteristics of the sound markers used in medical applications,
coupled with the technical limitations of the use of sound based systems in an
MRI or operating room environment, hampered the medical application of this
technology. Only one major medical company used the sonic technology. That
company no longer uses such technology. Sonic technology is still used in
industrial applications because of its ability to make measurements in large
fields-of-view.
Mechanical arm localizers are used extensively in industrial application,
but are used as the basis of only two medical devices. In medical applications,
the "feel" and range of motion of the arm impose significant constraints on the
surgeon, thus limiting the use of the device. Similarly, magnetic field
digitizers have also been used in, or evaluated for, such applications. Errors
caused by the movement of metal components in and around the surgical field have
made these magnetic field localizers impractical for most general surgery
applications.
Companies other than NDI may also become competitors. Competitors may have
substantially greater financial, technical, marketing, manufacturing and human
resources, as well as name recognition, than the Company. Competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements and to devote substantially greater resources to the
research and development, marketing and sale of their products than the Company.
Also, the Company's customers may determine to develop their own localizers to
insure control over their localizer technology or for other reasons.
Furthermore, such competitors may develop technology other than that based on
infrared optics that is more effective or economical than the technology of the
Company in localizing a point in 3D space. See "Risk Factors--Competition."
MANUFACTURING OPERATIONS
The Company's manufacturing activities primarily consist of assembling and
testing components and subassemblies acquired from qualified vendors, as well as
final assembly and testing of the Company's fully-configured systems. Components
are generally available from several sources although the order lead-time for
the semi-custom isolated power supply used in the FlashPoint 5000 varies from
four to six months. The Company's recent relocation to its new facility has
allowed it to expand its manufacturing space. The new facility has adequate
expansion room to nearly double the manufacturing space presently being used. An
integrated manufacturing planning and control computer system is in place which
provides for material requirements planning and inventory control, manufacturing
planning and scheduling and production work order tracking. See "Business--
Facilities."
The Company recently made a significant investment to improve the
calibration process for the products being shipped to its customers. A CMM
measurement device was leased and installed in the new facility. This new system
provides a higher degree of accuracy and consistency in the Company's
calibration process and gives the Company a final calibration tool which is
traceable to NIST standards. The CMM system is also used by the Company's
research and development staff for research and development projects. See
"Business--Products."
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INTELLECTUAL PROPERTY
The Company has been issued U.S. Patent 5,198,877 on its SprayLight
technology which is a non-contact, laser based, hand-held 3D localizer that
allows the user to acquire simply and easily a multitude of points on the
surface of an object or anatomy by sweeping a hand-held scanner over the desired
target. The Company has filed five additional patent applications with the U.S.
Patent and Trademark Office and has submitted several applications for patents
to various international patent agencies. However, the Company primarily relies
on a combination of trade secret and copyright laws, together with
non-disclosure agreements, to establish and protect proprietary rights in its
products. These measures only afford limited protection, and there can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to prevent misappropriation of its technology.
The Company's optical localizer is a complicated measuring device. Its
software contains elaborate mathematical modeling and its manufacture requires
precise production and careful calibration. The Company believes that it would
be impractical and not cost-effective for third parties to attempt to duplicate
the Company's software and production process. Unauthorized parties,
nevertheless, may attempt to copy aspects of the Company's products or to obtain
and use information that the Company regards as proprietary. The cost of
enforcement by the Company of its proprietary rights could be significant,
regardless of the outcome of such enforcement proceedings. Moreover, the
Company's proprietary rights will not prevent competitors of the Company from
developing their own localizers using their own technology. See "Risk
Factors--Absence of Patent Protection" and "Risk Factors-- Competition."
On January 24, 1995, St. Louis University was granted a patent covering a
particular technique for determining the position of a surgical probe within a
patient's body on an historical image of that body. Shortly thereafter, the
Company entered into an agreement with SNT, under which, among other things, (i)
the Company agreed to supply, and SNT agreed to purchase, the Company's optical
localizer, (ii) the Company agreed not to sell its optical localizer to any
customer whose use would knowingly infringe the SLU Patent, and (iii) the
Company was granted the exclusive right, subject to certain minimums, to sell
SNT's image display workstations to ENT (ear, nose and throat) customers
worldwide. The agreement with SNT was terminated at the Company's request in the
fall of 1995; SNT/Sofamor Danek remains a key customer of the Company. The
Company believes that the manufacture and sale of its FlashPoint localizer will
not infringe the SLU Patent, since a localizer is only a component part in the
system patented by SLU and since the Company's FlashPoint localizer has
substantial non-infringing uses. Under one part of the agreement with SNT which
was not terminated, the Company assigned to St. Louis University any right,
title and interest it had in the SLU Patent. See "Risk Factors--Customer
Concentration; Patents on Systems That Utilize Localizers" and Risk
Factors--Absence of Patent Protection."
GOVERNMENT REGULATION
The Company's FlashPoint localizer is incorporated into medical devices that
are subject to extensive regulation by the FDA and, in some instances, by
foreign and state governments. The FDA regulates the clinical testing,
manufacture, labeling, distribution, and promotion of medical devices. Before a
new device can be introduced into the market, the manufacturer must generally
obtain market clearance through either the 510(k) premarket notification process
or the lengthier and more costly PMA application process. 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 premarket clearance or premarket
approval for devices, 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.
In the United States, medical devices are classified in 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,
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premarket notification and adherence to GMPs) and Class II devices are subject
to general and special controls (for example, performance standards, postmarket
surveillance, patient registries, and FDA guidelines). Generally, Class III
devices are those which must receive premarket 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).
Before a new device can be introduced into the market, the manufacturer must
generally obtain marketing clearance through either a 510(k) notification or a
PMA application. 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 a PMA. Commercial distribution of a device for
which a 510(k) notification is required can begin only after FDA issues an order
finding the device to be "substantially equivalent" to a predicate device. The
FDA has recently been requiring a more rigorous demonstration of substantial
equivalence than in the past. It generally takes from four to twelve months from
the date of submission to obtain a 510(k) clearance, though it may take longer.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed Class I or Class II device, or if it is a Class
III device for which FDA has called for PMAs. A PMA application must be
supported by valid scientific evidence which typically includes extensive data,
including human clinical trial data to demonstrate the safety and effectiveness
of the device. The PMA application must also contain the results of all relevant
bench tests, laboratory and animal studies, a complete description of the device
and its components, and a detailed description of the methods, facilities and
controls used to manufacture the device. In addition, the submission must
include the proposed labeling, advertising literature and training methods (if
required). The PMA process can be expensive, uncertain and lengthy and a number
of devices for which FDA approval has been sought have never been approved for
marketing.
If human clinical trials of a device are required in connection with either
a 510(k) notification or a PMA, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) is required to file an investigational device exemption ("IDE")
application prior to commencing human clinical trials. The IDE application must
be supported by data, typically including the results of animal and laboratory
testing. If the IDE application is reviewed and approved by the FDA and one or
more appropriate Institutional Review Boards ("IRBs"), human clinical trials may
begin at a specific number of investigational sites with a specific number of
patients, as approved by the FDA. If the device presents a "nonsignificant risk"
to the patient, a sponsor may begin the clinical trial after obtaining approval
for the study by one or more appropriate IRBs.
The Company believes that the FlashPoint localizer is a medical device
component not subject to the full panoply of the FDA medical device regulations,
including the market clearance requirements. The medical equipment manufacturers
that incorporate the FlashPoint localizer into their products are, however,
required to obtain market clearance from the FDA for such products.
Modifications to such products manufactured by the medical equipment
manufacturers will require additional clearances or approvals, if such
modifications could significantly effect the safety and effectiveness of the
devices or establish a new intended use for the devices. There can be no
assurance that the Company's customers have, with respect to their products that
incorporate FlashPoint localizers, complied or will be able to comply with all
applicable market clearance requirements. Failure on the part of the Company's
customers to comply with such requirements could have a material adverse effect
on the Company's business, financial condition and results of operations.
There can be no assurance that the FDA will not require, or change its rules
or interpretations so as to require, the Company to obtain 510(k) clearance for
its FlashPoint localizer apart from or in
25
<PAGE>
addition to any market clearances obtained by its medical device customers.
Failure of the Company to comply with such market clearance requirements could
have a material adverse affect on the Company's business, financial condition
and results of operations.
Products manufactured by the Company and its medical device customers that
incorporate the Company's products are subject to continuing regulation by the
FDA. FDA enforcement policy strictly prohibits the promotion of products for any
uses other than those for which clearance or approval was obtained. The
Company's manufacturing facilities and those of its medical device customers
that incorporate its products may also be subject to periodic inspection for
compliance with GMP and other regulatory requirements by the FDA and comparable
state agencies. The Company is currently installing the necessary systems and
controls to become certified under the ISO 9001 standards (the European
equivalent to GMPs). This process requires a significant investment of time and
resources to complete.
The introduction into foreign markets of the Company's FlashPoint localizer
and the products of the medical equipment manufacturers that incorporate the
FlashPoint localizer may also subject the Company and such customers to foreign
regulatory clearances and requirements which may impose additional substantial
costs and burdens. International sales of medical devices are subject to the
regulatory requirements of each country. The regulatory process varies from
country to country.
Violations of regulatory requirements of the FDA or foreign or state
regulatory agencies or changes in such regulations or in interpretations of such
regulations, could have a material adverse affect on the Company's business,
financial condition and results of operations.
RESEARCH AND DEVELOPMENT
The Company devotes a significant portion of its resources to research and
development. In 1995, 33% of revenues (or $627,266) were spent on the
development and commercial introduction of the FlashPoint 5000 and Pixsys 5000.
The Company has estimated that approximately $1,000,000 (20.8%) of the estimated
net proceeds of this offering, assuming an initial public offering price of
$5.00 per Share, will be allocated to fund further research and development
activities and the Company believes that a substantial amount of capital will be
required to be allocated to such activities in the future.
The Company has developed core competencies in software development,
mathematical modeling of the 3D measurement process, digital signal processing,
circuit design, computer system integration and 3D optical sensor system
development. Outside consultants and contract engineering are employed, when
needed, for optical system design, surgical instrument development and safety
engineering. The Company's engineers work closely with its OEMs and VARs to
assist in the integration of the Company's products with customer systems and to
identify new applications for the Company's products.
The Company is currently developing a family of infra-red optical camera
systems to meet a range of requirements for different sized fields-of-view and
measurement accuracy. Although optical sensing systems appear to be the best
technology choice for the present time, the Company's advanced development team
is evaluating a number of methodologies for detecting and measuring a point in
space and/or creating an image of a complex surface. These include a variety of
both passive and active markers, video imaging techniques and advanced software
and hardware designs.
The Company's product development engineering staff is currently in the
requirements development phase for the FlashPoint 6000 system, which will have a
higher degree of accuracy, a larger field-of-view, a faster sample/frame rate
and a more flexible interface to customers' systems.
Additional projects are in the planning stage to create a series of unique,
proprietary marker devices such as high accuracy LEDs, passive markers,
non-magnetic markers for surgical instruments used in magnetic resonance
environments and a family of probes and instruments for both the medical and
industrial markets. The Company is currently considering making some or all of
the
26
<PAGE>
probes and instruments cost effective, single-use disposable items. These are
especially important for the medical markets served by the Company. There can be
no assurance, however, that any of these products will be developed.
Although the Company intends to build on, and expand its current technical
competencies to introduce new products and product enhancements, it also intends
to review compatible, complimentary technology for possible acquisition or
licensing. See "Use of Proceeds."
PRODUCT LIABILITY INSURANCE
The Company faces an inherent business risk of exposure to product liability
claims in the event that the use of its products is alleged to have resulted in
adverse effects. To date, no product liability claims have been asserted against
the Company. The Company maintains a product liability and commercial general
liability insurance policy with coverage of $1,000,000 per occurrence and an
annual aggregate maximum coverage of $2,000,000 ($1,000,000 for lawsuits outside
the United States, Canada and Puerto Rico). The Company's product liability and
general liability policy is provided on an occurrence basis and is subject to
annual renewal. There can be no assurance that liability claims will not exceed
the coverage limits of such policy or that such insurance will continue to be
available on commercially reasonable terms or at all. If the Company does not or
cannot maintain sufficient liability insurance, its ability to market its
products could be materially adversely affected. See "Risk Factors--Risk of
Product Liability Claims."
EMPLOYEES
At June 30, 1996, the Company had twenty-four full-time and one part-time
employee, including six employees in research and development, 10 in
manufacturing and support services, two in sales and marketing and seven
employees in administration and finance. None of the Company's employees are
represented by a collective bargaining agreement nor has the Company ever
experienced a work stoppage. The Company believes its relations with its
employees are satisfactory.
FACILITIES
The Company occupies 12,900 square feet within a 133,000 square foot
multi-tenant facility in Boulder, Colorado, where it performs all development,
manufacturing, marketing and corporate activities. The base rent payment is
approximately $9,200 per month for 1996, $9,700 per month for 1997 and $10,200
per month for 1998. In addition to base rent, the Company pays its pro-rata
share of building operating expenses, insurance and taxes and its own utilities.
The Company believes the present facility will provide adequate space during the
remaining term of the lease, which expires in January 1999.
27
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information with respect to each executive
officer and director of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ---------------------------------------------
<S> <C> <C>
Paul L. Ray........................ 49 Chief Executive Officer and Chairman of the
Board of Directors
Robert E. Silligman................ 56 President and Chief Operating Officer
Jeffrey J. Hiller.................. 44 Chief Financial Officer and Vice President of
Finance
Waldean Schulz, Ph.D............... 51 Vice President of Technology, Secretary and
Director
Ray Hauser, Ph.D. (2).............. 69 Director
Clifford F. Frith (1).............. 57 Director
Derace Schaffer, M.D............... 47 Director
Robert T. Hamilton (1)(2).......... 52 Director
David G. Sengpiel (1)(2)........... 43 Director
</TABLE>
- ------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
PAUL L. RAY has served as Chief Executive Officer and Chairman of the Board
of Directors of the Company since January 1994, has served as a Director of the
Company since 1992 and served as President of the Company from January 1994
through November 1995. Prior to his employment with the Company, Mr. Ray was a
Managing Partner and a Director of Paradigm Partners, LLC, Colorado. Paradigm
Partners, LLC is the managing general partner of Paradigm Capital Network, Ltd.,
a Colorado limited partnership which engages in venture investment. Prior to
co-founding Paradigm Partners in 1992, Mr. Ray, through his own company, MedCap,
Ltd., Denver, Colorado, provided management consulting services to companies in
the medical industry. Mr. Ray has 27 years of management experience in the
medical industry, with an emphasis on medical devices. He is a founder and a
board member of the Colorado Biomedical Venture Center and serves as a director
for several companies. Mr. Ray holds a Bachelor of Science in Business
Administration from Ball State University.
ROBERT E. SILLIGMAN joined the Company as President and Chief Operating
Officer in November 1995. From June 1992 to November 1995, Mr. Silligman served
as President of Leadership Development Systems, Inc. a productivity improvement
and management development consulting firm. Before founding Leadership
Development Systems, Inc., Mr. Silligman, from March 1990 through June 1992, was
Vice President and General Manager of Medtronic Hemotec, Inc., a medical
diagnostic products company. Mr. Silligman has also held the positions of Vice
President and General Manager of Becton Dickenson Critichem Products Group,
President and Chief Executive Officer of Advanced Surgical Technologies, Inc.,
and Executive Vice President and Chief Operating Officer of Irex Corp., all
manufacturers of high technology medical products. Mr. Silligman holds an
Engineering Degree from Perry Institute of Technology and a Bachelor of Science
in Business Administration from California Western University.
JEFFREY J. HILLER joined the Company in January 1994 as Chief Financial
Officer and was elected Vice President, Finance in May 1994. From 1988 through
1993, Mr. Hiller was employed by BI Incorporated, a publicly held electronic
monitoring equipment company, first, as manager of business development and,
from 1989 through 1993, as Vice President of Finance and Chief Financial
Officer.
28
<PAGE>
From 1985 to 1988, Mr. Hiller was President of Flatiron Capital Corporation, a
capital equipment leasing company that provided computer and aircraft financing
to highly capitalized public companies. Mr. Hiller held several management
positions in the Treasury Division of Storage Technology Corporation from 1978
to 1985. Mr. Hiller holds a Bachelor of Science in Business Administration from
the University of Colorado.
WALDEAN A. SCHULZ, PH.D., is the Vice President, Technology, Secretary and a
Director of the Company. Dr. Schulz is the founder of the Company and served as
its President from its inception until December 1990, at which time he assumed
his present position. In 1979, Dr. Schulz co-founded Language Resources, a
software company. Prior to 1986, Dr. Schulz was a Product Manager for multiple
projects at NBI, Inc., a word processing company, and Intel Corporation. At
Intel Corporation, Dr. Schulz led the development of the first ANSI-76 FORTRAN
compiler and participated in the design of the microprocessors now used in
DOS-based personal computers. Dr. Schulz obtained his undergraduate and masters
degrees in mathematics, as well as his Ph.D. in computer science, from the
University of Colorado.
RAY L. HAUSER, PH.D., has served as a Director of the Company since 1991.
Dr. Hauser has started several companies, including Dental Science Laboratories,
an electro-anaesthesia device company, Tele:Time Corporation, a digital
telephone call duration measurement device company, and Hauser Laboratories,
Inc., an independent materials testing and chemical laboratory. He was
co-founder and has been director of Hauser Chemical Research, Inc. from 1983 to
present, a company that supplies Taxol for cancer therapy. Dr. Hauser has also
been a Senior Scientist with Hauser Chemical Research, Inc. since 1990. From
1961 to 1990, Dr. Hauser was a founder, and held various management positions
at, Hauser Laboratories, Inc. From 1957 to 1961, Dr. Hauser was employed by
Martin Marietta Corporation as head of Materials Engineering Unit, Titan Missile
Project. Dr. Hauser has a Ph.D. in Chemical Engineering from the University of
Colorado, a Masters of Engineering in Chemical Engineering from Yale University,
and a Bachelor of Science in Chemical Engineering from the University of
Illinois.
CLIFFORD F. FRITH has served as a Director of the Company since January
1994. Mr. Frith currently serves as the President of several small start-up
companies including Poretics, a clinical chemistry and medical filter company
which is a division of Osmonics, Inc., a water purification equipment company.
He joined American Business Advisors, Inc., as a Vice President in November 1993
until he left that company in January 1996. In this capacity, Mr. Frith has
provided research and development, marketing and corporate management services
to a wide variety of small to mid-size high technology companies. He has been
the President and a director of Boulder Intertec Inc., a business management
advising service, since June 1992. Mr. Frith was a founder, director and chief
executive officer of Anatel Corporation, a provider of high purity water
instrumentation from 1983 to 1991. Prior to that, he held management positions
with Millipore Corporation, a provider of separations processes and analysis. In
addition to over 30 years of management experience, Mr. Frith has broad
experience in both domestic and international medical and industrial marketing.
Mr. Frith holds a Bachelor of Science in Chemistry from the Virginia Military
Institute.
DERACE SCHAFFER, M.D., has served as a Director of the Company since
September 1994. He has been Chairman and Chief Executive Officer of NeuralTech,
a financial services company, since its inception. Dr. Schaffer is President of
the Ide Radiology Group, a medical practice, as well as the Lan Group, Inc., a
venture investment company. He also serves as Chairman of the Board of Directors
of Medifax, Inc., a medical transcription company, and serves as a Director of
Patient Infosystems, Inc., a healthcare information systems company as well as a
number of not-for-profit corporations. He holds a Doctorate in Medicine from
Albany Medical College.
DAVID G. SENGPIEL has served as a Director of the Company since April 1995.
He has been a Vice-President of Equity Dynamics, Inc., a financial consulting
firm, since March 1995. Prior to such time, Mr. Sengpiel was the Alternate
Investment Manager with Farm Bureau Life Insurance Company for five years. Mr.
Sengpiel holds a Bachelor of Science in Business degree from Carroll College.
29
<PAGE>
ROBERT T. HAMILTON has served as a Director of the Company since April 1995.
He is President of Rexam Coatings, a film and paper specialty coatings company.
Prior to that, Mr. Hamilton was President and Chief Executive Officer of
Hamilton & Associates, a consulting firm specializing in strategy and
operational management services. He is also Senior Vice President of Intrados
International Management Group, which consults for major healthcare,
communications and imaging companies. Prior to 1995, Mr. Hamilton spent 31 years
with Eastman Kodak Company ("Kodak") where he served most recently as Vice
President and Regional General Manager of the Kodak Imaging division. From 1986
to 1991, he was Vice President and General Manager of Kodak's Health Sciences
Division. Prior to that, Mr. Hamilton held a variety of senior management
positions with Kodak. Mr. Hamilton has a Masters of Science in Business
Management from Massachusetts Institute of Technology (Sloan Fellow), a Master
of Science in Chemical Engineering from the University of Rochester and a
Bachelor of Science in Math and Science from Hobart College.
Directors are elected to serve until the next annual meeting of shareholders
or until their successors are elected and qualified. Each officer is appointed
and serves at the discretion of the Board of Directors. Each of the Company's
officers and directors, other than non-employee directors, devotes substantially
full time to the affairs of the Company. There are no family relationships among
any of the directors, officers or key employees of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee which
currently consists of Messrs. Frith, Hamilton and Sengpiel. The Compensation
Committee reviews and recommends to the Board the compensation and benefits for
all officers of the Company and reviews general policy relating to compensation
and benefits of the employees.
The Board of Directors has also established an Audit Committee consisting of
Dr. Hauser and Messrs. Hamilton and Sengpiel. Such committee recommends the
selection of the Company's independent public accountants to the Board of
Directors, evaluates the independent public accountants, and consults with the
independent public accountants as to the Company's internal accounting controls.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses associated with attendance at Board and
Committee meetings. Each non-employee director has been granted options to
purchase 25,758 shares of Common Stock at an exercise price of $1.00 per share.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation earned for services rendered in all capacities to the Company for
the fiscal year ended December 31, 1995 by the Company's Chief Executive
Officer. No executive officer had a combined salary and bonus in excess of
$100,000 for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL ------------------------------- OPTIONS ALL OTHER
POSITION SALARY BONUS OTHER GRANTED (1) COMPENSATION
- ----------------------------------------------------- --------- --------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Paul L. Ray, Chairman and
Chief Executive Officer............................. $ 88,545 $ 0.00 $ 0.00 50,000 $ 0.00
</TABLE>
- ------------------------
(1) On June 23, 1995, Mr. Ray was granted an option to purchase 50,000 shares of
Common Stock at the exercise price of $1.00 per share. Such option is
subject to a three-year vesting period and will
30
<PAGE>
thus be fully vested on June 22, 1998. See "Management--Employment
Agreements." At the time of grant, the fair market value of the option was
determined by the Board of Directors to be $1.00 per share.
1994 STOCK OPTION PLAN
In March 1994, the Board of Directors of the Company and, in November 1994,
the shareholders of the Company adopted the Plan. The Plan provides for the
grant of options to purchase up to 800,000 shares of Common Stock to employees,
directors, and consultants of the Company. Options may be either "incentive
stock options" within the meaning of Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code"), or non-qualified stock options.
Incentive stock options may be granted only to employees of the Company, while
non-qualified stock options may be issued to non-employee directors and
consultants, as well as to employees of the Company.
The Plan will be administered by a committee of "disinterested members" of
the Board of Directors (as defined by Rule 16b-3 under the Exchange Act), who
determine, among other things, the individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock issuable upon the exercise of each option, and
the option exercise price.
The exercise price per share of Common Stock subject to an incentive stock
option may not be less than the fair market value per share of Common Stock on
the date the option is granted. The per share exercise price of the Common Stock
subject to a non-qualified stock option may be less than the fair market value
per share. The aggregate fair market value (determined as of the date the option
is granted) of Common Stock for which any person may be granted incentive stock
options which first become exercisable in any calendar year may not exceed
$100,000. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option to such person, 10% or more of the total
combined voting power of all classes of stock of the Company (a "10%
Stockholder") shall be eligible to receive any incentive stock options under the
Plan unless the exercise price is at least 110% of the fair market value of the
shares of Common Stock subject to the option, determined on the date of grant.
Non-qualified stock options are not subject to such limitation.
No stock option may be transferred by an optionee other than by will or the
laws of descent and distribution, and, during the lifetime of an optionee, the
option will be exercisable only by the optionee, unless otherwise determined by
the Board of Directors. In the event of termination of employment other than by
death or disability, the optionee will have no more than three months after such
termination during which the optionee shall be entitled to exercise the option,
unless otherwise determined by the Board of Directors. Upon termination of
employment of an optionee by reason of death or disability, such optionee's
options remain exercisable for one year thereafter to the extent such options
were exercisable on the date of such termination, unless otherwise determined by
the Board of Directors.
Options under the Plan must be issued within ten years from the effective
date of the Plan. The effective date of the Plan is March 15, 1994. Stock
options granted under the Plan cannot be exercised more than ten years from the
date of grant. Incentive stock options issued to a 10% Stockholder are limited
to five-year terms. Options granted under the Plan provide for the payment of
the exercise price in cash or, with the approval of the Board of Directors,
provide for the payment of the exercise price by delivery to the Company of
shares of Common Stock already owned by the optionee having a fair market value
equal to the exercise price of the options being exercised. Therefore, such
optionee may be able to tender shares of Common Stock to purchase additional
shares of Common Stock and may theoretically exercise all of his stock options
with no additional investment other than the purchase of his original shares.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan.
31
<PAGE>
To date, options to acquire 710,840 shares of Common Stock have been granted
under the Plan. Of such options, options to acquire for 212,000 shares of Common
Stock are exercisable at an exercise price of $0.99 per share, options to
acquire for 101,200 shares of Common Stock are exercisable at an exercise price
of $1.33 per share, and options to acquire for 397,640 shares of Common Stock
are exercisable at an exercise price of $1.00 per share.
401(K) PLAN
In June 1996, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees who have been employed by the Company for
at least one year may elect to reduce their current compensation by an amount up
to the annual statutory limit ($9,500 in 1996) and have the amount of the
reduction contributed to the 401(k) Plan. The Company may also make additional
discretionary employer contributions to the 401(k) Plan. The trustee under the
401(k) Plan invests the assets of the 401(k) Plan in any of several investment
options. The 401(k) Plan is intended to qualify under Section 401 of the Code so
that contributions by the employees to the 401(k) Plan, and income earned on
plan contributions, are not taxable to employees until withdrawn, and so that
the contributions by employees will be deductible from gross income by the
Company when made. Any Company contributions vest at a rate of 20% per year from
the employee's date of employment through the fifth anniversary thereof.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock options
granted under the Plan to Paul L. Ray, the Chairman of the Board of Directors
and Chief Executive Officer of the Company, during the fiscal year ended
December 31, 1995.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ------------------------------------------ --------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul L. Ray............................... 50,000 25.05%(2) $ 1.00 06/22/02 $ 20,500 $ 47,500
</TABLE>
- ------------------------
(1) Potentially realizable value is based on the assumption that the Common
Stock price appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the seven-year option term for the
options shown. The fair market value of the Common Stock as of the date of
grant, June 23, 1995, was determined to be $1.00 per share. The Common Stock
price at the end of the seven-year option term would be $1.41 based on an
annual 5% appreciation rate and $1.95 based on an annual 10% appreciation
rate. The amounts have been calculated based on the requirements promulgated
by the Securities and Exchange Commission (the "Commission"). There can be
no assurance that the value realized will be at or near the potential
realizable value as shown in this table.
(2) Based on 199,600 options granted to employees during the year ended December
31, 1995.
32
<PAGE>
AGGREGATE OPTION EXERCISES IN 1995 AND HOLDINGS
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1995, with respect to
Paul L. Ray, the Chairman of the Board of Directors and the Chief Executive
Officer of the Company:
AGGREGATE OPTIONS EXERCISED IN THE
LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED,
NUMBER OF UNEXERCISED IN-THE-MONEY
NUMBER OF SHARES OPTIONS HELD AT 12/31/95 OPTIONS AT 12/31/95 (2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul L. Ray.............. 0.00 $ 0.00 75,799 86,701 $ 0.00 $ 0.00
</TABLE>
- ------------------------
(1) Based on the fair market value of the Common Stock on the exercise date,
less the per share exercise price.
(2) Based on the fair market value of the Common Stock of $1.00 per share, as
determined by the Company's Board of Directors, less the per share exercise
price.
EMPLOYMENT AGREEMENTS
Paul L. Ray, Chief Executive Officer and Chairman of the Board of Directors
of the Company, has a two-year employment agreement (the "Ray Agreement") with
the Company that terminates on December 31, 1997. The Ray Agreement provides for
an annual salary of $105,000. Mr. Ray's compensation package (including salary,
bonus and stock options and/or other equity incentives) is subject to an annual
review by the Board of Directors, but no portion of such compensation package
can be decreased without Mr. Ray's written consent. Pursuant to the Ray
Agreement, options granted to Mr. Ray by virtue of option agreements with the
Company shall expire seven years from the date of grant and remain exercisable
for a seven-year period regardless of whether Mr. Ray's employment with the
Company terminates earlier and notwithstanding contrary provisions in said
option agreements. Options not vested on Mr. Ray's termination of employment
shall be forfeited unless the Board of Directors decides otherwise. In the event
of a Change in Control of the Company (as defined in the Ray Agreement), all
options previously granted to Mr. Ray which remain unvested will automatically
vest immediately. Upon a termination of Mr. Ray's employment following a Change
in Control, unless Mr. Ray voluntarily terminates his employment for other than
certain listed reasons (which he has the right to do upon at least thirty days
written notice to the Company), the Company is to pay Mr. Ray a lump sum
severance payment of one-half of his then current annual salary. In addition, if
Mr. Ray's employment is terminated (i) upon his death, (ii) by the Company due
to various described disability circumstances, (iii) by the Company without
cause or (iv) by Mr. Ray voluntarily upon the Company's default or unremedied
Adverse Change in Duties (as defined in the Ray Agreement), then the Company is
to pay Mr. Ray a lump sum severance payment of one-half of his then current
annual salary. Upon the termination of Ray's Agreement, Mr. Ray is subject to
certain non-compete, non-disturbance and non-interference provisions for a
period of six months.
Robert E. Silligman, President and Chief Operating Officer of the Company,
has an employment agreement with the Company which expires on November 30, 1997
(the "Silligman Agreement"). The Silligman Agreement provides for an annual
salary of $90,000, annual compensation review provisions similar to those
described above with respect to the Ray Agreement, and similar provisions to
those set forth in the Ray Agreement with respect to (i) automatic option
vesting on Change in Control, (ii) severance on termination following Change in
Control, (iii) severance on termination for other causes and (iv) non-compete,
non-interference and non-disturbance upon termination of employment.
Waldean A. Schulz, Vice President, Technology of the Company, also has an
employment agreement with the Company (the "Schulz Agreement") which expires on
December 31, 1997. The Schulz
33
<PAGE>
Agreement provides for an annual salary of $80,000 and provisions similar to
those described above with respect to the Silligman Agreement except that the
Schulz Agreement provides for a longer, twelve-month non-compete,
non-interference and non-disturbance upon termination of employment.
Jeffrey J. Hiller, Vice President, Finance of the Company and Chief
Financial Officer, also has an employment agreement with the Company (the
"Hiller Agreement") which expires on December 31, 1997. The Hiller Agreement
provides for an annual salary of $85,000 and contains provisions similar to
those described above for Mr. Silligman.
INDEMNIFICATION
Sections 7-109-102 and 7-109-107 of the Colorado Business Corporation Act
(the "CBCA") permit indemnification of directors, officers, employees,
fiduciaries and agents of corporations under certain conditions and subject to
certain limitations. The Company's By-Laws include provisions which require the
Company to indemnify its directors and officers to the fullest extent permitted
by the CBCA, including circumstances in which indemnification is otherwise
discretionary. The Company's By-Laws include a provision which permits, but does
not require, the Company to indemnify its employees and agents under certain
prescribed circumstances within certain prescribed limitations. In addition, the
Company maintains directors' and officers' liability coverage to insure
indemnification of its directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
34
<PAGE>
CERTAIN TRANSACTIONS
Ray L. Hauser, a shareholder and member of the Board of Directors of the
Company, is an owner of the facility that was leased by the Company until it
moved into its current office space in February 1996. Rent expense under such
lease was $21,645 in 1994 and $48,604 in 1995.
During 1995, the Company issued a series of short-term notes in the
aggregate principal amount of $775,000 for working capital. These were issued to
five of the Company's existing shareholders and one director (the "Lenders").
Each Lender also received warrants ("Warrants") to purchase one share of Common
Stock for each $2 loaned to the Company as a term of the loan transaction. Each
note accrues interest at the rate of 11% per annum and is secured by the
Company's current and future inventory, accounts receivable, intangible assets
and intellectual property. The Company intends to repay the principal amount of,
and accrued and unpaid interest on, such notes with a portion of the proceeds of
this offering. See "Use of Proceeds." The following table sets forth each
Lender's name, his or its relationship to the Company, the original principal
amount of each note, the number of warrants issued in connection with the
issuance of such , and the amount of interest accrued on such as of June 30,
1996.
<TABLE>
<CAPTION>
ACCRUED
INTEREST
WARRANTS AS OF
LENDER TITLE NOTE AMOUNT ISSUED JUNE 30, 1996
- ------------------------------------------------------ -------------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
Colorado Incubator Fund, L.P.......................... Shareholder $ 10,000 5,000 $ 1,299
Edgewater Private Equity Fund, L.P.................... Shareholder 100,000 50,000 14,025
Edgewater Private Equity Fund, L.P.................... Shareholder 50,000 25,000 4,874
Edgewater Private Equity Fund, L.P.................... Shareholder 70,000 35,000 5,903
Farm Bureau Life Insurance............................ Shareholder 100,000 50,000 13,567
Farm Bureau Life Insurance............................ Shareholder 50,000 25,000 4,874
Farm Bureau Life Insurance............................ Shareholder 70,000 35,000 5,497
Robert Hamilton....................................... Director 50,000 25,000 3,835
Robert Hamilton....................................... Director 50,000 25,000 6,875
John Pappajohn........................................ Shareholder 100,000 50,000 14,086
John Pappajohn........................................ Shareholder 50,000 25,000 4,904
John Pappajohn........................................ Shareholder 70,000 35,000 5,903
Paradigm Partners..................................... Shareholder 5,000 2,500 649
------------ --------- ---------------
TOTAL............................................. $ 775,000 387,500 $ 86,291
------------ --------- ---------------
------------ --------- ---------------
</TABLE>
35
<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of the Common Stock as of June 30, 1996, by (i) each director, (ii)
the Chief Executive Officer of the Company, (iii) each shareholder known by the
Company to own beneficially five percent or more of the outstanding shares of
Common Stock and (iv) the Chief Executive Officer and all directors of the
Company as a group, and their percentage ownership of Common Stock after
completion of this offering. All information in this table gives effect to the
conversion of the Company's outstanding Series A Preferred Stock into 380,363
shares of Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING COMMON
STOCK BENEFICIALLY
NUMBER OF SHARES OWNED
OF COMMON STOCK ------------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED(2) OFFERING OFFERING
- ------------------------------------------------------------------------- ---------------- ----------- -----------
<S> <C> <C> <C>
Paul L. Ray(3)........................................................... 118,424 5.39% 3.49%
Ray L. Hauser(4)......................................................... 380,085 18.06% 11.50%
Clifford F. Frith(5)..................................................... 19,733 * *
Derace Schaffer(6)....................................................... 30,822 1.47% *
David G. Sengpiel(7)..................................................... 10,733 * *
Robert Hamilton(8)....................................................... 60,733 2.83% 1.82%
Waldean A. Schulz(9)..................................................... 212,788 10.10% 6.43%
Edgewater Private Equity Fund, L.P ...................................... 517,309 24.81% 15.75%
667 Grand Avenue, Suite 200
Des Moines, Iowa 50309
John Pappajohn .......................................................... 291,026 13.96% 8.86%
2116 Financial Center
Des Moines, Iowa 50309
FBL Ventures of South Dakota ............................................ 150,857 7.24% 4.59%
5400 University Avenue
West Des Moines, Iowa 50266
Attn: Steven Hunter
Timothy L. Feaver(10).................................................... 142,000 6.77% 4.31%
Farm Bureau Life Insurance(11) .......................................... 260,857 12.51% 7.94%
5400 University Avenue
West Des Moines, Iowa 50266
Attn: Steven Hunter
Chief Executive Officer and all directors as a group (6 persons)(12)..... 833,318 35.55% 23.51%
</TABLE>
- ------------------------
* Less than one percent.
(1) Unless otherwise noted, the address for each beneficial owner is c/o the
Company, 5710-B Flatiron Parkway, Boulder, Colorado 80301.
(2) Except as otherwise noted, each individual or entity has sole voting and
investment power with respect to the shares listed. Beneficial ownership is
determined in accordance with the rules of the Commission and generally
includes voting or investment power with respect to securities. In
accordance with Commission rules, shares of the Common Stock which may be
acquired upon exercise of stock options which are currently exercisable or
which become exercisable within 60 days of the date of this Prospectus are
deemed beneficially owned by the optionee and each
36
<PAGE>
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days of the date of this
Prospectus have been exercised. Except as indicated by footnote, and subject
to community property laws where applicable, the persons or entities named
in the table above have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
(3) Includes 110,816 shares which Mr. Ray has a right to acquire upon exercise
of stock options currently exercisable or exercisable within 60 days of the
date of this Prospectus. Does not include (i) 6,648 shares of Common Stock
held by Paradigm Partners ("Paradigm"), a limited liability company of which
Mr. Ray is a member, but not a manager, (ii) 12,500 shares Paradigm has a
right to acquire upon exercise of stock options currently exercisable or
exercisable within 60 days of the date of this Prospectus and (iii) 17,589
shares of Common Stock held by Paradigm Capital Network, Ltd., a Colorado
limited partnership of which Paradigm is the general partner.
(4) Includes 19,733 shares of Common Stock Dr. Hauser has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus and 3,200 shares of Common Stock
owned by Dr. Hauser's wife of which Dr. Hauser disclaims beneficial
ownership.
(5) Includes 19,733 shares of Common Stock Mr. Frith has a right to acquire upon
exercise of stock options currently exercisable or exercisable within 60
days of the date of this Prospectus.
(6) Includes 15,733 shares of Common Stock Dr. Schaffer has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus.
(7) Includes 10,733 shares of Common Stock Mr. Sengpiel has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus.
(8) Includes 10,733 shares of Common Stock Mr. Hamilton has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus and 50,000 shares of Common Stock Mr.
Hamilton has a right to acquire upon exercise of Warrants which are
currently exercisable.
(9) Includes 22,100 shares of Common Stock Dr. Schulz has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus.
(10) Includes 12,500 shares of Common Stock Mr. Feaver has a right to acquire
upon exercise of stock options currently exercisable or exercisable within
60 days of the date of this Prospectus and 15,200 shares of Common Stock
held by Mr. Feaver and his wife, Dewi Anne Feaver, as joint tenants.
(11) Includes 150,857 shares of Common Stock owned by FBL Ventures of South
Dakota, which is a wholly-owned subsidiary of Farm Bureau Life Insurance.
(12) Includes 209,581 shares of Common Stock issuable upon exercise of options
currently exercisable or exercisable within 60 days of the date of this
Prospectus, 50,000 shares of Common Stock issuable upon exercise of Warrants
which are currently exercisable and 3,200 shares of Common Stock owned by
Dr. Hauser's wife of which Dr. Hauser disclaims beneficial ownership.
37
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of (i) 10,000,000
shares of Common Stock and (ii) 2,416,668 shares of Preferred Stock, no par
value (after giving effect to the mandatory conversion of 83,332 shares of
Preferred Stock into 380,363 shares of Common Stock effective upon the closing
of this offering; the "Preferred Stock"). The discussions of the Common Stock
and Preferred Stock here and elsewhere in this Prospectus are qualified in their
entirety by reference to (i) the Restated and Amended Articles of Incorporation
of the Company, as amended, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and (ii) the
applicable provisions of the laws of the State of Colorado.
COMMON STOCK
Immediately prior to the closing of this offering, 2,084,699 shares of
Common Stock were issued and outstanding and were held of record by 50
shareholders (after giving effect to the mandatory conversion of 83,332 shares
of Series A Preferred Stock into 380,363 shares of Common Stock effective upon
the closing of this offering). Holders of Common Stock are entitled to one vote
for each share held of record on each matter submitted to a vote of shareholders
and do not have cumulative voting rights in the election of directors. Subject
to the preferences that may be applicable to any outstanding Preferred Stock,
the holders of Common Stock are entitled to receive such dividends, if any, as
may be declared from time to time by the Board of Directors. In the event of
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets of the Company remaining after
payment of liabilities, subject to distribution preferences of the Preferred
Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock and the shares of Common Stock to be issued upon completion of
this offering will be validly authorized and issued, fully paid and non-
assessable. The rights, preferences and privileges of holders of Common Stock
are subject to the rights of the holders of shares of any series of Preferred
Stock which the Company may issue in the future.
PREFERRED STOCK
Upon the closing of this offering, the Company will be authorized to issue
up to 2,416,668 shares of Preferred Stock. At the closing of this offering, no
shares of Preferred Stock will be issued and outstanding. The Board of Directors
has the authority to issue the Preferred Stock in one or more series, to fix the
number of shares constituting each such series and the designations thereof
(including the right to increase or decrease such numbers of shares), and to fix
the rights, preferences, privileges and restrictions thereof, within the
limitations of the CBCA, as such act may be amended, including, but not limited
to, dividend rights, dividend rates, conversion rights, redemption rights,
voting rights and liquidation preferences. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the shareholders and may adversely affect the
voting and other rights of the holders of Common Stock, The issuance of the
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. At present, the Company has no plans to issue any additional
Preferred Stock. See "Risk Factors--Preferred Stock; Possible Anti-Takeover
Effects."
WARRANTS
Immediately prior to the closing of this offering, the Company has
outstanding Warrants to purchase 50,000 shares of the Common Stock at an
exercise price of $1.00 per share. In lieu of delivering the exercise price in
cash or by check, the holder may elect to receive shares equal to the value of
the Warrant or portion thereof being exercised. Holders of the Warrants are
entitled to advance notice of certain dividends and distributions, proposed
liquidation, merger or consolidation and benefit from anti-dilution protection.
Holders of Warrants are entitled to the Piggyback Rights described below. See
"Description of Securities--Registration Rights."
38
<PAGE>
REGISTRATION RIGHTS
The holders of 717,863 shares of Common Stock and the holder of a Warrant to
purchase 50,000 shares of Common Stock will be entitled to the registration
rights described below with respect to such shares, subject to the terms of the
lock-up agreements described elsewhere in this Prospectus. See "Shares Eligible
For Future Sale" and "Underwriting". Under the terms of the Registration Rights
Agreement, dated as of July 8, 1994, between the Company and the holders of its
Series A Preferred Stock ("Registration Rights Agreement"), if the Company
proposes at any time after 12 months after the date of this Prospectus to
register any of its shares under the Securities Act either for its own account
or for the account of other shareholders, such holders are entitled to notice of
such registration and are entitled to include, in such registration ("Piggyback
Rights"), their 380,363 shares of Common Stock received on conversion of their
Series A Preferred Stock. Such shareholders may also require the Company, by
request of the holders of a majority of the aggregate outstanding registrable
securities, on one and only one occasion after 12 months after the effective
date of this offering, to file a registration statement under the Securities Act
at the Company's expense with respect to such shares of Common Stock, and the
Company is required to use its best efforts to effect such registration ("Demand
Rights"). In addition, holders of (i) 337,500 shares of Common Stock acquired
pursuant to the exercise of Warrants and (ii) outstanding Warrants to purchase
50,000 shares of Common Stock have the Piggyback Rights described above with
respect to such shares. If not expired sooner, the above registration rights
granted to the holders of the Series A Preferred Stock expire on July 7, 1999
and the registration rights granted to the holders of the Warrants expire on
March 15, 2000.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
39
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 3,284,699 shares of
Common Stock outstanding (3,464,699 shares of Common Stock outstanding if the
Representative's over-allotment option is exercised in full). Of these shares,
the 1,200,000 Shares offered hereby (1,380,000 shares if the Representative's
over-allotment option is exercised in full) will be freely tradeable without
further registration under the Securities Act. The holders of substantially all
the Common Stock outstanding, including all officers and directors of the
Company, and the option holders under the Plan and the warrant holder have
agreed not to (i) publicly sell, or otherwise dispose of, any securities of the
Company, except for limited transfers to qualifying charitable institutions, for
a period of 18 months from the date of this offering without the
Representative's prior written consent and (ii) privately sell or otherwise
dispose of any securities of the Company during such period unless the proposed
transferee agrees to be bound by such restrictions or transfer. Pursuant to such
agreements, in the event that the Representative consents to any such
disposition of securities, the Representative must give to each other officer,
director, and shareholder of the Company who is a party to such agreements the
right to transfer an equivalent proportion of their securities subject to such
agreements.
All of the 2,084,699 shares of Common Stock outstanding prior to this
offering are "restricted securities" within the meaning of Rule 144 of the
Securities Act and, if held for at least two years, would be eligible for sale
in the public market in reliance upon, and in accordance with, the provisions of
Rule 144 following the expiration of such two-year period. In general, under
Rule 144 as currently in effect, a person or persons whose shares are
aggregated, including a person who may be deemed to be an "affiliate" of the
Company as that term is defined under the Securities Act ("Affiliate"), would be
entitled to sell within any three-month period a number of shares beneficially
owned for at least two years that does not exceed the greater of (i) 1% of the
then outstanding shares of Common Stock, or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
of sale, notice, and the availability of current public information about the
Company. However, a person who is not deemed to have been an affiliate of the
Company during the 90 days preceding a sale by such person and who has
beneficially owned shares of Common Stock for at least three years may sell such
shares without regard to the volume, manner of sale, or notice requirements of
Rule 144. The Commission has recently proposed an amendment to Rule 144 which
would reduce the holding period for shares subject to Rule 144 to become
eligible for sale in the public market.
Rule 701 under the Securities Act provides that the shares of Common Stock
acquired on the exercise of options granted under a written compensatory plan of
the Company or contract with the Company prior to the date of this Prospectus
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. There are 145,580 shares
of Common Stock outstanding from prior exercises of options under the Company's
stock plans and 710,840 shares of Common Stock are issuable upon the exercise of
outstanding options under the Plan (collectively, the "Option Shares").
Beginning 90 days after the date of this Prospectus, all of the Option Shares
would be eligible for sale in reliance on Rule 701, subject to certain vesting
provisions.
Prior to this offering, there has been no public market for the Company's
securities. Following this offering, the Company cannot predict the effect, if
any, that sales of shares of Common Stock pursuant to Rule 144 or otherwise, or
the availability of such shares for sale, will have on the market price
prevailing from time to time. Nevertheless, sales by the current shareholders of
a substantial number of shares of Common Stock in the public market could
materially adversely affect prevailing market prices for the Common Stock. In
addition, the availability for sale of a substantial number of shares of Common
Stock acquired through the exercise of the Representative's Warrants or the
currently outstanding options under the Plan or the outstanding warrant could
materially adversely affect prevailing market prices for the Common Stock. See
"Risk Factors--Shares Eligible For Future Sale."
40
<PAGE>
Up to 120,000 additional shares of Common Stock may be purchased by the
Representative during the period commencing on the first anniversary of the date
of this Prospectus and terminating on the fifth anniversary of the date of this
Prospectus through the exercise of the Representative's Warrants. Any and all
shares of Common Stock purchased upon the exercise of the Representative's
Warrants may be freely tradeable, provided that the Company satisfies certain
securities registration and qualification requirements in accordance with the
terms of the Representative's Warrants. See "Underwriting."
After the offering, the holders of 717,863 shares of Common Stock, or their
transferees, will be entitled to certain rights with respect to the registration
of such shares under the Securities Act. See "Description of
Securities--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by Affiliates)
immediately upon the effectiveness of such registration.
41
<PAGE>
UNDERWRITING
GENERAL
The Underwriters named below, for which Hampshire Securities Corporation is
acting as Representative, have severally, and not jointly, agreed, subject to
the terms and conditions contained in the Underwriting Agreement, to purchase,
and the Company has agreed to sell, the shares of Common Stock offered hereby in
the amount set forth opposite their respective names below.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
Hampshire Securities Corporation.....................................................
-----------------
Total............................................................................ 1,200,000
-----------------
-----------------
</TABLE>
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement, to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions. The Underwriters shall be obligated to purchase all of the
shares of Common Stock offered hereby if any are purchased.
Through the Representative, the Underwriters have advised the Company that
they propose to offer the shares of Common Stock offered hereby to the public at
the public offering price set forth on the cover page of this Prospectus and
that they may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD"), and to certain foreign
dealers, concessions not in excess of $ per share, of which amount a sum
not in excess of $ per share may in turn be reallowed by such dealers to
other dealers who are members of the NASD and to certain foreign dealers. After
the commencement of this offering, the concessions and the reallowances may be
changed by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company has agreed to pay to the Representative an aggregate expense
allowance, on a non-accountable basis, equal to 3% of the gross proceeds derived
from the sale of 1,200,000 shares of Common Stock offered hereby (or 1,380,000
shares of Common Stock if Representative's over-allotment option is exercised in
full). The Company paid an advance on such allowances in the amount of $50,000.
The Company has also agreed to pay certain of the Representative's expenses in
connection with this offering, including expenses in connection with qualifying
the shares of Common Stock for sale under the laws of such states as the
Representative may designate. In addition, the Company will sell to the
Representative, at an aggregate purchase price of $120, the Representative's
Warrants to purchase up to an aggregate of 120,000 shares of Common Stock
exercisable at a price per share equal to 110% of the initial public offering
price per Share.
The officers, directors and certain current shareholders of the Company have
agreed not to publicly sell or otherwise dispose of their shares of Common
Stock, securities of the Company convertible into, or exercisable or
exchangeable for, shares of Common Stock, or shares of Common Stock received
upon conversion, exercise, or exchange of such securities, to the public without
the prior consent of the Representative for a period of 18 months from the date
of this Prospectus.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price of the shares of Common Stock has been
determined by negotiation between the Company and the Representative. Among the
factors considered in such negotiations were (i) an
42
<PAGE>
assessment of the Company's future prospects, (ii) the experience of the
Company's management, (iii) the current financial position of the Company, (iv)
the prevailing conditions in the securities markets, including the market value
of the publicly traded common stock of companies in similar industries, (v) the
market conditions for new offerings of securities and (vi) the demand for
similar securities of comparable companies.
OVER-ALLOTMENT OPTION
The Company has granted to the Representative an option, exercisable in the
sole discretion of the Representative within 45 days after the date of this
Prospectus, to purchase up to an aggregate of 180,000 shares of Common Stock
solely to cover over-allotments, if any. Such options are exercisable at the
public offering price per share less underwriting discounts and commissions.
After the commencement of this offering, the Representative may confirm sales of
shares of Common Stock subject to this over-allotment option. Purchases of
shares of Common Stock upon exercise of the over-allotment option will result in
the realization of additional compensation by the Representative.
REPRESENTATIVE'S WARRANTS
In connection with this offering, the Company has agreed to sell to the
Representative, individually and not as the Representative of the several
underwriters, for an aggregate purchase price of $120, the Representative's
Warrants to purchase up to 120,000 shares of Common Stock. The Representative's
Warrants are exercisable for a period of four years commencing one year from the
date hereof at an exercise price per share (the "Exercise Price") equal to 110%
of the initial public offering price per share. The Representative's Warrants
may not be sold, transferred, assigned, pledged, or hypothecated for a period of
12 months from the date of the Prospectus, except to members of the selling
group and officers and partners of the Representative and members of the selling
group. The Representative's Warrants contain anti-dilution provisions providing
for adjustment of the Exercise Price and the number of shares of Common Stock
issuable upon the exercise thereof upon the occurrence of certain events,
including stock dividends, stock splits, recapitalizations and sales of Common
Stock below the then current market price (as defined therein). The holders of
the Representative's Warrants have no voting, dividend or other rights as
shareholders of the Company with respect to shares of Common Stock underlying
the Representative's Warrants, unless the Representative's Warrants have been
exercised.
The Company has agreed, on one occasion during the period beginning one year
after the date hereof and ending four years thereafter, if requested by the
holders of a majority of the Representative's Warrants or Warrant Shares, to
make all necessary filings to permit a public offering of the Warrant Shares and
to use its best efforts to cause such filing to become effective under the
Securities Act and to remain effective for at least nine months, at the
Company's sole expense. Notwithstanding the foregoing, the Company shall have no
obligation to prepare and file such new registration statement or post-effective
amendment to the registration statement if, within 20 days after it receives the
request therefor, the Company or insiders who own individually in excess of 5%
of the Common Stock agree to purchase the Representative's Warrants and/or the
underlying securities from such requesting holders at a price, in the case of
the Representative's Warrants, equal to the difference between the exercise
price of the Representative's Warrants and the current market price (as defined
therein) of the Warrant Shares. In addition, the Company has agreed, for the
period starting at the beginning of the second year and concluding at the end of
the fifth year after the effective date of the Registration Statement of which
this Prospectus is a part, to give advance notice to holders of the
Representative's Warrants and Warrant Shares of its intention to file a
registration statement, and in such case, holders of the Representative's
Warrants and the Warrant Shares shall have the right to require the Company to
include the Warrant Shares in such registration statement at the Company's
expense.
During the period that the Representative's Warrants are exercisable, the
Representative and any transferee will have the opportunity to profit from a
rise in the market price of the Common Stock with a resulting dilution in the
interest of other shareholders. In addition, the terms on which the
43
<PAGE>
Company will be able to obtain additional capital during the exercise period may
be adversely affected since the Representative is likely to exercise the
Representative's Warrants at a time when the Company would, in all likelihood,
be able to obtain capital by a new offering of securities on terms more
favorable than those provided by the terms of the Representative's Warrants.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Ireland, Stapleton, Pryor & Pascoe, P.C., Denver, Colorado. Certain
legal matters will be passed upon for the Underwriters by Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, New York, New York.
EXPERTS
The financial statements as of December 31, 1994 and 1995, and for each of
the two years in the period ended December 31, 1995, included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statements with respect to the SLU Patent, and the statements regarding
infringement with respect thereto, included in this Prospectus have been so
included in reliance on Nikaido, Marmelstein, Murray & Oram, given on the
authority of said firm as experts in patent law.
CHANGE IN INDEPENDENT ACCOUNTANTS
On November 17, 1994, the Company dismissed its then current auditors and,
on November 28, 1994, the Company retained Price Waterhouse LLP as the Company's
independent accountants. Such actions were approved by the Company's Board of
Directors. The former auditors' report on the Company's financial statements for
the two years ended December 31, 1993, does not cover the financial statements
of the Company included in this Prospectus. The former auditors' report was not
modified as to audit scope or accounting principles, but did contain an
explanatory paragraph relating to the Company's ability to continue as a going
concern. There were no disagreements with the former auditors on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure at the time of the change or with respect to the Company's
financial statements for either of the two years in the period ended December
31, 1993, which, if not resolved to the former auditors' satisfaction, would
have caused them to make reference to the subject matter of the disagreement in
connection with their report. Prior to retaining Price Waterhouse LLP, the
Company had no consultations with Price Waterhouse LLP regarding the audit
reports of the former auditors or application of accounting principles.
ADDITIONAL INFORMATION
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington D.C. 20549, a registration statement on Form SB-2 (the "Registration
Statement"), including amendments thereto, under the Securities Act with respect
to the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith, as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Offering, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
as to the contents of any contract or other document which has been filed as an
exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for a complete statement of their terms and
conditions. The Registration Statement and the exhibits and schedules thereto
may be inspected without charge at the offices of the Commission and copies of
all or any part thereof may be obtained from the Commission's principal office
at 450 Fifth Street, N.W., Washington D.C. 20549 or at certain of the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, upon
44
<PAGE>
payment of the fees prescribed by the Commission. Electronic registration
statements filed through the Electronic Data Gathering, Analysis and Retrieval
system are publicly available through the Commission's Web site
(http://www.sec.gov). Following approval of the Shares for quotation on the
Nasdaq SmallCap Market, reports and other information concerning the Company may
be inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington D.C. 20006. In addition, following
approval of the Shares on the Stock Exchange, reports and other
information concerning the Company may be inspected at the offices of the
Stock Exchange, .
45
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheet............................................................. F-3
Statement of Operations................................................... F-4
Statement of Changes in Shareholders' Equity (Deficit).................... F-5
Statement of Cash Flows................................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Image Guided Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Image Guided
Technologies, Inc. (the "Company") at December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audits 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boulder, Colorado
July 12, 1996
F-2
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, DECEMBER 31, JUNE 30, EQUITY
1994 1995 1996 JUNE 30, 1996
-------------- ------------ ----------- -------------
(UNAUDITED) (NOTE 1)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 92,406 $ 31,822 $ 137,851
Accounts receivable, net of allowance for doubtful accounts of $0,
$23,506, and $40,656 at December 31, 1994 and 1995 and June 30,
1996 (unaudited), respectively..................................... 279,401 522,405 577,384
Inventories......................................................... 113,366 175,256 355,384
Other current assets................................................ 13,702 37,657 119,748
-------------- ------------ -----------
Total current assets................................................ 498,875 767,140 1,190,367
Property and equipment, net of accumulated depreciation of $18,435,
$54,535 and $93,113 at December 31, 1994 and 1995 and June 30, 1996
(unaudited), respectively............................................ 72,007 91,475 253,473
Deposits.............................................................. 12,000
-------------- ------------ -----------
Total assets...................................................... $ 570,882 $ 858,615 $ 1,455,840
-------------- ------------ -----------
-------------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................... $ 159,053 $ 302,659 $ 320,937
Accrued liabilities................................................. 95,285 384,628 391,270
Notes payable....................................................... 775,000 775,000
-------------- ------------ -----------
Total current liabilities........................................... 254,338 1,462,287 1,487,207
Capital lease obligation.............................................. 108,971
-------------- ------------ -----------
Total liabilities................................................... 254,338 1,462,287 1,596,178
Commitments and contingencies (Note 8)
Shareholders' equity (deficit):
Series A Convertible Preferred Stock, no par value; 2,500,000 shares
authorized; 83,332 issued and outstanding; 2,416,668 shares
authorized pro forma; none issued and outstanding pro forma........ 999,960 999,960 999,960
Common Stock, no par value; 10,000,000 shares authorized; 1,350,176,
1,368,836, and 1,704,336 shares issued and outstanding at December
31, 1994 and 1995 and June 30, 1996 (unaudited), respectively, and
2,084,699 at June 30, 1996 pro forma (unaudited)................... 1,645,490 1,777,223 2,114,723 $ 3,114,683
Accumulated deficit................................................. (2,328,906) (3,380,855) (3,255,021) (3,255,021)
-------------- ------------ ----------- -------------
Total shareholders' equity (deficit).............................. 316,544 (603,672) (140,338) (140,338)
-------------- ------------ ----------- -------------
Total liabilities and shareholders' equity (deficit).............. $ 570,882 $ 858,615 $ 1,455,840 $ 1,455,840
-------------- ------------ ----------- -------------
-------------- ------------ ----------- -------------
</TABLE>
The accompanying notes are an integral part these financial statements.
F-3
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue................................. $ 908,146 $ 1,883,802 $ 496,865 $1,746,657
Cost of goods sold...................... 502,625 793,622 258,909 733,803
----------- ----------- ----------- -----------
Gross profit............................ 405,521 1,090,180 237,956 1,012,854
----------- ----------- ----------- -----------
Operating expenses:
Research and development.............. 291,461 627,266 384,812 328,442
Selling and marketing................. 605,745 767,664 353,223 224,541
General and administrative............ 551,393 595,603 236,878 296,384
----------- ----------- ----------- -----------
Total operating expenses............ 1,448,599 1,990,533 974,913 849,367
----------- ----------- ----------- -----------
Operating income (loss)................. (1,043,078) (900,353) (736,957) 163,487
Other income (expense):
Interest expense...................... (41,472) (175,806) (16) (44,099)
Interest and other income............. 24,295 24,210 11,122 6,446
----------- ----------- ----------- -----------
Net income (loss)....................... $(1,060,255) $(1,051,949) $ (725,851) $ 125,834
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Pro forma net income (loss) per common
share (unaudited)...................... $ (.50) $ .04
----------- -----------
----------- -----------
Pro forma weighted average number of
common shares outstanding
(unaudited)............................ 2,118,549 2,825,613
----------- -----------
----------- -----------
Supplemental pro forma net income (loss)
per common share (unaudited)........... $ (.45) $ .06
----------- -----------
----------- -----------
Supplemental pro forma weighted average
number of common shares outstanding
(unaudited)............................ 2,220,764 2,933,274
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE
PREFERRED STOCK COMMON STOCK TOTAL
---------------- --------------------- UNEARNED ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT EQUITY (DEFICIT)
------ -------- --------- ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993.............. 504,216 $ 938,585 $(13,257) $(1,268,651) $ (343,323)
Stock issued upon conversion of debt and
interest................................. 41,468 55,256 55,256
Exercise of stock options and warrants.... 152,920 2,713 2,713
Issuance of common stock and preferred
stock.................................... 83,332 $999,960 651,572 632,469 1,632,429
Grant of options to directors, officers,
and employees in exchange for services... 16,467 (16,467)
Stock option compensation expense......... 29,724 29,724
Net loss.................................. (1,060,255 ) (1,060,255)
------ -------- --------- ---------- ------------ ----------- ----------------
Balance at December 31, 1994.............. 83,332 999,960 1,350,176 1,645,490 -- (2,328,906 ) 316,544
Exercise of stock options and warrants.... 16,660 41 41
Warrants issued with debt................. 131,692 131,692
Net loss.................................. (1,051,949 ) (1,051,949)
------ -------- --------- ---------- ------------ ----------- ----------------
Balance at December 31, 1995.............. 83,332 999,960 1,366,836 1,777,223 -- (3,380,855 ) (603,672)
Exercise of warrants...................... 337,500 337,500 337,500
Net income................................ 125,834 125,834
------ -------- --------- ---------- ------------ ----------- ----------------
Balance at June 30, 1996 (unaudited)...... 83,332 $999,960 1,704,336 $2,114,723 $ -- $(3,255,021) $ (140,338)
------ -------- --------- ---------- ------------ ----------- ----------------
------ -------- --------- ---------- ------------ ----------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ --------------------------
1994 1995 1995 1996
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net income (loss)..................................... $ (1,060,255) $ (1,051,949) $ (725,851) $ 125,834
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation........................................ 23,710 52,082 22,684 41,127
Amortization of debt discount....................... 131,692
Provision for doubtful accounts..................... 26,907 6,175 17,428
Write-off of fixed assets........................... 51,046 40,828
Stock option compensation expense................... 29,724
Allowance for inventory obsolescence................ 32,546 12,892 20,546 (3,339)
Changes in operating assets and liabilities:
Accounts receivable............................... (177,178) (269,911) 306,329 (72,407)
Inventories....................................... (89,742) (74,782) (70,693) (176,789)
Other current assets.............................. (11,796) (23,955) (17,583) (82,091)
Deposits.......................................... (12,000)
Accounts payable.................................. (39,959) 143,606 63,043 18,278
Accrued liabilities............................... 70,143 289,343 46,411 (10,403)
-------------- -------------- ------------ ------------
Net cash used by operating activities............. (1,171,761) (723,247) (348,939) (154,362)
-------------- -------------- ------------ ------------
INVESTING ACTIVITIES
Additions to property and equipment................... (121,689) (112,378) (78,381) (77,109)
-------------- -------------- ------------ ------------
Net cash used by investing activities............. (121,689) (112,378) (78,381) (77,109)
-------------- -------------- ------------ ------------
FINANCING ACTIVITIES
Payments on short-term line of credit................. (250,000)
Proceeds from issuance of debt and warrants........... 775,000 365,000
Proceeds from the issuance of common stock and
preferred stock...................................... 1,635,142 41 40 337,500
-------------- -------------- ------------ ------------
Net cash provided by financing activities......... 1,385,142 775,041 365,040 337,500
-------------- -------------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.......................................... 91,692 (60,584) (62,280) 106,029
Cash and cash equivalents at beginning of period...... 714 92,406 92,406 31,822
-------------- -------------- ------------ ------------
Cash and cash equivalents at end of period............ $ 92,406 $ 31,822 $ 30,126 $ 137,851
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid......................................... $ 26,154 $ 250 $ 5,416
Equipment acquired under capital lease................ $ 126,016
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Image Guided Technologies, Inc. (the "Company") was incorporated in 1990 in
the State of Colorado to design, develop, manufacture and market proprietary,
hand-held electro-optical 3-dimensional position input devices for medical and
industrial applications. In March 1995, the Company changed its name from
Pixsys, Inc. to Image Guided Technologies, Inc.
REVENUE RECOGNITION AND WARRANTY
Revenue is recognized upon shipment. The Company offers a one-year warranty
on products sold. The costs of product warranties are accrued at the time sales
are recorded based upon estimates of costs to be incurred to repair or replace
items under warranty.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is determined
using the first-in, first-out ("FIFO") method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated on a straight-line
basis over their estimated useful lives of two to five years.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are carried at cost which approximates fair value.
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 reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL DATA
The interim financial data as of June 30, 1996 and for the six months ended
June 30, 1995 and June 30, 1996 is unaudited; however, in the opinion of
management of the Company, the interim data includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results for the interim periods presented. All data presented in these notes at
such date and for such periods is unaudited.
UNAUDITED PRO FORMA SHAREHOLDERS' EQUITY
The Board of Directors authorized management of the Company to file a
registration statement with the Securities and Exchange Commission ("SEC")
permitting the Company to sell shares of its common stock to the public. If the
Company's initial public offering is consummated under the terms presently
anticipated, all of the convertible preferred stock outstanding will
automatically convert into 380,363 shares of common stock. Unaudited pro forma
shareholders' equity as of June 30, 1996, as set forth on the accompanying
balance sheet, is adjusted for the anticipated conversion of preferred stock.
F-7
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
The Company's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of convertible preferred
stock into common stock concurrent with the closing of the Company's anticipated
initial public offering. Accordingly, historical net income (loss) per common
share is not considered meaningful and has not been presented herein.
Pro forma net income (loss) per common share is computed based on the
weighted average number of common shares outstanding and gives effect to certain
adjustments described below. Common equivalent shares are not included in the
per share calculation where the effect of their inclusion would be antidilutive,
except that, in conformity with SEC requirements, common and common equivalent
shares issued during the twelve-month period prior to the filing of the
Company's proposed initial public offering have been included in the calculation
as if they were outstanding for all periods, using the treasury stock method and
the assumed initial public offering price of $5 per share. Additionally, all
outstanding shares of convertible preferred stock are assumed to have been
converted to common stock at the time of their issuance.
UNAUDITED SUPPLEMENTAL PRO FORMA NET INCOME (LOSS) PER SHARE
Supplemental pro forma net income (loss) per share is based on the weighted
average number of shares of common stock and common stock equivalents used in
the calculation of pro forma net income (loss) per share plus the number of
shares that would be required to be sold, on a net proceeds basis, to repay
borrowings outstanding on the Company's notes payable ($775,000 in the aggregate
at June 30, 1996) as contemplated in connection with the Company's initial
public offering. For purposes of this calculation, net income has been increased
by $43,098 for the six-month period ended June 30, 1996 and net loss has been
reduced by $43,192 for the year ended December 31, 1995, to reflect elimination
of interest expense on such notes payable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash,
short-term trade receivables and payables and long-term debt, approximate their
fair values.
CONCENTRATION OF CREDIT RISK
The majority of the Company's revenues during 1994 and 1995 resulted from
sales of a single product which is used to determine the location of a surgical
instrument in a three dimensional space. Customers accounting for 10% or more of
total revenues during 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Customer A............................................................................... 18%
Customer B............................................................................... 18%
Customer C............................................................................... 12%
Customer D............................................................................... 19%
Customer E............................................................................... 13%
Customer F............................................................................... 38%
</TABLE>
At December 31, 1994, 17%, 0% and 29% of accounts receivable were with
customers A, B, and C, respectively. At December 31, 1995, 25%, 6% and 60% of
accounts receivable were with customers D, E and F, respectively.
EXPORT SALES
The Company had export sales totaling approximately $400,247 and $450,187
for the years ended December 31, 1994 and 1995, respectively, principally to
Germany, France, and Canada.
F-8
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ADOPTION OF NEW ACCOUNTING STANDARDS
The Company has reviewed Statements of Financial Accounting Standards No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF, and
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, for applicability. Based on
management's estimates and its intention to continue to apply its existing
accounting for stock options, the adoption of these standards is not expected to
have a material effect on the Company's financial statements.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- ----------- JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials................................................... $ 126,281 $ 211,029 $ 173,868
Work-in-process................................................. 4,125 4,104 182,912
Finished goods.................................................. 15,506 5,561 40,703
----------- ----------- -----------
145,912 220,694 397,483
Less allowance for obsolescence................................. (32,546) (45,438) (42,099)
----------- ----------- -----------
$ 113,366 $ 175,256 $ 355,384
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
---------- -----------
<S> <C> <C>
Demonstration equipment........................................................ $ 2,885 $ 30,938
Computer equipment............................................................. 52,695 54,746
Production equipment........................................................... 23,909 44,658
Furniture and fixtures......................................................... 10,953 15,668
---------- -----------
90,442 146,010
Less accumulated depreciation.................................................. (18,435) (54,535)
---------- -----------
$ 72,007 $ 91,475
---------- -----------
---------- -----------
</TABLE>
4. CREDIT ARRANGEMENTS
In April 1994, a shareholder of the Company repaid amounts owed under a
$250,000 revolving line of credit in return for 187,616 shares of the Company's
common stock. The Company has no current lines of credit.
F-9
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE
The notes payable at December 31, 1995 and June 30, 1996 (unaudited) consist
of the following:
<TABLE>
<S> <C>
Notes payable to shareholders or shareholders' wholly-owned subsidiaries;
interest at 11% per year; principal and interest payable on demand...... $ 210,000
Note payable to related party; interest at 11% per year; principal and
interest payable on demand.............................................. 50,000
Notes payable to shareholders or shareholders' wholly-owned subsidiaries;
interest at 11% per year; matures 1996 (as extended).................... 465,000
Note payable to related party; interest at 11% per year; matures 1996 (as
extended)............................................................... 50,000
---------
$ 775,000
---------
---------
</TABLE>
The Company issued 387,500 warrants to purchase common stock at an exercise
price of $1.00 per share pursuant to each of the notes payable above. These
warrants are fully vested and outstanding at December 31, 1995 and are
exercisable through 2000. The warrants were valued in good faith by management
at $131,692 and a corresponding amount was recorded as debt discount which was
fully amortized, over the original term of the notes payable, during 1995. Of
these warrants, 337,500 warrants were exercised in May and June of 1996.
The notes payable are secured by the Company's current and future inventory,
accounts receivable, intangible assets, and intellectual property. The fair
market value of the notes payable approximates their carrying value at December
31, 1995. Subsequent to December 31, 1995, the Company negotiated extended
payment terms on the above notes payable. See Note 9.
6. INCOME TAXES
At December 31, 1994, the Company had net operating loss carryforwards of
approximately $1,967,000. At December 31, 1995, the Company has net operating
loss carryforwards of approximately $2,788,000 which expire from 2006-2010.
During 1994, certain changes in the Company's ownership occurred which limit the
future utilization of these net operating loss carryforwards. Future ownership
changes may further limit the ability of the Company to realize its net
operating loss carryforwards.
At December 31, 1994 and 1995, the Company had gross deferred tax assets of
approximately $792,000 and $1,180,000, respectively, consisting primarily of the
tax effect of net operating loss carryforwards. The gross deferred tax assets
have been reduced by a valuation allowance of $792,000 and $1,180,000,
respectively, because based on the weight of available evidence, management
believes it is more likely than not that such benefits will not be realized. The
valuation allowance increased by approximately $383,000 and $388,000 during 1994
and 1995, respectively, primarily because no benefit was recorded for current
year losses.
The difference between the expected statutory benefit, determined by
applying the federal income tax rate of 34% to loss before income tax, and the
Company's tax benefit was primarily the additional valuation allowance recorded
against net operating loss benefits generated during 1994 and 1995. No provision
for income taxes has been recorded during 1996, as the Company has been able to
utilize net operating loss carryforwards.
F-10
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SHAREHOLDERS' EQUITY
STOCK SPLIT
During 1994, the Company effected a four-for-one stock split of the
Company's common stock. All common stock and stock option amounts presented in
these financial statements reflect this stock split.
CONVERTIBLE PREFERRED STOCK
Holders of Series A Convertible Preferred Stock ("Series A stock") are
entitled to receive dividends equal to those paid on the number of common shares
into which the preferred shares are convertible. Each share of outstanding
Series A stock is entitled to as many votes as the number of shares of common
stock into which it is convertible. The holders of Series A shares may, at any
time, convert their preferred shares into common shares on a one-for-one basis,
subject to adjustments for stock splits and certain antidilution provisions. As
of December 31, 1995, such Series A shares outstanding would convert to
approximately 380,363 shares of common stock. All Series A stock automatically
converts into common stock at the closing of an underwritten public offering of
common stock of the Company with aggregate offering proceeds of no less than
$5,000,000 or when at least 75% of all outstanding Series A stock has been
converted.
In the event of a liquidation of the Company, holders of Series A shares
will be entitled to a liquidation preference of $3.00 per share, before
adjustment for any future stock splits.
COMMON STOCK
At December 31, 1995, the Company has reserved an aggregate of 1,543,068
shares of its common stock for the conversion of the outstanding Series A stock
and stock issuable upon exercise of outstanding options and warrants.
STOCK OPTIONS
Stock option activity is as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
---------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1993.................................. 230,444 $ .0025
Options granted........................................................... 449,500 .0025-1.33
Options exercised......................................................... (128,920) .0025
Options forfeited......................................................... (3,064) .0025
---------- ---------------
Options outstanding at December 31, 1994.................................. 547,960 .0025-1.33
Options granted........................................................... 310,390 1.00
Options exercised......................................................... (16,660) .0025
Options forfeited......................................................... (47,250) 1.00
---------- ---------------
Options outstanding at December 31, 1995.................................. 794,440 $ 1.00 - 1.33
---------- ---------------
---------- ---------------
</TABLE>
The Company has authorized 800,000 options to be granted pursuant to its
stock option plan. At December 31, 1995, there were 5,560 options available for
grant under the plan. Options are generally granted at fair market value as
determined by the Board of Directors at the date of grant and vest over a
five-year period. At December 31, 1995, 331,030 options are exercisable.
WARRANTS
At December 31, 1995, and in addition to those warrants described in Note 5,
27,800 warrants to purchase common stock of the Company are outstanding at an
exercise price of $2.50 per share. The warrants are fully exercisable and expire
in 1996. Subsequent to December 31, 1995, the warrants expired prior to
exercise.
F-11
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment under non-cancelable leases and the
Company has required future minimum rental payments of $1,004 at December 31,
1995. A shareholder of the Company is an owner of the facility leased by the
Company under a short-term cancelable lease which expired in February, 1996.
Rent expense for 1994 and 1995 was $21,645 and $48,604, respectively.
9. OTHER EVENTS SUBSEQUENT TO DECEMBER 31, 1995
Subsequent to December 31, 1995, the Company and the note holders agreed to
extend the due dates of all principal ($775,000 at December 31, 1995) and
accrued interest at December 31, 1995 to the earlier of June 30, 1997 or thirty
days after the closing of an underwritten initial public offering of the
Company's common stock with gross proceeds of not less than $5,000,000.
Subsequent to December 31, 1995, the Company's board of directors authorized
the Company to undertake an initial public offering of the Company's common
stock pursuant to a letter of intent dated May 21, 1996.
F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, 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 OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION IN SUCH JURISDICTION. 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 HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Dilution.................................................................. 14
Selected Financial Information............................................ 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 19
Management................................................................ 28
Certain Transactions...................................................... 35
Principal and Management Shareholders..................................... 36
Description of Securities................................................. 38
Shares Eligible for Future Sale........................................... 40
Underwriting.............................................................. 42
Legal Matters............................................................. 44
Experts................................................................... 44
Independent Public Accountants............................................ 44
Additional Information.................................................... 44
</TABLE>
------------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,200,000 SHARES
IMAGE GUIDED
TECHNOLOGIES, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
HAMPSHIRE SECURITIES
CORPORATION
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 7-109-102 and 7-109-107 of the Colorado Business Corporation Act
(the "CBCA") permit indemnification of directors, officers, employees,
fiduciaries and agents of corporations under certain conditions and subject to
certain limitations. The Registrant's Bylaws include provisions which require
the Registrant to indemnify its directors and officers to the fullest extent
permitted by the CBCA, including circumstances in which indemnification is
otherwise discretionary. The Registrant's Bylaws include a provision which
permits, but does not require, the Registrant to indemnify its employees and
agents under certain prescribed circumstances within certain prescribed
limitations. In addition, the Registrant maintains directors' and officers'
liability coverage to insure its indemnification of its directors and officers.
Section 8 of the Underwriting Agreement filed as Exhibit 1.1 hereto provides
for the indemnification by the Underwriters of the Registrant and its directors
and officers, and by the Registrant of the Underwriters, for certain liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act"), or
otherwise.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses (other than underwriting discounts
and commissions) of the issuance and distribution of the securities being
registered, all of which will be paid by the Registrant.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 3,128
NASD filing fee.................................................. *
Nasdaq listing Fee............................................... *
Blue Sky filing fees and expenses................................ *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer agent and registrar fees................................ *
Premium on directors and officers liability insurance............ 58,000
Underwriter's non-accountable expense allowance**................ 180,000
Miscellaneous.................................................... *
---------
Total........................................................ $ 600,000
---------
---------
</TABLE>
- ------------------------
* To be supplied by amendment.
** Will increase to $207,000 if the Underwriter's over-allotment option is
exercised in full.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant has issued unregistered
securities in the transactions described below. Securities issued in such
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act, relating to sales by an
issuer not involving any public offering, Regulation D promulgated pursuant to
the Securities Act and/or Rule 701 promulgated under the Securities Act. The
sales of securities were made without the use of an underwriter and the
certificates evidencing the shares bear a restrictive legend permitting the
transfer thereof only upon registration of the shares or an exemption under the
Securities Act.
(1) On July 1, 1993 and April 5, 1994, the Registrant issued an aggregate of
1,804 shares of Common Stock (7,216 after the Registrant's December, 1994 four
for one stock split) to a director of the Registrant upon conversion of a note
payable by the Registrant to the director at a conversion price of $5.33 per
share for a total consideration of $9,615.32.
II-1
<PAGE>
(2) On March 25, 1994, the Registrant issued 6,000 shares of Common Stock
(24,000 after the Registrant's December, 1994 four for one stock split) to a
director of the Registrant upon exercise of a warrant at an exercise price of
$.40 per share for a total consideration of $2,400.
(3) On March 18, 1994, the Registrant issued 15,465 shares of Common Stock
(61,860 after the Registrant's December, 1994 four for one stock split) to 10
existing shareholders of the Registrant at a price of $5.33 per share for an
aggregate consideration of $82,428.45.
(4) On March 18, 1994, the Registrant issued an aggregate of 8,448 shares of
Common Stock (33,792 after the Registrant's December, 1994 four for one stock
split) to two directors of the Registrant, a partnership affiliated with one of
such directors, and an employee of the Registrant. Such issuances were made upon
the conversion of notes payable by the Registrant to said parties at a
conversion price of $5.33 per share for a total consideration of $45,006.52.
(5) Between March 18, 1994 and June 23, 1995, the Registrant issued an
aggregate of 36,395 shares of Common Stock (145,580 after the Registrant's
December, 1994 four for one stock split) to various employees, directors and a
consultant of the Registrant, in addition to a limited liability company
affiliated with one of such directors, at a price of $.01 per share for
aggregate consideration of $363.95, pursuant to the exercise of options
previously granted to such parties by the Registrant.
(6) On July 6, 1994, the Registrant issued 46,904 shares of Common Stock
(187,616 after the Registrant's December, 1994 four for one stock split) to a
director of the Company at a price of $5.33 per share in exchange for the
director's payment of a note payable by the Registrant to Vectra Bank in the
amount of $250,000.
(7) In July and August, 1994, the Registrant issued an aggregate of 101,024
shares of Common Stock and an aggregate of 83,332 shares of Series A Preferred
Stock pursuant to a private placement of such stock to six sophisticated
investors (404,096 and 333,328 shares, respectively, after the Registrant's
December, 1994 four for one stock split). The purchase price was $2.97 per share
for Common Stock and $12.00 per share for Series A Preferred Stock for an
aggregate purchase price of $1,300,000. One of the investors received his shares
in lieu of payment of a $300,000 note payable by the Registrant to such
investor.
(8) In May and June, 1996, the Registrant issued 337,500 shares of Common
Stock to five holders of outstanding notes payable by the Registrant upon the
exercise of warrants issued by the Registrant to such parties in connection with
their loans to the Registrant. The warrants were exercised at a price of $1.00
per share for an aggregate consideration of $337,500.
ITEM 27. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of the Company and Articles of Amendment and
Certificate of Correction thereto.
3.2 -- Bylaws of the Company.
4.1 -- Specimen Common Stock Certificate.*
5.1 -- Opinion of Ireland, Stapleton, Pryor & Pascoe, P.C.*
10.1 -- 1994 Stock Option Plan of the Company, as amended, and after the Company's December 1994 four
for one stock split.
10.2 -- Form of Stock Option Agreement under the Company's 1994 Stock Option Plan.
10.3 -- Registration Rights Agreement dated as of July 8, 1994, among the Company and holders of the
Company's Series A Preferred Stock.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
10.4 -- Form of Consultant Non-Disclosure Agreement used between the Company and consultants.
10.5 -- Form of Employee Non-Disclosure and Inventions Agreement used between the Company and its
employees.
10.6 -- Form of Promissory Notes payable by the Company to each of the Company's Lenders and form of
Extension Agreements thereto.
10.7 -- Form of Security Agreement between the Company and each of the Company's Lenders.
10.8 -- Form of Stock Purchase Warrants issued by the Company to each of the Company's Lenders.
10.9 -- OEM Agreement dated as of April 25, 1996, between the Company and DeeMed International.*,**
10.10 -- Strategic Alliance Agreement dated as of February 27, 1995 between the Company and Surgical
Navigation Technologies, Inc. and letters regarding termination of such agreement.*,**
10.11 -- Equipment Lease Agreement between the Company and Machinery Systems, Inc., for a refurbished
Zeiss Coordinate Measuring Machine.
10.12 -- Commercial Industrial Lease dated January 11, 1996, between the Company and Life Investors
Company of America.
10.13 -- Domestic Sales Representation Agreement dated December 21, 1993, between the Company and Sandab,
Inc.
10.14 -- Terms and Conditions of Sale between the Company and Carl Zeiss, Inc.*,**
10.15 -- Employment Agreement between the Company and Paul L. Ray and Amendment thereto.
10.16 -- Employment Agreement between the Company and Robert E. Silligman.
10.17 -- Employment Agreement between the Company and Waldean A. Schulz.
10.18 -- Employment Agreement between the Company and Jeffrey J. Hiller.
10.19 -- Lease between the Company and Raycon Properties.
10.20 -- Form of Representative's Warrants.
10.21 -- Letter Agreement dated June 24, 1992, between the Company and Giken Shoji Company, Ltd. and
notice of termination thereof.
11.1 -- Statement re computation of earnings per share.
16.1 -- Letter from Ernst & Young to the Commission.
23.1 -- Consent of Independent Accountants.
23.2 -- Consent of Ireland, Stapleton, Pryor & Pascoe, P.C. (included in Exhibit 5.1).*
23.3 -- Consent of Nikaido, Marmelstein, Murray & Oram.
24.1 -- Power of Attorney (included in signature pages).
27.1 -- Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** This document will be the subject of a request for confidential treatment to
be made to the Commission.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) It will:
(a) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(c) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in Boulder, Colorado,
on this 29th day of July, 1996.
IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ PAUL L. RAY
-----------------------------------
Paul L. Ray, Chief Executive
Officer
POWER OF ATTORNEY
The undersigned directors and/or officers of the Registrant, by virtue of
their signatures to this Registration Statement appearing below, hereby
constitute and appoint Paul L. Ray or Robert E. Silligman, or either of them,
with full power of substitution, as attorney-in-fact in their names, places and
steads to execute any and all amendments to this Registration Statement in the
capacities set forth opposite their names and hereby ratify all that said
attorneys-in-fact may do by virtue hereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT WAS SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES STATED.
SIGNATURES TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ PAUL L. RAY
- ----------------------------------- Principal Executive July 29, 1996
Paul L. Ray Officer and Director
/s/ ROBERT E. SILLIGMAN
- ----------------------------------- President July 29, 1996
Robert E. Silligman
/s/ JEFFREY J. HILLER Principal Financial
- ----------------------------------- Officer and Principal July 29, 1996
Jeffrey J. Hiller Accounting Officer
/s/ WALDEAN A. SCHULZ
- ----------------------------------- Vice President, July 29, 1996
Waldean A. Schulz Technology and Director
/s/ RAY L. HAUSER
- ----------------------------------- Director July 29, 1996
Ray L. Hauser
/s/ CLIFFORD F. FRITH
- ----------------------------------- Director July 29, 1996
Clifford F. Frith
/s/ DERACE SCHAFFER
- ----------------------------------- Director July 29, 1996
Derace Schaffer
/s/ ROBERT HAMILTON
- ----------------------------------- Director July 29, 1996
Robert Hamilton
/s/ DAVID G. SENGPIEL
- ----------------------------------- Director July 29, 1996
David G. Sengpiel
II-5
<PAGE>
DRAFT 072196A
________________ Shares
IMAGE GUIDED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
_____________, 1996
Hampshire Securities Corporation
As Representative of the several
Underwriters named in Schedule I
attached hereto
640 Fifth Avenue
New York, New York 10019
Gentlemen:
The undersigned, Image Guided Technologies, Inc., a Delaware corporation
(the "Company"), hereby confirms its agreement with Hampshire Securities
Corporation (individually, "Hampshire," and, as representative (the
"Representative") of the several underwriters named in Schedule I hereto (the
"Underwriters")), and the Underwriters as follows:
1. INTRODUCTION.
(a) The Company proposes to issue and sell to the Underwriters an
aggregate of 1,200,000 shares of common stock, no par value, of the Company (the
"Common Stock"). Such shares of Common Stock are hereinafter referred to as the
"Firm Stock".
(b) Solely for the purpose of covering over-allotments, if any, the
Company proposes to grant to Hampshire, individually and not as Representative,
an option (the "Over-
<PAGE>
allotment Option") to purchase from it, in the aggregate, up to an additional
180,000 shares of Common Stock. Such shares of Common Stock are hereinafter
referred to as the "Additional Stock." The Firm Stock and the Additional
Stock are hereinafter referred to as the "Stock."
(c) The Company proposes to sell to Hampshire, individually and not
as Representative, 120,000 warrants (the "Representative's Warrants") to
purchase up to an aggregate of 120,000 shares of Common Stock (the "Warrant
Shares") for an aggregate purchase price of $120.00. The Representative's
Warrants shall be substantially in the form filed as an exhibit to the
Registration Statement (as hereinafter defined). The Representative's Warrants
and the Warrant Shares are hereinafter referred to collectively as the
"Representative's Securities." The Stock and the Representative's Securities
are hereinafter referred to collectively as the "Securities."
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to, and agrees with, the several
Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and may have filed one or more
amendments thereto, on Form SB-2 (Registration No. 333-_______), including in
such registration statement and each such amendment a related preliminary
prospectus, for the registration of the Securities under the Securities Act of
1933, as amended (the "Securities Act"). As used in this Agreement, the term
"Registration Statement" shall refer to such registration statement referred to
in the first sentence of this Section 2(a), as amended, on file with the
Commission at the time such registration statement is declared by the Commission
to be effective under the Securities Act (including the prospectus, financial
statements, and exhibits filed as a part thereof, provided, however, that such
-2-
<PAGE>
registration statement, at the time it is declared by the Commission to be
effective under the Securities Act, may omit such information as is permitted to
be omitted from such registration statement when it becomes effective under the
Securities Act pursuant to Rule 430A of the General Rules and Regulations of the
Commission under the Securities Act (the "Regulations"), which information (the
"Rule 430A Information") shall be deemed to be included in such registration
statement when a final prospectus is filed with the Commission in accordance
with Rules 430A and 424(b)(1) or (4) of the Regulations); the term "Preliminary
Prospectus" shall refer to each prospectus included in the Registration
Statement, or any amendments thereto, before the Registration Statement is
declared by the Commission to be effective under the Securities Act, the form of
prospectus omitting Rule 430A Information included in the Registration Statement
when the Registration Statement becomes effective under the Securities Act, if
applicable (the "Rule 430A Prospectus"), and any prospectus filed by the Company
with the consent of the Representative pursuant to Rule 424(a) of the
Regulations; and the term "Prospectus" shall refer to the final prospectus
forming a part of the Registration Statement in the form first filed with the
Commission pursuant to Rule 424(b)(1) or (4) of the Regulations or, if no such
filing is required, the form of final prospectus forming a part of the
Registration Statement.
(b) When the Registration Statement becomes effective under the
Securities Act, and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 3(a) hereof) and each Additional Closing
Date (as defined in Section 3(b) hereof), and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, and during such longer period until any post-effective
amendment thereto shall become effective under the Securities Act, the
Registration Statement (and any post-effective
-3-
<PAGE>
amendment thereto) and the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement to
the Registration Statement or the Prospectus) will contain all statements
which are required to be stated therein in accordance with the Securities Act
and the Regulations, will comply with the Securities Act and the Regulations,
and 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, and no event will have occurred which
should have been set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not then been set forth in such an
amendment or supplement; if a Rule 430A Prospectus is included in the
Registration Statement at the time it is declared by the Commission to be
effective under the Securities Act, the Prospectus filed pursuant to Rules
430A and 424(b)(1) or (4) of the Regulations will contain all Rule 430A
Information and all statements which are required to be stated therein in
accordance with the Securities Act or the Regulations, will comply with the
Securities Act and the Regulations, and 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; and each
Preliminary Prospectus, as of the date filed with the Commission, contained
all statements required to be stated therein in accordance with the
Securities Act and the Regulations, complied with the Securities Act and the
Regulations, and did 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; except that no representation or
warranty is made in this Section 2(b) with respect to statements or omissions
made in reliance upon, and in conformity with, written information furnished
to the Company as stated in Section 8(b) with respect to any Underwriter by,
or on behalf
-4-
<PAGE>
of, such Underwriter through the Representative expressly for inclusion in
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto.
(c) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of, or preventing or suspending the use of, the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, refusing to permit the effectiveness of the Registration
Statement, or suspending the registration or qualification of the Securities nor
has any of such authorities instituted or threatened to institute any
proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, or license required
to be described in the Registration Statement or the Prospectus has been
properly described therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to the Registration Statement.
(e) The Company has no subsidiaries (as defined in the Regulations).
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Colorado with full power and authority,
and all necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and filings with, all
federal, state, local, and other governmental authorities and all courts and
other tribunals, to own, lease, license, and use its properties and assets and
to conduct its business in the manner described in the Prospectus. The Company
is duly qualified to do business as a foreign corporation and is in good
standing as such in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its business makes
such qualification necessary, except
-5-
<PAGE>
where the failure to so qualify will not have a material adverse effect on the
Company's business, properties, or financial condition on a consolidated basis.
(f) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, of which 2,086,689 shares are outstanding,
and 2,500,000 shares of preferred stock, no par value (the "Preferred Stock"),
of which 83,332 are outstanding, which shares of Preferred Stock will be
mandatorily converted immediately prior to the Closing Date into 380,353 shares
of Common Stock. Each outstanding share of Common Stock and Preferred Stock is
validly authorized and issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, has not been issued and
is not owned or held in violation of any preemptive or similar rights of
stockholders. There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance of, any
share of capital stock of the Company or any security or other instrument which
by its terms is convertible into, or exercisable or exchangeable for, capital
stock of the Company, except as may be properly described in the Prospectus.
There is outstanding no security or other instrument which by its terms is
convertible into, or exercisable or exchangeable for, capital stock of the
Company, except as may be properly described in the Prospectus. The
certificates evidencing the Common Stock and the Preferred Stock are in due and
proper form.
(g) The consolidated financial statements of the Company included in
the Registration Statement and the Prospectus fairly present, with respect to
the Company, the financial position, the results of operations, the cash flows,
and the other information purported to be shown therein at the respective dates
and for the respective periods to which they apply. Such consolidated financial
statements have been prepared in accordance with generally accepted accounting
-6-
<PAGE>
principles (except to the extent that certain footnote disclosures regarding any
stub period may have been omitted in accordance with the applicable rules of the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) consistently applied throughout the periods involved, are correct and
complete in all material respects, and are in accordance with the books and
records of the Company. Price Waterhouse LLP, the accountants whose report on
the audited consolidated financial statements is filed with the Commission as a
part of the Registration Statement, are, and during the periods covered by their
reports included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the Regulations. No other financial
statements are required by Form SB-2 or otherwise to be included in the
Registration Statement or the Prospectus. There has at no time been a material
adverse change in the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the Company on a
consolidated basis from the latest information set forth in the Registration
Statement or the Prospectus, except as may be properly described in the
Prospectus.
(h) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or, to
the best knowledge of the Company, in prospect (or any basis therefor) with
respect to the Company or any of it operations, businesses, properties, or
assets, except as may be properly described in the Prospectus or such as
individually or in the aggregate do not now have, and will not in the future
have, a material adverse effect upon the operations, business, properties, or
assets of the Company. To the best knowledge of the Company, the Company is not
in violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as may be properly described in the
Prospectus or
-7-
<PAGE>
such as in the aggregate do not now have, and will not in the future have, a
material adverse effect upon the operations, business, properties, or assets
of the Company; nor is the Company currently required to take any action in
order to avoid any such violation or default.
(i) The Company has good and marketable title to all properties and
assets which the Prospectus indicates are owned by it, free and clear of all
liens, security interests, pledges, charges, encumbrances, and mortgages, except
as may be properly described in the Prospectus or as are not material to the
Company. No real property owned, leased, licensed, or used by the Company lies
in an area which is, or to the knowledge of the Company will be, subject to
zoning, use, or building code restrictions which would prohibit, and no state of
facts relating to the actions or inaction of another person or entity or his or
its ownership, leasing, licensing, or use of any real or personal property
exists or will exist which would prevent, the continued effective ownership,
leasing, licensing, or use of such real property in the business of the Company
as presently conducted or as the Prospectus indicates it contemplates
conducting, except as may be properly described in the Prospectus.
(j) The Company nor, to the knowledge of the Company, any other
party, is now, or is expected by the Company to be, in violation or breach of,
or in default with respect to, any provision of any contract, agreement,
instrument, lease, license, arrangement, or understanding which is material to
the Company, and each such contract, agreement, instrument, lease, license,
arrangement, and understanding is in full force and effect and is the legal,
valid, and binding obligation of the parties thereto and is enforceable as to
them in accordance with its respective terms. The Company enjoys peaceful and
undisturbed possession under all leases and licenses under which it is
operating. Except as described in the Prospectus, the Company is not a party
to,
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or bound by, any contract, agreement, instrument, lease, license, arrangement,
or understanding, or subject to any charter or other restriction, which has
had, or may in the future have, a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities,
or future prospects of the Company. The Company is not in violation or breach
of, or in default with respect to, any term of its certificate of incorporation
(or other charter document) or by-laws.
(k) The Company owns or possesses adequate rights to use all patents,
patent rights, inventions, trade secrets, licenses, know-how, proprietary
techniques, including processes and substances, trademarks, service marks, trade
names, and copyrights described or referred to in the Prospectus as owned or
used by it or which are necessary for the conduct of its business as currently
conducted as described in the Prospectus and, to the best knowledge of the
Company, its business as contemplated as described in the Prospectus. To the
best knowledge of the Company, all such patents, patent rights, licenses,
trademarks, service marks, and copyrights are (i) valid and enforceable, (ii)
not being infringed by any third parties which infringement could, singly or in
the aggregate, materially and adversely affect the business, properties,
operations, condition (financial or otherwise), results of operations, income,
or business prospects of the Company as presently being conducted or as proposed
to be conducted as described in the Prospectus, and (iii) are uncontested by any
third party. The Company has no knowledge of, nor has it received any notice
of, infringement of, or conflict with, asserted rights of others with respect to
any patents, patent rights, inventions, trade secrets, licenses, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names, or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling, or finding could materially and
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adversely affect the business, properties, operations, condition (financial or
otherwise), results of operations, income, or business prospects of the Company
as presently being conducted or as proposed to be conducted as described in the
Prospectus.
(l) Neither the Company, nor, to the best knowledge of the Company,
any director, officer, agent, employee, or other person associated with, or
acting on behalf of, the Company, has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company's internal accounting controls and procedures are sufficient to cause
the Company and each of the Subsidiaries to comply in all respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(m) The Company has all requisite power and authority to execute,
deliver, and perform each of this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance by the Company of this
Agreement and the Representative's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid, and
binding obligation of the Company, and is enforceable as to the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, or other laws affecting the rights of creditors
generally. The Representative's Warrants have been duly authorized by the
Company and, when executed and delivered by the Company, will be legal, valid,
and
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binding obligations of the Company, each enforceable as to the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, or other laws affecting the rights of creditors
generally. No consent, authorization, approval, order, license, certificate,
or permit of or from, or declaration or filing with, any federal, state,
local, or other governmental authority or any court or other tribunal is
required by the Company for the execution, delivery, or performance by the
Company of this Agreement or the Representative's Warrants, except filings
under the Securities Act which have been or will be made before the Closing
Date, and consents consisting only of consents under "blue sky" or securities
laws which have been obtained at or prior to the date of this Agreement. No
consent of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party, or to which
any of its properties or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Representative's Warrants;
and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will not violate, result in a breach of, conflict
with, result in the creation or imposition of any lien, charge, or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, or, with or without the giving of notice or the passage of time or
both, entitle any party to terminate or call a default under, any such
contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate, result in a breach of, or conflict with any term
of the certificate of incorporation (or other charter document) or by-laws of
the Company, or violate, result in a breach of, or conflict with, any law,
rule, regulation, order, judgment, or decree binding on the Company or to
which any of its operations, businesses, properties, or assets are subject.
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(n) The Firm Stock is validly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully paid,
and nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders, and the Underwriters will receive good title to the shares of
Firm Stock purchased by them, respectively, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts. The Additional Stock is validly authorized and, when issued
in accordance with the terms hereof, will validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not issued in violation of any preemptive or similar rights of
stockholders. The Stock conforms to all statements relating thereto contained
in the Registration Statement and the Prospectus.
(o) The Warrant Stock is validly authorized and has been duly and
validly reserved for issuance and, when issued and delivered upon exercise of
the Representative's Warrants in accordance with the terms thereof, will be
validly issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of any
preemptive or similar rights of stockholders; and the holders of the
Representative's Warrants will receive good title to the securities purchased by
them upon the exercise of the Representative's Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Representative's Securities conform to all
statements relating thereto contained in the Registration Statement and the
Prospectus.
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in
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the Prospectus, the Company has not (i) issued any securities or incurred any
material liability or material obligation, primary or contingent, for
borrowed money, (ii) entered into any material transaction not in the
ordinary course of business, (iii) declared or paid any dividend on its
capital stock, or (iv) experienced any adverse changes or any development
which may materially adversely effect the condition (financial or otherwise),
net assets or stockholders' equity, results of operations, business, key
personnel, assets, or properties of the Company.
(q) Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the termination of the offering contemplated by this
Agreement, any action designed to stabilize or manipulate the price of any
security of the Company, or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company, to facilitate the sale
or resale of any of the Firm Stock or the Additional Stock.
(r) The Company has obtained from each of its directors and officers
a written agreement, in form and substance satisfactory to counsel for the
Underwriters, that, for a period of 18 months from the date on which the
Registration Statement is declared by the Commission to be effective under the
Securities Act, he, she, or it will not, without the prior written consent of
the Representative, publicly offer, pledge, sell, contract to sell, grant any
option for the sale of, or otherwise dispose of, directly or indirectly, any
shares of Common Stock or any security or other instrument which by its terms is
convertible into, or exercisable or exchangeable for, shares of Common Stock or
other securities of the Company, including, without limitation, any shares of
Common Stock issuable pursuant to the terms of any employee stock options;
provided, however,
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that such persons may offer, sell, contract to sell, grant an option for the
sale of, or otherwise dispose of all or any part of his, her, or its shares
of Common Stock or other such security or instrument of the Company during
such period if such transaction is private in nature and the transferee of
such shares of Common Stock or other securities or instruments agrees, prior
to such transaction, to be bound by all of the provisions of such agreement.
(s) The Company is not, and does not intend to conduct its business
in a manner in which it would be required to register as, an "investment
company" as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations promulgated thereunder.
(t) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement, which right has not been waived.
(u) Except as may be set forth in the Prospectus, the Company has not
incurred any liability for a fee, commission, or other compensation on account
of the employment of a broker or finder in connection with the transactions
contemplated by this Agreement.
(v) Neither the Company, nor any of its affiliates, is presently
doing business with the government of Cuba or with any person or affiliate
located in Cuba. If, at any time after the date on which the Registration
Statement is declared by the Commission to be effective under the Securities Act
or with the Florida Department of Banking and Finance (the "Florida
Department"), whichever is later, and prior to the end of the period referred to
in the first clause of Section 2(b) hereof, the Company commences engaging in
business with the government of Cuba or with any person or affiliate located in
Cuba, the Company will so inform the Florida Department
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<PAGE>
within 90 days after such commencement of business in Cuba, and, during the
period referred to in Section 2(b) hereof, will inform the Florida Department
within 90 days after any change occurs with respect to previously reported
information.
(w) No officer, director, or stockholder of the Company has any
affiliation or association with the National Association of Securities Dealers,
Inc. (the "NASD") or any member thereof.
(x) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state, local, and foreign income and franchise tax returns
and other reports required to be filed and has paid all taxes shown as due
thereon; and there is no tax deficiency which has been, or, to the knowledge of
the Company, might be, asserted against the Company.
(y) To the best knowledge of the Company, none of the activities or
business of the Company is in violation of, or will cause the Company to
violate, any law, rule, regulation, or order of the United States, any state,
county, or locality, or of any agency or body of the United States or of any
state, county, or locality, the violation of which would have a material adverse
effect upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company.
(z) The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market and the __________ Stock Market.
3. PURCHASE, SALE, AND DELIVERY OF THE STOCK AND THE REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the several
Underwriters, and, the Underwriters, severally and
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not jointly, agree to purchase from the Company, the numbers of shares of
Firm Stock set forth opposite the respective names of the Underwriters in
Schedule I hereto.
The purchase price per share of the Firm Stock to be paid by the several
Underwriters shall be $__________. The initial public offering price per share
of the Firm Stock shall be $ _________.
Payment for the Firm Stock by the Underwriters shall be made by certified
or official bank check in New York Clearing House (next day) funds or by
electronic wire transfer of next day funds, payable to the order of the Company,
at the offices of Hampshire Securities Corporation, 640 Fifth Avenue, New York,
New York 10019, or at such other place in the New York City metropolitan area as
the Representative shall determine and advise the Company by at least two full
days' notice, upon delivery of the Firm Stock to the Representative for the
respective accounts of the Underwriters. Such delivery and payment shall be
made at 9:00 a.m., New York City local time, on the third business day following
the time of the initial public offering, as defined in Section 11(a) hereof
(unless such time and date is postponed in accordance with the provisions of
Section 9(c) hereof), or at such other time as shall be agreed upon between the
Representative and the Company. The time and date of such delivery and payment
are hereinafter referred to as the "Closing Date."
Certificates representing the Firm Stock shall be registered in such name
or names and in such authorized denominations as the Representative may request
in writing at least two full business days prior to the Closing Date. The
Company shall permit the Representative to examine and package such certificates
for delivery at least one full business day prior to the Closing Date.
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<PAGE>
(b) The Company hereby grants to Hampshire the Over-allotment Option to
purchase up to an additional 180,000 shares of Common Stock, as may be necessary
to cover over-allotments, at the same purchase price per share to be paid by the
several Underwriters to the Company for the Firm Stock as provided for in this
Section 3 hereof. The Over-allotment Option may be exercised only to cover
over-allotments in the sale of shares by Hampshire. The Over-allotment Option
may be exercised by Hampshire on the basis of the representations, warranties,
covenants, and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, at any time and from time to time on or
before the forty-fifth day following the date on which the Registration
Statement becomes effective under the Securities Act, by written notice by
Hampshire to the Company. Such notice shall set forth the aggregate number of
shares of Additional Stock as to which the Over-allotment Option is being
exercised, the name or names in which the certificates representing the
Additional Stock are to be registered, the authorized denominations in which the
Additional Stock is to be registered, and the time and date, as determined by
Hampshire, when such shares of Additional Stock are to be delivered (each such
time and date are hereinafter referred to as an "Additional Closing Date");
provided, however, that no Additional Closing Date shall be earlier than the
Closing Date nor earlier than the second business day after the date on which
the notice of the exercise of the Over-allotment Option shall have been given
nor later than the eighth business day after the date on which such notice shall
have been given.
In the event the Company declares or pays a dividend or a distribution on
the Common Stock, whether in the form of cash, shares of Common Stock, or other
consideration, prior to the Additional Closing Date, such dividend or
distribution shall also be paid on the Additional Stock
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<PAGE>
on the later of the Additional Closing Date and the date on which such
dividend or distribution is payable.
Payment for the shares of Additional Stock by Hampshire shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds payable to the order of the
Company at the offices of Hampshire Securities Corporation, 640 Fifth Avenue,
New York, New York 10019, or at such other place in the New York City
metropolitan area as Hampshire shall determine and advise the Company by at
least two full days' notice, upon delivery of the shares of Additional Stock to
Hampshire for its account.
Certificates for the shares of Additional Stock shall be registered in such
name or names and in such authorized denominations as Hampshire may request in
writing at least two full business days prior to the Additional Closing Date
with respect thereto. The Company shall permit Hampshire to examine and package
such certificates for delivery at least one full business day prior to the
Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to Hampshire
and/or its designees on the Closing Date the Representative's Warrants to
purchase the Warrant Shares for an aggregate purchase price of $120.00.
Delivery and payment for the Representative's Warrants shall be made
on the Closing Date. The Company shall deliver to Hampshire, upon payment
therefor, certificates representing the Representative's Warrants in the name or
names and in such authorized denominations as Hampshire may request. The
Representative's Warrants shall be exercisable for a period of four years
commencing one year from the date on which the Registration Statement was
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<PAGE>
declared effective under the Securities Act at an initial exercise price per
Warrant Share equal to $_____________.
(d) It is understood that the Hampshire may (but shall not be
obligated to) make any and all the payments required pursuant to this Section 3
on behalf of any Underwriters whose check or checks shall not have been received
by the Representative at the time of delivery of the Stock to be purchased by
such Underwriter or Underwriters. Any such payment by the Representative shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.
4. OFFERING. The Underwriters are to make a public offering of the Firm
Stock as soon, on or after the date on which the Registration Statement becomes
effective under the Securities Act, as the Representative deems it advisable so
to do. The Firm Stock is to be initially offered to the public at the initial
public offering price as provided for in Section 3(a) (such price being
hereinafter referred to as the "public offering price"). After the initial
public offering, the Representative may from time to time increase or decrease
the public offering price, in the sole discretion of the Representative, by
reason of changes in general market conditions or otherwise.
5. COVENANTS.
The Company covenants that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as possible and notify the
Representative and counsel to the Underwriters immediately, and confirm such
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective under the Securities Act, (ii) of the receipt
of any comments from the Commission or the "blue sky" or securities authority of
any
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<PAGE>
jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Prospectus, or any amendment or supplement thereto,
(iii) of the filing with the Commission of any supplement to the Prospectus,
and (iv) of the receipt of any notification with respect to a Stop Order or
the initiation or threatening of any proceeding with respect to a Stop Order.
The Company will use its best efforts to prevent the issuance of any Stop
Order and, if any Stop Order is issued, to obtain the lifting thereof as
promptly as possible. If the Registration Statement has become or becomes
effective under the Securities Act with a form of prospectus omitting Rule
430A Information, or filing of the Prospectus with the Commission is
otherwise required under Rule 424(b) of the Regulations, the Company will
file with the Commission the Prospectus, properly completed, pursuant to Rule
424(b) of the Regulations within the time period prescribed and will provide
evidence satisfactory to the Representative of such timely filing.
(b) During the time when a prospectus relating to the Firm Stock or
the Additional Stock is required to be delivered hereunder or under the
Securities Act or the Regulations, comply with all requirements imposed upon it
by the Securities Act, as now existing and as hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Firm Stock and the Additional Stock
in accordance with the provisions hereof and the Prospectus. If, at any time
when a prospectus relating to the Firm Stock or the Additional Stock is required
to be delivered hereunder or under the Securities Act or the Regulations, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, the Registration Statement or the
Prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements
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<PAGE>
therein not misleading, or if, in the opinion of either of such counsel, it
is necessary at any time to amend or supplement the Registration Statement or
the Prospectus to comply with the Securities Act or the Regulations, the
Company will immediately notify the Representative and promptly prepare and
file with the Commission an appropriate amendment or supplement (in form and
substance satisfactory to the Representative and counsel to the Underwriters)
which will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any such amendment declared
effective under the Securities Act as soon as possible.
(c) Deliver without charge to each of the several Underwriters such
number of copies of each Preliminary Prospectus as may reasonably be requested
by the Underwriters and, as soon as the Registration Statement, or any amendment
thereto, becomes effective under the Securities Act or a supplement is filed
with the Commission, deliver without charge to the Representative two signed
copies of the Registration Statement, including exhibits, or such amendment
thereto, as the case may be, and two copies of any supplement thereto, and
deliver without charge to each of the several Underwriters such number of copies
of the Prospectus, the Registration Statement, and amendments and supplements
thereto, if any, as the Representative may request for the purposes contemplated
by the Securities Act.
(d) Endeavor in good faith, in cooperation with the Representative,
at or prior to the time the Registration Statement becomes effective under the
Securities Act, to qualify the Securities for offering and sale under the "blue
sky" or securities laws of such jurisdictions as may be designated by the
Representative; provided, however, that no such qualification shall be required
in any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction to which it is not
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then subject. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees in writing that
such action is not at the time necessary or advisable, file and make such
statements or reports at such times as are or may be required by the laws of
such jurisdiction.
(e) Make generally available, within the meaning of Section 11(a) of
the Securities Act and the Regulations, to its security holders as soon as
practicable, but not later than __________, 1996, an earnings statement, which
need not be certified by independent certified public accountants unless
required by the Securities Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Securities Act and the Regulations, covering
a period of at least 12 months beginning after the date on which the
Registration Statement was declared effective under the Securities Act.
(f) For a period of 18 months after the date of the Prospectus, not,
without the prior written consent of the Representative, offer, issue, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company, or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock, except as
contemplated by Section 3 hereof and except for (i) the issuance of stock
options, or shares of Common Stock issuable upon the exercise thereof, which
have been or may be granted pursuant to the Company's 1994 Stock Option Plan, up
to an aggregate of 800,000 shares of Common Stock, all as properly described in
the Prospectus, (ii) upon the exercise of warrants outstanding on the date
hereof, as properly described in the Prospectus, (iii) the issuance of shares of
Warrant Stock issuable upon
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exercise of the Representative's Warrants, and (iv) the issuance of shares of
Common Stock in connection with an acquisition by the Company.
(g) For a period of five years after the date on which the
Registration Statement was declared effective under the Securities Act furnish
the Representative, without charge, the following:
(1) within 90 days after the end of each fiscal year, one copy
of financial statements certified by independent certified public accountants,
including a balance sheet, statement of income, and statement of changes in cash
flows of the Company and its then existing subsidiaries, if any, with supporting
schedules, prepared in accordance with generally accepted accounting principles,
as at the end of such fiscal year and for the 12 months then ended, which may be
on a consolidated basis;
(2) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the Commission or
the NASD, one copy of each annual and interim financial and other report or
communication sent by the Company to its stockholders or filed with, or
furnished to, the Commission or the NASD;
(3) as soon as practicable, one copy of every press release and
every material news item and article in respect of the Company, any subsidiary,
or their respective affairs which was released by the Company or any such
subsidiary; and
(4) such additional documents and information with respect to
the Company, any subsidiary, and their respective affairs, as the Representative
may from time to time reasonably request; provided, however, that such
additional documents and information shall be received by the Representative on
a confidential basis, unless otherwise disclosed to the public, and
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shall not be used in violation of the federal securities laws and the rules
and regulations promulgated thereunder.
(h) Apply the net proceeds received by the Company from the offering
contemplated by this Agreement in the manner set forth under the heading "Use of
Proceeds" in the Prospectus.
(i) Furnish to the Representative as early as practicable prior to
the Closing Date and each Additional Closing Date, if any, as the case may be,
but not less than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have been
read by the Company's independent certified public accountants, as stated in
their letters to be furnished pursuant to Section 7(f) hereof.
(j) File no amendment or supplement to the Registration Statement or
Prospectus at any time, whether before or after the date on which the
Registration Statement was declared effective under the Securities Act, unless
such filing shall comply with the Securities Act and the Regulations and unless
the Representative shall previously have been advised of such filing and
furnished with a copy thereof, and the Representative shall have approved such
filing in writing. Until the later of (i) the completion by the Underwriters of
the distribution of the Stock (but in no event more than nine months after the
date on which the Registration Statement shall have been declared effective
under the Securities Act) and (ii) 25 days after the date on which the
Registration Statement shall have been declared effective under the Securities
Act, the Company will prepare and file with the Commission, promptly upon the
Representative's request, any amendments or supplements to the Registration
Statement or the Prospectus which, in the sole
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opinion of the Representative, may be necessary or advisable in connection
with the distribution of the Stock.
(k) File timely with the Commission an appropriate form to register
the Common Stock pursuant to Section 12(b) and/or 12(g) of the Exchange Act to
include the Stock and comply with all registration, filing, and reporting
requirements of the Exchange Act, which may from time to time be applicable to
the Company.
(l) Comply with all provisions of all undertakings contained in the
Registration Statement.
(m) Prior to the Closing Date or any Additional Closing Date, as the
case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference with respect to the Company, the
financial condition, results of operations, business, properties, assets,
liabilities of any the Company, or this offering, without the prior written
consent of the Representative.
(n) Make all filings required to maintain the inclusion of the
Common Stock on the Nasdaq SmallCap Market and the ________ Stock Exchange for a
least four years from the date of this Agreement.
(o) On the Closing Date, sell to the Hampshire, individually and not
as Representative of the several Underwriters, at the price of $.001 per
warrant, warrants to purchase the Warrant Stock, which Representative's Warrants
shall be substantially in the form set forth as an exhibit to the Registration
Statement.
(p) Until expiration of the Representative's Warrants, keep reserved
a sufficient number of shares of Common Stock for issuance upon exercise of the
Representative's Warrants.
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(q) Deliver to the Representative, without charge, within a
reasonable period after the last Additional Closing Date or the expiration of
the period during which the Representative may exercise the Over-allotment
Options, four sets of bound volumes of the Registration Statement and all
related materials to the individuals designated by the Representative or counsel
to the Underwriters.
(r) For a period of five years after the effective date on which the
Registration Statement is declared effective under the Securities Act, provide,
at its sole expense, to the Representative copies of the Company's daily
transfer sheets, if so requested by the Representative.
(s) Maintain key-person life insurance payable to the Company on the
lives of each of ____________, the ___________of the Company, and __________,
the _________ of the Company, each in the amount of at least $1,000,000, for the
period of time equal to the longer of three years from the date on which the
Registration Statement becomes effective under the Securities Act and the term
of the respective employment agreement between the Company and such officer.
(t) For a period of three years from the date on which the
Registration Statement becomes effective under the Securities Act, the
Representative shall have the right to appoint a designee as an observer of the
Company's Board of Directors. Such observer will have the right to attend all
meetings of the Board of Directors. Such observer shall be entitled to receive
reimbursement for all out-of-pocket expenses incurred in attending such
meetings, including, but not limited to, food, lodging, transportation, and any
fees paid to directors for attending meetings. The Representative shall be
given notice of such meetings at the same time and in the same manner as
directors of the Company are informed. The Representative and such observer
shall be
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indemnified to the same extent as the other directors. The Company will
purchase directors and officers insurance in an amount of not less than
$2,000,000, with a deductible of not more than $_____________, provided,
however, that the Company shall not be required to pay more than $50,000 per
year in order to maintain such insurance, and if insurance in such amount is
not available at such cost, the Company shall purchase that amount of such
insurance which is available at a cost of $50,000 per year.
6. PAYMENT OF EXPENSES.
The Company hereby agrees to pay all expenses (other than fees of counsel
for the Underwriters, except as provided in Section 6(c)) in connection with (a)
the preparation, printing, filing, distribution, and mailing of the Registration
Statement and the Prospectus and the printing, filing, distribution, and mailing
of this Agreement and the Master Agreement Among Underwriters, any Master
Selected Dealer Agreement and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments or supplements thereto supplied to the Underwriters in quantities as
hereinabove stated, and the registration of the Common Stock under the Exchange
Act,(b) the issuance, sale, transfer, and delivery (as applicable) of the
Securities, including any transfer or other taxes payable thereon, (c) the
qualification of the Securities under state or foreign "blue sky" or securities
laws, including the costs of printing and mailing the preliminary and final
"Blue Sky Survey" and the fees of counsel for the Underwriters ($35,000) and the
disbursements in connection therewith, (d) the filing fees payable to the
Commission, the NASD, and the jurisdictions in which such qualification is
sought, (e) any fees relating to the listing of the Common Stock on the Nasdaq
SmallCap Market and the ________ Stock Exchange, (f) the cost of printing
certificates representing the shares of Common
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Stock, (g) the fees of the transfer agent for the Common Stock, (h) the cost
of publication of "tombstone" advertisements with respect to offerings, not
to exceed $20,000, and (i) a non-accountable expense allowance equal to three
percent of the gross proceeds of the sale of the Firm Stock and the
Additional Stock (less amounts, if any, previously paid to the Representative
by the Company in respect of such non-accountable expense allowance) to the
Representative on the Closing Date. Notwithstanding the foregoing, if the
offering contemplated hereby should be terminated, the Company agrees to pay
the Representative only the out-of-pocket expenses incurred by the
Underwriters in connection with this Agreement or the proposed offer, sale,
and delivery of the Securities.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for the
Firm Stock and the Additional Stock, as provided herein, and the obligation of
Hampshire to purchase and pay for the Representative's Warrants, each as
provided herein, shall be subject, in the discretion of the Representative, to
the continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to the Underwriters, as of the date hereof and as of
the Closing Date (or any Additional Closing Date, as the case may be), to the
performance by the Company of its obligations hereunder, and to the following
conditions:
(a) The Registration Statement shall have become effective under the
Securities Act not later than 6:00 P.M., New York City local time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Representative; on or prior to the Closing Date, or any
Additional Closing Date, as the case may be, no Stop Order shall have been
issued and
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no proceeding shall have been initiated or threatened with respect to a Stop
Order; and any request by the Commission for additional information shall
have been complied with by the Company to the reasonable satisfaction of
counsel for the Underwriters. If required, the Prospectus shall have been
filed with the Commission in the manner and within the time period required
by Rule 424(b) under the Securities Act.
(b) (1) At the Closing Date and any Additional Closing Date, as the
case may be, the Underwriters shall have received the opinion of Messrs.
Ireland, Stapleton, Pryor & Pascoe, P.C. counsel for the Company, dated the date
of delivery, addressed to the Underwriters, and in form and scope satisfactory
to counsel for the Underwriters, with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) the Company has no subsidiaries (as defined in the
Regulations). The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Colorado, with full power and
authority, and all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and declarations and filings
with, all federal, state, local, and other governmental authorities and all
courts and other tribunals, to own, lease, license, and use its properties and
assets and to conduct its business in the manner described in the Prospectus.
The Company is duly qualified to do business as a foreign corporation and is in
good standing as such in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its business makes
such qualification necessary;
(ii) the authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, of which [2,086,689] shares are outstanding,
and 2,500,000
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shares of Preferred Stock, of which none are outstanding. Except as
disclosed in the Prospectus, each outstanding share of Common Stock is
validly authorized and issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, has not been issued
and is not owned or held in violation of any preemptive or similar rights of
stockholders. To the knowledge of such counsel, there is no commitment,
plan, or arrangement to issue, and no outstanding option, warrant, or other
right calling for the issuance of, any share of capital stock of the Company
or any security or other instrument which by its terms is convertible into,
or exercisable or exchangeable for, capital stock of the Company, except as
may be properly described in the Prospectus. There is outstanding no
security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company. The
certificates evidencing the Common Stock are in due and proper form;
(iii) to the knowledge of such counsel, there is no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending, threatened, or in prospect (or any basis
therefor) with respect to the Company or any of its operations, businesses,
properties, or assets, except as may be properly described in the Prospectus or
such as individually or in the aggregate do not now have, and will not in the
future have, a material adverse effect upon the operations, business,
properties, or assets of the Company. To the knowledge of such counsel, the
Company is not in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, except as may be properly described in
the Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business, properties,
or assets of the Company; nor is the Company required to take any action in
order to avoid any such violation or default;
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(iv) to the knowledge of such counsel, neither the
Company, nor any other party is now, or is expected by the Company to be, in
violation or breach of, or in default with respect to, any provision of any
contract, agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company, and, to the knowledge of such counsel, each
such contract, agreement, instrument, lease, license, arrangement, or
understanding is in full force and effect and is the valid, legal, and binding
obligation of the parties thereto and is enforceable in accordance with its
terms;
(v) the Company is not in violation or breach of, or
in default with respect to, any term of its respective certificate of
incorporation (or other charter document) or by-laws;
(vi) the Company has all requisite power and authority to
execute, deliver, and perform this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance by the Company of this Agreement and
the Representative's Warrants. This Agreement has been duly authorized,
executed, and delivered by the Company, is the legal, valid, and binding
obligation of the Company, and, subject to applicable bankruptcy, insolvency,
and other laws affecting the enforceability of creditors' rights generally, is
enforceable as to the Company in accordance with its terms. The
Representative's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required
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by the Company for the execution, delivery, or performance by the Company of
this Agreement or the Representative's Warrants, except filings under the
Securities Act which have been made prior to the Closing Date or Additional
Closing Date, as the case may be, and consents consisting only of consents
under "blue sky" or securities laws, which have been obtained. No consent of
any party to any contract, agreement, instrument, lease, license, arrangement,
or understanding known to such counsel to which the Company is a party, or to
which any of its properties or assets is subject, is required for the execution,
delivery, or performance of this Agreement and the Representative's Warrants;
and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will not violate, result in a breach of, conflict
with, result in the creation or imposition of any lien, charge, or encumbrance
upon any properties or assets of the Company pursuant to the terms of, or, with
or without the giving of notice or the passage of time or both, entitle any
party to terminate or call a default under, any such contract, agreement,
instrument, lease, license, arrangement, or understanding known to such counsel,
violate or result in a breach of, or conflict with any term of the certificate
of incorporation (or other charter document) or by-laws of the Company, or
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on the Company to which any of its
operations, businesses, properties, or assets are subject;
(vii) each share of Firm Stock to be delivered on the
Closing Date is validly authorized and, when issued and delivered in accordance
with the terms hereof, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof, and will not
issued in violation of any preemptive or similar rights of stockholders. Each
share of Additional Stock to be delivered on any Additional Closing Date is
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validly authorized and, when issued and delivered in accordance with the terms
hereof, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, and will not issued in
violation of any preemptive or similar rights of stockholders. The Underwriters
will receive good title to the shares of Firm Stock and Additional Stock
purchased by them, respectively, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements, and voting
trusts. The Stock conforms to all statements relating thereto contained in the
Registration Statement or the Prospectus;
(viii) the Warrant Stock is validly authorized and has
been duly and validly reserved for issuance pursuant to the terms of the
Representative's Warrants. The Representative's Warrants have been duly and
validly issued and delivered. The Warrant Stock, when issued and delivered in
accordance with the Representative's Warrants, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and will not have been issued in violation of any preemptive
rights of stockholders. The Representative, and any other holders of the
Representative's Warrants, will receive good title to the securities purchased
by them upon exercise of the Representative's Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Representative's Securities conform to all
statements relating thereto contained in the Registration Statement or the
Prospectus;
(ix) to the knowledge of such counsel, each contract,
agreement, instrument, lease, or license required to be described in the
Registration Statement or the Prospectus has been properly described therein,
and each contract, agreement, instrument, lease, or license
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required to be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to the Registration Statement;
(x) insofar as statements in the Prospectus purport to
summarize the status of litigation or the provisions of laws, rules,
regulations, orders, judgments, decrees, contracts, agreements, instruments,
leases, or licenses, such statements have been prepared or reviewed by such
counsel and accurately reflect the status of such litigation and provisions
purported to be summarized and are correct in all respects;
(xi) the Company is not an "investment company" as
defined in the Investment Company Act and the rules and regulations thereunder
and, if the Company conducts its business as set forth in the Prospectus, will
not become an "investment company", and will not be required to be registered
under the Investment Company Act;
(xii) to the knowledge of such counsel, no person or
entity has the right to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of the
Registration Statement, except by entities which have waived such rights as
described in the Registration Statement and the Prospectus; and
(xiii) the Registration Statement has become effective under
the Securities Act, the Prospectus has been filed in accordance with Rule 424(b)
of the Regulations, including the applicable time periods set forth therein, or
such filing is not required. To the knowledge of such counsel, no Stop Order
has been issued and no proceeding for that purpose has been instituted or
threatened. On the basis of the participation of such counsel in conferences at
which the contents of the Registration Statement and the Prospectus and related
matters were discussed, but without independent verification by such counsel of
the accuracy, completeness, or
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fairness of the statements contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, such counsel have no
knowledge that (other than financial statements and other financial data and
schedules which are or should be contained therein, and as to matters set
forth under the headings ____________ and ___________, in each case as to
which such counsel need express no opinion): (A) the Registration Statement,
any Rule 430A Prospectus, and the Prospectus, and any amendment or supplement
thereto, does not appear on its face to comply as to form in all material
respects with the requirements of the Securities Act and the Regulations; (B)
any of the Registration Statement, any Rule 430A Prospectus, or the
Prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(C) since the date of effectiveness under the Securities Act of the
Registration Statement, any event has occurred which should have been set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not been set forth in such an amendment or supplement.
In rendering such opinion, counsel for the Company may rely (A) as to
matters involving the application of laws other than the laws of the United
States and the laws of the State of Colorado, to the extent counsel for the
Company deems proper and to the extent specified in such opinion, upon an
opinion or opinions (in form and substance satisfactory to counsel for the
Underwriters) of other counsel, acceptable to counsel for the Underwriters,
familiar with the applicable laws, in which case the opinion of counsel for the
Company shall state that the opinion or opinions of such other counsel are
satisfactory in scope, form, and substance to counsel for the Company and that
reliance thereon by counsel for the Company and the Underwriters is reasonable;
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(B) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company; and (C) to the extent they deem proper,
upon written statements or certificates of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company; provided that copies of any such opinions,
certificates, or statements shall be annexed as exhibits to the opinion of
counsel for the Company.
(2) At the Closing Date and any Additional Closing Date, as the
case may be, the Underwriters shall have received the favorable opinion of
Messrs. Nikaido, Marmelstein, Murray & Oram, patent counsel for the Company,
dated the date of delivery, addressed to the Underwriters, and in form and scope
satisfactory to counsel for the Underwriters, with reproduced copies or signed
counterparts thereof for each of the Underwriters.
In rendering such opinion, patent counsel for the Company may rely as to
matters of fact, to the extent proper, on certificates of responsible officers
of the Company; provided, that copies of any such opinions, certificates, or
statements shall be annexed as exhibits to the opinion of patent counsel for the
Company.
(c) On or prior to the Closing Date and any Additional Closing Date,
as the case may be, the Underwriters shall have been furnished such information,
documents, certificates, and opinions as they may reasonably require for the
purpose of enabling them to review the matters referred to in Section 7(b), and
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained, or as the Representative may reasonably request.
(d) At the Closing Date or any Additional Closing Date, as the case
may be, (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall
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contain all statements which are required to be stated therein in accordance
with the Securities Act and the Regulations, and in all material respects
conform to the requirements thereof, and neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto shall 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, (ii) there shall have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
no material adverse change, or any development involving a prospective
material adverse change, in the business, properties, or condition (financial
or otherwise), results of operations, capital stock, long-term or short-term
debt, or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the date on
which the Registration Statement becomes effective under the Securities Act,
and the Company shall not have incurred any material liabilities or entered
into any agreements not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus, (iii) except as set
forth in the Prospectus, no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation shall be pending,
threatened, or in prospect (or any basis therefor) with respect to the
Company or any of its operations, businesses, properties, or assets which
would be required to be set forth in the Registration Statement, wherein an
unfavorable decision, ruling, or finding would materially adversely affect
the business, property, condition (financial or otherwise), results of
operations, or general affairs of the Company, and (iv) the Stock be quoted
upon the Nasdaq SmallCap Market and the _______ Stock Exchange.
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(e) At the Closing Date and any Additional Closing Date, as the case
may be, the Underwriters shall have received a certificate of the chief
executive officer, the chief financial officer, and the chief accounting officer
of the Company, dated the Closing Date or such Additional Closing Date, as the
case may be, to the effect, among other things, that (i) the conditions set
forth in Sections 7(a) and 7(d) have been satisfied, (ii) as of the date of this
Agreement and as of the Closing Date or such Additional Closing Date, as the
case may be, the representations and warranties of the Company contained herein
were and are accurate and correct in all materials respects, and (iii) as of the
Closing Date or such Additional Closing Date, as the case may be, the
obligations to be performed by the Company hereunder on or prior to such time
have been fully performed.
(f) At the time this Agreement is executed and at the Closing Date
and any Additional Closing Date, as the case may be, you shall have received a
letter, addressed to the Underwriters, and in form and substance satisfactory to
the Representative, with reproduced copies or signed counterparts thereof for
each of the Underwriters, from Price Waterhouse LLP, independent certified
public accountants for the Company, dated the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the published Regulations and stating that the
answer to Item 10 [CHECK] of the Registration Statement is correct insofar as it
relates to them;
(ii) stating that, in their opinion, the financial statements and
schedules of the Company included in the Registration Statement examined by them
comply in form in all
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material respects with the applicable accounting requirements of the Securities
Act and the related published rules and regulations;
(iii) stating that, on the basis of procedures (but not an
examination made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and Boards of Directors of the Company and
committees of such Board of Directors, inquiries to certain officers and other
employees of the Company responsible for financial and accounting matters, and
other specified procedures and inquiries, nothing has come to their attention
that caused them to believe that: (A) the unaudited financial statements and
schedules of the Company included in the Registration Statement and Prospectus
do not comply in form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the related
published rules and regulations under the Securities Act or the Exchange Act or
are not fairly presented in conformity with generally accepted accounting
principles (except to the extent that certain footnote disclosures regarding any
stub period may have been omitted in accordance with the applicable rules of the
Commission under the Exchange Act) applied on a basis consistent with that of
the audited financial statements appearing therein; (B) there was any change in
the capital stock or long-term debt of the Company or any decrease in the net
current assets or stockholders' equity of the Company as of the date of the
latest available monthly financial statements of the Company as of a specified
date not more than five business days prior to the date of such letter, each as
compared with the amounts shown in the ______________ balance sheet included in
the Registration Statement and Prospectus, other than
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as properly described in the Registration Statement and Prospectus or any
change or decrease (which shall be set forth therein) which, in the sole
discretion of the Representative, the Representative shall accept, or (C)
there was any decrease in net sales, net earnings, or net earnings per share
of Common Stock during the period from ___________________ to the date of the
latest available monthly financial statements of the Company or to a
specified date not more than five business days prior to the date of such
letter, each as compared with the corresponding period in 1995, other than as
properly described in the Registration Statement and Prospectus or any
decrease (which shall be set forth therein) which, the sole discretion of the
Representative, the Representative shall accept; and
(iv) stating that they have compared specific numerical data
and financial information pertaining to the Company set forth in the
Registration Statement, which have been specified by the Representative prior to
the date of this Agreement, to the extent that such data and information may be
derived from the general accounting records of the Company, and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries, and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter,
and found them to be in agreement.
(g) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be satisfactory in form and
substance to the Representative and to counsel for the Underwriters, and the
Underwriters shall have received from such counsel for the Underwriters the
opinion, dated as of the Closing Date and the Additional Closing Date, as the
case
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may be, with respect to such of the matters set forth under Section 7(b), and
with respect to such other related matters, as the Representative may
reasonably request.
(h) The NASD, upon review of the terms of the public offering of the
Stock shall not have objected to the Underwriters' participation in such
offering.
(i) Prior to or on the Closing Date, the Company shall have entered
into the Representative's Warrants with the Representative.
(j) Prior to or on the Closing Date, the Company shall have provided
to you copies of the agreements referred to in Section 2(r).
Any certificate or other document signed by any officer of the Company and
delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company hereunder to the
Underwriters as to the statements made therein. If any condition to the
Underwriters' obligations hereunder to be fulfilled prior to or at the Closing
Date or any Additional Closing Date, as the case may be, is not so fulfilled,
the Representative may, on behalf of the several Underwriters, terminate this
Agreement or, if the Representative so elects, in writing waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage,
and expense whatsoever (which shall include, for all purposes of this Section 8,
but not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating,
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preparing, or defending against any litigation, commenced or threatened, or
any claim whatsoever and any and all amounts paid in settlement of any claim
or litigation) as and when incurred arising out of, based upon, or in
connection with, (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Registration Statement, any Preliminary
Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto or (B) any application
or other document or communication (for purposes of this Section 8,
collectively referred to as an "application") executed by, or on behalf of,
the Company or based upon written information furnished by, or on behalf of,
the Company filed in any jurisdiction in order to qualify the Securities
under the "blue sky" or securities laws thereof or filed with the Commission
or any securities exchange; or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, written information furnished to
the Company as stated in Section 8(b) with respect to any Underwriter by, or
on behalf of, such Underwriter through the Representative expressly for
inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach of any representation, warranty,
covenant, or agreement of the Company contained in this Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this
Agreement.
If any action is brought against an Underwriter or any of its respective
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of an Underwriter (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant
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to the foregoing paragraph, such indemnified party or parties shall promptly
notify the Company in writing of the institution of such action (but the
failure so to notify shall not relieve the Company from any liability it may
have other than pursuant to this Section 8(a)) and the Company shall promptly
assume the defense of such action, including, without limitation, the
employment of counsel satisfactory to such indemnified party or parties and
payment of expenses. Such indemnified party or parties shall have the right
to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such
action or the indemnifying party shall not have promptly employed counsel
satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
concluded that there may be one or more legal defenses available to it or
them or to other indemnified parties which are different from, or in addition
to, those available to the indemnifying party, in any of which events such
fees and expenses shall be borne by the indemnifying party, and the
indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this
paragraph to the contrary notwithstanding, the indemnifying party shall not
be liable for any settlement of any such claim or action effected without its
written consent, which consent shall not be unreasonably withheld. The
indemnifying party shall not, without the prior written consent of each
indemnified party that is not released as described in this sentence, settle
or compromise any action, or permit a default or consent to the entry of
judgment or otherwise seek to terminate any pending or threatened action, in
respect of which indemnity may be sought hereunder (whether or not any
indemnified party is a party thereto),
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unless such settlement, compromise, consent, or termination includes an
unconditional release of each indemnified party from all liability in respect
of such action. The Company agrees promptly to notify the Underwriters of the
commencement of any litigation or proceedings against the Company or any of
its officers or directors in connection with the sale of the Securities, the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment or supplement thereto, or any application.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who shall
have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the several Underwriters in Section 8(a), but only with
respect to statements or omissions, if any, made in the Registration Statement,
any Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information furnished to the
Company as stated in this Section 8(b) with respect to any Underwriter by, or on
behalf of, such Underwriter through the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or on any application, as the case may be;
provided, however, that the obligation of each Underwriter to provide indemnity
under the provisions of this Section 8(b) shall be limited to the amount which
represents the product of (i) the number of shares of Stock underwritten by such
Underwriter hereunder and the (ii) the underwriting discount per share of Common
Stock set forth on the cover page of the Prospectus. For all purposes of this
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Agreement, the amounts of the selling concession and reallowance and the name of
each of the Underwriters, and the number of shares of Firm Stock purchased by
each of the Underwriters set forth in the Prospectus constitute the only
information furnished in writing by, or on behalf of, such Underwriter expressly
for inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus (as from time to time amended or supplemented), or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against any Underwriter pursuant to this Section
8(b), such Underwriter shall have the rights and duties given to the Company,
and the Company and each other person so indemnified shall have the rights and
duties given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 8(a) or
8(b) (in each case, subject to the limitations thereof), but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case or (ii) any indemnified or
indemnifying party seeks contribution under the Securities Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by, or on behalf of, any director of the Company, any officer of the
Company who signed the Registration Statement, and any controlling person of the
Company), as one entity, and the Underwriters (including for this purpose any
contribution by, or on behalf of, an indemnified party) as a second entity,
shall contribute to the losses, liabilities,
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claims, damages, and expenses whatsoever to which any of them may be subject,
so that the Underwriters, in the aggregate, are responsible for the
proportion thereof equal to the percentage which the underwriting discount
per share of Common Stock set forth on the cover page of the Prospectus
represents of the initial public offering price per share of Common Stock set
forth on the cover page of the Prospectus and the Company is responsible for
the remaining portion; provided, however, that if applicable law does not
permit such allocation, then other relevant equitable considerations such as
the relative fault of the Company and the Underwriters in connection with the
facts which resulted in such losses, liabilities, claims, damages, and
expenses shall also be considered. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission, or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission, or alleged omission relates to information supplied by
the Company or by the Underwriters, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and
the Underwriters agree that it would be unjust and inequitable if the
respective obligations of the Company and the Underwriters for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Underwriters and the
other indemnified parties were treated as one entity for such purpose) or by
any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8(c). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section
8(c), each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act
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or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent, and counsel of any Underwriter shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed
the Registration Statement and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 8(c). Anything in this Section 8(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 8(c) is intended to supersede any right to
contribution under the Securities Act, the Exchange Act, or otherwise.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Stock or Additional Stock hereunder, and if the
number of shares of Firm Stock or Additional Stock to which the defaults of all
Underwriters in the aggregate relate does not exceed 10% of the number of shares
of Firm Stock or Additional Stock, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such shares of Firm Stock or Additional
Stock to which such defaults relate shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(b) If such defaults exceed in the aggregate 10% of the number of
shares of Firm Stock or Additional Stock, as the case may be, which all
Underwriters have agreed to purchase hereunder, the Representative may, in its
discretion, arrange to purchase itself or for another party or parties to
purchase such shares of Firm Stock or Additional Stock, as the case may be, to
which
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<PAGE>
such default relates on the terms contained herein. If the Representative
does not arrange for the purchase of such shares of Firm Stock or Additional
Stock, as the case may be, within one business day after the occurrence of
defaults relating to in excess of 10% of the Firm Stock or the Additional
Stock, as the case may be, then the Company shall be entitled to a further
period of one business day within which to procure another party or parties
satisfactory to the Representative to purchase such shares of Firm Stock or
Additional Stock, as the case may be, on such terms. If the Representative
or the Company do not arrange for the purchase of the shares of Firm Stock or
Additional Stock, as the case may be, to which such defaults relate as
provided in this Section 9(b), this Agreement may be terminated by the
Representative or by the Company without liability on the part of the Company
(except that the provisions of Sections 5(a), 6, 8, 10, and 13 shall survive
such termination) or the several Underwriters, but nothing in this Agreement
shall relieve a defaulting Underwriter of its liability, if any, to the other
several Underwriters and to the Company for any damages occasioned by its
default hereunder.
(c) If the shares of Stock or Additional Stock to which such defaults
relate are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, the Representative or the
Company shall have the right to postpone the Closing Date or the Additional
Closing Date, as the case may be, for a reasonable period but not in any event
more than seven business days in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements with respect to the Firm Stock or the Additional
Stock, and the Company agrees to prepare and file promptly any amendment or
supplement to the Registration Statement or the Prospectus which in the opinion
of counsel for the Underwriters may thereby be made necessary.
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<PAGE>
The term "Underwriter" as used in this Agreement shall include any party
substituted under this Section 9 as if such party had originally been a party
to this Agreement and had been allocated the number of shares of Firm Stock
and Additional Stock actually purchased by it as a result of its original
commitment to purchase Firm Stock and Additional Stock and its purchase of
shares of Firm Stock or Additional Stock pursuant to this Section 9.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by, or on behalf of, any Underwriter or any indemnified
person, or by, or on behalf of, the Company, or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Firm Stock and the Additional Stock, if
any, to the several Underwriters. In addition, the provisions of Sections 5(a),
6, 8, 10, 11, and 13 shall survive termination of this Agreement, whether such
termination occurs before or after the Closing Date or any Additional Closing
Date. Notwithstanding anything in the second sentence of Section 6 hereof to
the contrary, and in addition to the obligations assumed by the Company pursuant
to the first sentence of Section 6 hereof, if the offering should be terminated,
the Company shall be liable to the Underwriters only for out-of-pocket expenses
incurred by the Underwriters in connection with this Agreement or the proposed,
offer, sale, and delivery of the Securities.
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<PAGE>
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective at 9:30 A.M., New York City
local time, on the first full business day following the day on which the
Registration Statement becomes effective under the Securities Act or at the time
of the initial public offering by the Underwriters of the Firm Stock, whichever
is earlier. The time of the initial public offering shall mean the time, after
the Registration Statement becomes effective under the Securities Act, of the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Firm Stock or the
time, after the Registration Statement becomes effective under the Securities
Act, when the Firm Stock is first released by the Representative for offering by
the Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative or the Company may prevent this Agreement from becoming
effective without liability of any party to any other party, except as noted
below in this Section 11, by giving the notice indicated in Section 11(d) before
the time this Agreement becomes effective under the Securities Act.
(b) If the purchase price of the Firm Stock has not been determined
as provided for in Section 3 prior to 4:30 p.m., New York City local time, on
the fifth full business day after the date on which the Registration Statement
becomes was declared effective under the Securities Act, this Agreement may be
terminated at any time thereafter either by the Representative or by the Company
by giving notice to the other unless before such termination the purchase price
for the Firm Stock has been so determined. If the purchase price of the Firm
Stock has not been so determined prior to 4:30 p.m., New York City local time,
on the tenth full business day after the
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date on which the Registration Statement was declared effective under the
Securities Act, this Agreement shall automatically terminate forthwith.
(c) In addition to the right to terminate this Agreement pursuant to
Sections 7 and 9 hereof, the Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date or any Additional Closing
Date, as the case may be, by giving notice to the Company, and, if exercised,
the Over-allotment Option, at any time prior to any Additional Closing Date, by
giving notice to the Company, (i) if any domestic or international event, act,
or occurrence has materially and adversely disrupted, or, in the opinion of the
Representative, will in the immediate future materially and adversely disrupt,
the securities markets; or (ii) if there shall have been a general suspension
of, or a general limitation on prices for, trading in securities on the New York
Stock Exchange, the American Stock Exchange, the _______ Stock Exchange, or in
the over-the-counter market; or (iii) if there shall have been an outbreak or
increase in the level of major hostilities or other national or international
calamity; or (iv) if a banking moratorium has been declared by a state or
federal authority; or (v) if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or (vi) if there shall have
been a material interruption in the mail service or other means of communication
within the United States; or (vii) if the Company shall have sustained a
material or substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage, or other calamity or malicious act, whether or not such loss
shall have been insured, or from any labor dispute or court or government
action, order, or decree, which will, in the opinion of the Representative, make
it inadvisable to proceed with the offering, sale, or delivery of the Firm Stock
or the Additional Stock, as the case may be; or (viii) if any material
governmental restrictions shall have been imposed on trading in securities in
general, which
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restrictions are not in effect on the date hereof; or (ix) if there shall be
passed by the Congress of the United States or by any state legislature any
act or measure, or adopted by any governmental body or authoritative
accounting institute or board, or any governmental executive, any orders,
rules, or regulations, which the Representative believes likely to have a
material adverse effect on the business, financial condition, or financial
statements of the Company or the market for the Common Stock; or (x) if there
shall have been such material and adverse change in the market for the
Company's securities or securities in general or in political, financial, or
economic conditions as in the judgment of the Representative makes it
inadvisable to proceed with the offering, sale, and delivery of the Firm
Stock or the Additional Stock, as the case may be, on the terms contemplated
by the Prospectus.
(d) If the Representative elects to prevent this Agreement from
becoming effective, as provided in this Section 11, or to terminate this
Agreement pursuant to Section 7 of this Agreement or this Section 11, the
Representative shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to
prevent this Agreement from becoming effective or to terminate this Agreement,
the Company shall notify the Representative promptly by telephone, telex, or
telegram, confirmed by letter.
(e) Anything in this Agreement to the contrary notwithstanding other
than Section 11(f), if this Agreement shall not become effective by reason of an
election pursuant to this Section 11, or if this Agreement shall terminate or
shall otherwise not be carried out within the time specified herein by reason of
any failure on the part of the Company to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to the several Underwriters, in addition to the
obligations the Company
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assumed pursuant to the first sentence of Section 6, will be to reimburse the
several Underwriters for such out-of-pocket expenses (including the fees and
disbursements of their counsel) as shall have been incurred by them in
connection with this Agreement or the proposed offer, sale, and delivery of
the Securities, and, upon demand, the Company agrees to pay promptly the full
amount thereof to the Representative for the respective accounts of the
Underwriters. Anything in this Agreement to the contrary notwithstanding
other than Section 11(f), if this Agreement shall not be carried out within
the time specified herein for any reason other than the failure on the part
of the Company to perform any covenant or agreement or satisfy any condition
of this Agreement by it to be performed or satisfied, the Company shall have
no liability to the several Underwriters other than for obligations assumed
by the Company pursuant to Section 6.
(f) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 5(a), 6, 8, 10, and 13 shall not be in any way affected
by such election or termination or failure to carry out the terms of this
Agreement or any part hereof. Notwithstanding anything in the second sentence
of Section 6 hereof to the contrary, and in addition to the obligations assumed
by the Company pursuant to the first sentence of Section 6 hereof, if the
offering should be terminated, the Company shall be liable to the several
Underwriters only for out-of-pocket expenses incurred by the several
Underwriters in connection with this Agreement or the proposed, offer, sale, and
delivery of the Securities.
12. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to such Underwriter, c/o Hampshire Securities
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Corporation, 640 Fifth Avenue, New York, New York 10019, Attention: Mr. Leo
T. Abbe, Executive Vice President, with a copy to Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, One Citicorp Center, 153 East 53rd
Street, York, New York 10022, Attention: Robert Steven Brown, Esq.; or if
sent to the Company, shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to the Company, 5710-B Flatiron Parkway, Boulder,
Colorado 80301, Attention: Mr. Paul L. Ray, President, with a copy to
Ireland, Stapleton, Pryor & Pascoe, P.C. 1675 Broadway, 26th Floor, Denver,
Colorado 80202 Attention: William E. Tanis, Esq. All notices hereunder shall
be effective upon receipt by the party to which it is addressed.
13. PARTIES. Hampshire represents that it is authorized to act as
Representative on behalf of the several Underwriters named in Schedule I
hereto, and the Company shall be entitled to act and rely on any request,
notice, consent, waiver, or agreement purportedly given on behalf of the
Underwriters when the same shall have been given by Hampshire on such behalf.
This Agreement shall inure solely to the benefit of, and shall be binding
upon, the several Underwriters, the Company, and the persons and entities
referred to in Section 8 who are entitled to indemnification or contribution,
and their respective successors, legal representatives, and assigns (which
shall not include any buyer, as such, of the Firm Stock or the Additional
Stock), and no other person shall have, or be construed to have, any legal or
equitable right, remedy, or claim under, in respect of, or by virtue of this
Agreement or any provision herein contained. Notwithstanding anything
contained in this Agreement to the contrary, all of the obligations of the
Underwriters hereunder are several and not joint.
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14. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
conflict of laws. TIME IS OF THE ESSENCE IN THIS AGREEMENT.
15. CONSENT TO JURISDICTION. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that service thereof may be made in accordance with
Section 12. Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding, the Company shall appear or answer such summons, complaint, or
other process. Should the Company fail to appear or answer within such 30-day
period or such extended period, as the case may be, the Company shall be deemed
in default and judgment may be entered against the Company for the amount as
demanded in any summons, complaint, or other process so served.
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If the foregoing correctly sets forth the understandings between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
IMAGE GUIDED TECHNOLOGIES, INC.
BY:
---------------------------------------
PAUL L. RAY, PRESIDENT
ACCEPTED AS OF THE DATE FIRST ABOVE
WRITTEN IN NEW YORK, NEW YORK
HAMPSHIRE SECURITIES CORPORATION*
BY:
---------------------------------------
LEO T. ABBE, EXECUTIVE VICE PRESIDENT
*ON BEHALF OF ITSELF AND THE OTHER SEVERAL
UNDERWRITERS NAMED IN SCHEDULE I HERETO.
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SCHEDULE I
Total
Number
of Shares
to be
Underwriter Purchased
----------- ---------
Hampshire Securities Corporation...............................
---------
Total..................................................... 1,200,000
---------
---------
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PIXSYS, INC.
RESTATED AND AMENDED ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is Pixsys, Inc.
SECOND: That the text of the Restated and Amended Articles of
Incorporation of the Corporation is set forth on Exhibit A attached hereto and
is incorporated herein by reference.
THIRD: That the Restated and Amended Articles of Incorporation were
adopted by the shareholders of the Corporation on November 30, 1994.
FOURTH: That the number of votes cast for the Restated and Amended
Articles of Incorporation by each voting group entitled to vote separately on
the amendments and on the restatement was sufficient for approval by that voting
group.
IN WITNESS WHEREOF, said Pixsys, Inc. has caused these Restated and
Amended Articles of Incorporation to be duly executed this 30th day of November,
1994.
Pixsys, Inc.
By:/S/ PAUL L. RAY
--------------------------------
Paul L. Ray, President
<PAGE>
EXHIBIT A
RESTATED AND AMENDED ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Pixsys, Inc.
ARTICLE II
CAPITAL; SHAREHOLDERS
2.1 The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is Twelve Million Five
Hundred Thousand (12,500,000) shares, consisting of (i) Ten Million (10,000,000)
shares of Common Stock, no par value per share, and (ii) Two Million Five
Hundred Thousand (2,500,000) shares of Series Preferred Stock, no par value per
share. The Board of Directors of the Corporation shall have the authority (i)
to create from time to time series of Series Preferred Stock, (ii) to determine
the preferences, limitations and relative rights, within the limits provided by
the Colorado Business Corporation Act, as the same exists or may hereafter be
amended, of each such series of Series Preferred Stock before the issuance of
any shares of that series, including, but not limited to, dividend rights,
dividend rates, conversion rights, redemption rights, voting rights, and
liquidation preferences, (iii) to fix the number of shares constituting each
such series and the designations thereof, and (iv) to increase or decrease the
number of shares of each such series (but not below the number of shares of each
such series then outstanding).
2.2 Each shareholder of record of Common Stock shall have one vote
for each share of stock standing in his/her name on the books of the
Corporation, except that in the election of directors, he/she shall have the
right to vote such number of shares for as many persons as there are directors
to be elected. Cumulative voting shall not be allowed in the election of
directors or for any other purpose.
2.3 Any action to be taken by the shareholders of the Corporation for
which Section 7-117-101, C.R.S. requires approval by each voting group entitled
to vote separately thereon by two-
<PAGE>
thirds of all the votes entitled to be cast thereon by that voting group (I.E.,
amendments to the Articles of Incorporation, plans of merger or share exchange,
transactions involving a sale, lease, exchange or other disposition of all, or
substantially all, of the Corporation's property and proposals to dissolve or
revoke dissolution), shall only require the approval by each voting group
entitled to vote separately thereon by a majority of all the votes entitled to
be cast thereon by that voting group.
2.4 Pursuant to the power granted in Article 2.1 above, the Board of
Directors of the Corporation has created the Series A Preferred Stock with
115,380 shares authorized for issuance. A statement of the preferences,
limitations and relative rights of the Series A Preferred Stock is as follows:
1. DIVIDENDS
The holders of the outstanding Series A Preferred Stock shall not be
entitled to receive any preferential dividends vis-a-vis the holders of the
outstanding Common Stock but instead shall have the same rights to dividends as
the holders of the outstanding Common Stock. When, as and if a dividend is
declared on the Common Stock, then each holder of Series A Preferred Stock shall
be entitled to receive a dividend equal to that dividend that would be received
by a holder of the number of shares of Common Stock into which such holder's
shares of Series A Preferred Stock would be convertible, pursuant to Sections 3
and 4 below, immediately after the close of business on the record date fixed
for such dividend. This Section 1 shall not apply to, and the holders of Series
A Preferred Stock shall have no rights under this Section 1 to, dividends in
Common Stock, Options (as hereafter defined) or Convertible Securities (as
hereafter defined) of the Corporation.
2. LIQUIDATION PREFERENCE
(a) BASIC PREFERENCE RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation (a
"Liquidation"):
(1) PAYMENTS TO HOLDERS OF SERIES A PREFERRED STOCK. Each
holder of shares of Series A Preferred Stock then outstanding shall be entitled
to receive an amount equal to $12.00 for each share of Series A Preferred Stock,
before any payment shall be made in respect of the Corporation's Common Stock.
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(2) PAYMENTS TO HOLDERS OF COMMON STOCK. After payment has been
made to the holders of the Series A Preferred Stock of the full amounts to which
they are entitled under Section 2(a)(1) above, the holders of Common Stock then
outstanding shall be entitled to receive, distributed on a pro rata basis, an
amount equal to $12.00 per share.
(3) SHOULD ASSETS EXCEED PAYMENTS. After payment has been made
to the holders of Series A Preferred Stock and of Common Stock of the full
amounts to which they are entitled under Section 2(a)(1) and (2) above, the
remaining assets of the Corporation available for distribution to shareholders
shall be distributed pro rata among all of the Corporation's shareholders. For
purposes of this Section 2(a)(3), holders of Series A Preferred Stock shall
share in this distribution in proportion to the number of shares of Common Stock
they would hold had full conversion of their Series A Preferred Stock occurred
immediately prior to Liquidation, according to the provisions of Sections 3 and
4 below.
(4) SHOULD ASSETS BE INSUFFICIENT. If upon a Liquidation the
assets of the Corporation available for distribution to its shareholders shall
be insufficient to make full payments due under Section 2(a)(1) above, then the
holders of the Series A Preferred Stock then outstanding shall share ratably in
any distribution according to the respective amounts which would be payable in
respect of the shares held by them if all amounts payable on their shares
pursuant to Section 2(a)(1) above were paid in full. If upon a Liquidation the
assets of the Corporation available for distribution are adequate to make full
payment due under Section 2(a)(1) but insufficient to make full payment due
under Section 2(a)(2), then the holders of Common Stock shall share ratably
according to the respective amounts which would be payable in respect of the
shares held by them if all amounts payable on their shares pursuant to Section
2(a)(2) above were paid in full.
(5) SOURCE OF LIQUIDATION PAYMENT. The holders of stock shall
be paid under this Section 2(a) out of the assets of the Corporation available
for distribution to its shareholders, whether from capital, surplus or earnings.
(6) MERGER OR ACQUISITION. The Corporation shall not effect a
merger, reorganization, or consolidation of the Corporation into or with another
corporation or the sale or transfer of all or substantially all of the assets of
the Corporation until the Corporation shall have provided notice to all holders
of Series A Preferred Stock pursuant to Section 2(b), below. Unless otherwise
agreed to by the holders of a majority of the Series A Preferred Stock which is
then outstanding, a merger, consolidation, reorganization or sale of all or
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substantially all of the Corporation's assets shall be deemed to be a
Liquidation.
(b) NOTICE. In the event of any Liquidation of the Corporation, or
in the event of any merger, reorganization, or consolidation of the Corporation
into or with another corporation, or the sale or transfer of all or
substantially all of the assets of the Corporation, the Corporation shall give
each holder of Series A Preferred Stock initial written notice of the proposed
action within twenty (20) days after the date the Board of Directors approves
such action, or twenty (20) days prior to any shareholders' meeting called to
approve such action, or twenty (20) days after the commencement of any
involuntary proceeding, whichever is earliest.
(1) CONTENT OF NOTICE. Such initial written notice shall
describe the material terms and conditions of the proposed action, including a
description of the stock, cash, and property to be received by the holders of
Series A Preferred Stock upon consummation of the proposed action. If any
material change in the facts set forth in the initial notice shall occur, the
Corporation shall promptly give written notice to each holder of Series A
Preferred Stock of that material change.
(2) NOTICE PRECEDES CONSUMMATION. The Corporation shall not
consummate any Liquidation of the Corporation before the expiration of twenty
(20) days after the mailing of the initial notice or ten (10) days after the
mailing of any subsequent written notice, whichever is later. But any such
20-day or 10-day period may be shortened upon the written consent of the holders
of a majority of the Series A Preferred Stock then outstanding.
(c) NON-CASH DISTRIBUTIONS ON LIQUIDATION. In the event of any
Liquidation of the Corporation which will involve the distribution of assets
other than cash, the Corporation shall promptly engage a competent independent
appraiser to determine the value of the assets to be distributed. With respect
to the valuation of securities, the Corporation shall engage such appraiser as
shall be approved by the holders of a majority of the Series A Preferred Stock
then outstanding. The Corporation shall, upon receipt of such appraiser's
valuation, give prompt written notice to each holder of shares of Series A
Preferred Stock of the appraiser's valuation.
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<PAGE>
3. CONVERSION
(a) CONVERSION RIGHTS.
(1) OPTIONAL CONVERSION. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, into fully paid and non-assessable shares of
Common Stock of the Corporation at the then applicable Conversion Formula (as
described below).
(2) AUTOMATIC CONVERSION. All outstanding shares of Series A
Preferred Stock shall automatically be converted into fully paid and
non-assessable shares of Common Stock of the Corporation, at the then applicable
Conversion Formula, immediately, upon the occurrence of either of the following:
a. prior to the closing of an underwritten public offering of
the shares of Common Stock of the Corporation pursuant to a registration
statement filed under the Securities Act of 1933, as amended, with aggregate
offering proceeds from the public of not less than Five Million Dollars
($5,000,000), I.E., without deduction therefrom of any expenses incurred or any
underwriting commissions, discounts or concessions paid or allowed by the
Corporation in connection therewith (a "Qualified Public Offering"); or
b. upon the conversion into Common Stock of at least 75% of all
Series A Preferred Stock ever issued.
(3) CONVERSION FORMULA. Each share of Series A Preferred Stock shall
be valued at $12.00 (the "Original Purchase Price") for purposes of such
optional or automatic conversion. The number of shares of Common Stock into
which each share of the Series A Preferred Stock may be converted (the
"Conversion Formula") shall be determined by dividing the Original Purchase
Price by the Conversion Price (as determined as provided below) in effect at the
time of the conversion.
(b) INITIAL CONVERSION PRICE. The conversion price per share at which
shares of Common Stock shall be issuable uponconversion of any shares of Series
A Preferred Stock (the "Conversion Price") shall be equal to the Original
Purchase Price, subject to adjustment as provided in Section 4 below.
(c) MECHANICS OF CONVERSION.
(1) OPTIONAL CONVERSION. Before any holder of Series A Preferred
Stock will be entitled to convert the same into shares of Common Stock pursuant
to Section 3(a)(1) hereof, such
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<PAGE>
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series A
Preferred Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and will state therein the name or
names in which the certificate or certificates for shares of Common Stock should
be issued. The Corporation, as soon as practicable thereafter, will issue and
deliver at such office to such holder of Series A Preferred Stock or to the
holder's nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder will be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred Stock
to be converted (the "Conversion Date"), and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holder of such shares of Common
Stock on such Conversion Date.
(2) AUTOMATIC CONVERSION. Conversion of all the outstanding shares
of Series A Preferred Stock into shares of Common stock pursuant to Section
3(a)(2) hereof shall be deemed to have been made automatically and immediately
prior to the closing of a Qualified Public Offering or immediately following the
prior conversion of at least 75% of all Series A Preferred Stock ever issued as
set forth in Section 3(a)(2)b. hereof (collectively an "Automatic Conversion
Date"). Upon such automatic conversion, the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion will be treated
for all purposes as the record holder or holders of such Common Stock on the
Automatic Conversion Date whether or not such holder or holders shall have
surrendered certificates for such holder's shares of Series A Preferred Stock to
the Corporation. Upon the Automatic Conversion Date, the certificates
representing all the shares of Series A Preferred Stock shall be deemed void; as
soon as practicable after the surrender by any holder of Series A Preferred
Stock certificates, accompanied by a statement from the holder as to the name or
names in which the certificate or certificates for shares of Common Stock should
be issued, the Corporation shall then issue and deliver, at the office of the
Corporation to such holder or his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which the holder shall
be entitled.
(3) NEW CERTIFICATES. Upon conversion of only a portion of the
number of shares of Series A Preferred Stock represented by a certificate
surrendered for conversion, the Corporation shall issue and deliver upon the
written order of the holder at the expense of the Corporation, a new certificate
covering the number of shares of Series A Preferred Stock
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representing the unconverted portion of the certificate so surrendered.
(d) NO FRACTIONAL SHARES. The Corporation shall not issue fractional
shares of Common Stock or scrip upon conversion of shares of Series A Preferred
Stock. If more than one share of Series A Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon their conversion shall be computed on the basis of
the aggregate number of shares of Series A Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the same fraction of the Conversion Price in effect on the
business day next preceding the day of conversion.
(e) TAXES INCIDENT TO CONVERSION. The Corporation shall pay any and all
issue taxes and other taxes (excluding income taxes) that may be payable in
respect to any issue or delivery of shares of Common Stock on conversion of
Series A Preferred Stock. The Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the Series
A Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax, or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(f) SUFFICIENT RESERVES OF STOCK. The Corporation shall at all times
reserve and keep available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the Series A Preferred
Stock, the full number of shares of Common Stock deliverable upon the conversion
of all Series A Preferred Stock from time to time outstanding.
(g) VALID ISSUE FOR CONVERSION. All shares of Common Stock which may be
issued upon conversion of the shares of Series A Preferred Stock shall, upon
issuance by the Corporation, be validly issued, fully paid, non-assessable and
free from all taxes, liens and charges with respect to their issuance.
(h) CANCELLATION OF SERIES A PREFERRED STOCK ON CONVERSION. All
certificates of the Series A Preferred Stock surrendered for conversion shall be
appropriately cancelled on the books of the Corporation, and the shares so
converted represented by such certificate shall be deemed to be cancelled and no
longer authorized or available for issuance by the Corporation.
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<PAGE>
4. ADJUSTMENT OF CONVERSION PRICE
(a) ANTI-DILUTION ADJUSTMENT. The Conversion Price in effect at any time
shall be adjusted from time to time as provided in this Section 4.
(b) ADJUSTMENT OF PRICE UPON ISSUANCE OF COMMON STOCK. Except as provided
in paragraph 4(d) hereof, if and whenever the Corporation shall issue or sell,
or is in accordance with subparagraphs 4(b)(i) through 4(b)(vii) deemed to have
issued or sold, any shares of its Common stock for a consideration per share
less than the Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, the Conversion Price
shall be reduced to the price (calculated to the nearest cent) determined by
dividing (i) an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of outstanding
Series A Preferred Stock) multiplied by the then existing Conversion Price, and
(B) the consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding immediately
after such issue or sale (including as outstanding all shares of Common Stock
issuable upon conversion of outstanding Series A Preferred Stock).
No adjustment of the Conversion Price, however, shall be made in an amount
less than $.01 per share, and any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall amount
to $.01 per share or more.
For purposes of this paragraph 4(b), the following subparagraphs 4(b)(i) to
4(b)(vii) shall also be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. In case the Corporation shall in
any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") whether or not such Options, or the right to convert or
exchange any such Convertible Securities, are immediately
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<PAGE>
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities (determined by dividing (A)
the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options) shall be less than the Conversion
Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of
such Options and thereafter shall be deemed to be outstanding. Except
as otherwise provided in subparagraph 4(b)(iii) below, no adjustment
of the Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case the Corporation
shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (A)
the total amount received or
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<PAGE>
receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price
in effect immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of
the issue or sale of such Convertible Securities and thereafter shall
be deemed to be outstanding, provided that (A) except as otherwise
provided in subparagraph 4(b)(iii) below, no adjustment of the
Conversion Price shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities and
(B) if any such issue or sale of such Convertible Securities is made
upon exercise of any Option to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been or
are to be made pursuant to other provisions of this paragraph 4(b), no
further adjustment of the Conversion Price shall be made by reason of
such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the
happening of any of the following events, namely, if the purchase
price provided for in any Option referred to in subparagraph 4(b)(i),
the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
4(b)(i) or 4(b)(ii), or the rate at which any Convertible Securities
referred to in subparagraph 4(b)(i) or 4(b)(ii) are convertible into
or exchangeable for Common Stock shall change at any time (other than
under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event
shall forthwith be readjusted to the
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<PAGE>
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate,
as the case may be, at the time initially granted, issued or sold; and
on the expiration of any such Option or termination of any such right
to convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the
purchase price provided for in any such Option referred to in
subparagraph 4(b)(i) or the rate at which any Convertible Securities
referred to in subparagraph 4(b)(i) or 4(b)(ii) are convertible into
or exchangeable for Common Stock shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of Common Stock upon
the exercise of any such Option or upon conversion or exchange of any
such Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such respective amount as
would have been obtained had such Option or Convertible Securities
never been issued as to such Common Stock and had adjustments been
made upon the issuance of the shares of Common Stock delivered as
aforesaid, but only if as a result of such adjustment the Conversion
Price then in effect hereunder is thereby reduced.
(iv) STOCK DIVIDENDS. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution
shall be deemed to
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<PAGE>
have been issued or sold without consideration.
(v) CONSIDERATION FOR STOCK. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Corporation in connection
therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any
underwriting commissions, discounts or concessions paid or allowed by
the Corporation in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of
the Corporation, together compromising one integral transaction in
which no specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been issued
without consideration.
(vi) RECORD DATE. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities, or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date
of the granting of such right of subscription or purchase, as the case
may be.
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<PAGE>
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held
by or for the account of the Corporation, and the disposition of any
such shares shall be considered an issue or sale of Common Stock for
the purposes of this paragraph 4(b).
(c) SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
(d) CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of (i) the issuance by the
Corporation of shares of Common Stock upon conversion of the Series A Preferred
Stock, (ii) the issuance by the Corporation of shares of Common Stock upon
exercise of any options or warrants that were outstanding prior to the date of
issuance of the Series A Preferred Stock, (iii) the grant of options to purchase
Common Stock, and the issuance by the Corporation of Common Stock on exercise of
such options, to officers, employees, directors and consultants of the
Corporation or any subsidiary pursuant to any stock option plans of the
Corporation, whether now existing or hereafter arising, or (iv) any Common Stock
of the Corporation issued in conjunction with the Series A Preferred Stock.
5. REORGANIZATION, RECLASSIFICATION, AND SALE OF ASSETS
If any capital reorganization or reclassification of the capital stock of
the Corporation, including any such reorganization or reclassification in
connection with any merger, consolidation, or transfer of substantially all of
the assets of the Corporation, shall not be deemed to be a Liquidation pursuant
to Section 2 hereof, and if it 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 the following shall be an
express condition of such reorganization or reclassification.
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<PAGE>
(a) Lawful and adequate provisions in a form satisfactory to the
holders of a majority of the Series A Preferred Stock, shall be made, whereby
each holder of shares of Series A Preferred Stock shall thereafter have the
right to receive, upon the terms and conditions specified herein and in lieu of
the shares of Common Stock of the Corporation immediately theretofore receivable
upon the conversion of such shares of Series A Preferred Stock, 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 immediately theretofore so receivable had such
reorganization or reclassification not taken place.
(b) Moreover, in any such case, appropriate provision shall be made
with respect to the rights and interests of each such holder of Series A
Preferred Stock to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities, or assets thereafter deliverable upon the exercise of such
conversion rights. In the event of a merger or consolidation of the Corporation
as a result of which a greater or lesser number of shares of common stock of the
surviving Corporation are issuable to holders of the Common Stock of the
Corporation outstanding immediately prior to such merger or consolidation, the
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Corporation.
(c) The Corporation shall not effect any such reorganization,
reclassification, consolidation, merger, or sale unless, prior to the
consummation thereof: (i) the Corporation shall have obtained the consent of
the holders of a majority of the Series A Preferred Stock then outstanding, and
(ii) the successor corporation (if other than the Corporation) resulting from
such consolidation or merger, or the corporation purchasing such assets, shall
assume by written instrument, in a form satisfactory to the holders of a
majority of the Series A Preferred Stock then outstanding the obligation to
deliver to such holder such shares of stock, securities, or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive. Such written instrument shall be promptly mailed or delivered to each
holder of shares of Series A Preferred Stock at the last address of such holder
appearing on the books of the Corporation.
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<PAGE>
6. CERTIFICATE AS TO ADJUSTMENTS
(a) Upon the occurrence of each adjustment of the Conversion Price
pursuant to Section 4, the Corporation at its expense shall promptly compute
such adjustment and prepare and furnish to each holder of Series A Preferred
Stock a certificate setting forth such adjustment and showing in detail the
facts upon which such adjustment is based, and
(b) Upon the written request at any time of any holder of Series A
Preferred Stock, the Corporation shall furnish to such holder a like certificate
setting forth (i) such adjustment, (ii) the Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock which at the time would
be received upon the conversion of the Series A Preferred Stock.
7. NOTICE OF RECORD DATES
In the event:
(a) that the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash; or
(b) that the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase any shares
of stock of any class or to receive any other rights; or
(c) of any capital reorganization of the Corporation, reclassification of
the capital stock of the Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock), consolidation, or merger of the
Corporation with or into another corporation or conveyance of all or
substantially all of the assets of the Corporation to another corporation; or
(d) of the voluntary or involuntary dissolution, liquidation, or winding
up of the Corporation;
then, the Corporation shall cause to be mailed to the holders of record of the
outstanding Series A Preferred Stock, at least twenty (20) days prior to the
date specified therein, a notice stating the date on which that record is to be
taken or that event is to take place. The notice shall also specify the date,
if any is to be fixed, as of which holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such
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<PAGE>
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation, or winding up.
8. FORM OF NOTICES
Any notice required to be given pursuant to the terms hereof to the holders
of shares of Series A Preferred Stock shall be deemed given if hand delivered,
delivered by courier, or deposited in the United States mail, postage prepaid,
addressed to each holder of record at such holder's address appearing on the
books of the Corporation.
9. VOTING
The shares of Series A Preferred Stock shall be voted equally with the
shares of the Corporation's Common stock at any annual or special meeting of
shareholders of the Corporation, or may act by written consent on the same
basis, with respect to all matters which come before the shareholders. Each
holder of shares of Series A Preferred Stock shall be entitled to the number of
votes equal to the number of whole shares of the Corporation's Common Stock into
which such holder's shares of Series A Preferred Stock are convertible, pursuant
to Sections 3 and 4 above, immediately after the close of business on the record
date fixed for such meeting or the effective date of such written consent.
10. AMENDMENTS AND CHANGES
As long as any of the Series A Preferred Stock shall be issued and
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of a majority of the
Series A Preferred Stock then outstanding:
(a) Amend or repeal any provision of, or add any provision to, the
Corporation's Articles of Incorporation (including the terms of the Series A
Preferred Stock set forth herein) which would increase the authorized number of
shares of Series A Preferred Stock or which would alter or change the
preferences, limitations or relative rights of the Series A Preferred Stock;
(b) Authorize or issue shares of any class of stock or any bonds,
debentures, notes, or other obligations convertible
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<PAGE>
into or exchangeable for or having options or rights to purchase any shares of
stock of the Corporation having any preference or priority, as to dividends,
assets or otherwise, on a parity with or superior to any preferences or priority
of the Series A Preferred Stock;
(c) Reclassify any outstanding shares into shares having any
preference or priority as to dividends, assets or otherwise superior to or on a
parity with any such preference or priority of Series A Preferred Stock; or
(d) Amend this Section 10.
Nothing in this Section 10 shall require the approval of the holders of the
Series A Preferred Stock to increase the authorized shares of Common Stock, to
issue additional shares of Common Stock, to issue any bonds, debentures, notes,
other obligations convertible into or exchangeable for or having options or
rights to purchase any shares of Common Stock, to issue any options or rights to
purchase any shares of Common Stock, to reclassify any outstanding shares into
shares of Common Stock, or to issue the 115,380 shares of Series A Preferred
Stock. The terms of the Series A Preferred Stock set forth herein can be
amended, subject to the terms of this Section 10, in accordance with the
procedures and requirements for amendments set forth in the Colorado Business
Corporation Act.
ARTICLE III
PREEMPTIVE RIGHTS
No shareholder of the Corporation shall have any preemptive or similar
right to acquire or subscribe for any additional unissued or treasury shares of
stock, or other securities of any class, or rights, warrants or options to
purchase stock or scrip, or securities of any kind convertible into stock or
carrying stock purchase warrants or privileges.
ARTICLE IV
BOARD OF DIRECTORS
The number of directors of the Corporation shall be fixed and may be
altered from time to time as provided in the bylaws of the Corporation.
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ARTICLE V
LIMITATION ON LIABILITY
To the fullest extent permitted by the Colorado Corporation Code, as
the same exists or may hereafter be amended, a director of the Corporation shall
not be liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director. Any repeal or modification of this
Article by the shareholders of the Corporation shall be prospective only and
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
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<PAGE>
MAIL TO: SECRETARY OF STATE FOR OFFICE USE ONLY
CORPORATIONS SECTION
1560 BROADWAY, SUITE 200
DENVER, CO 80202
(303) 894-2251
MUST BE TYPED FAX (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT
PLEASE INCLUDE A TYPED TO THE
SELF-ADDRESSED ENVELOPE ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Pixsys, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on March 21, 1996, as prescribed by the Colorado Business
Corporation Act, in the manner marked with an X below:
No shares have been issued or Directors Elected - Action by
- ----- Incorporators
No shares have been issued but Directors Elected - Action by
- ----- Directors
Such amendment was adopted by the board of directors where shares
- ----- have been issued.
XX Such amendment was adopted by a vote of the shareholders. The
- ----- number of shares voted for the amendment was sufficient for
approval.
Article FIRST of the Articles of Incorporation of the Corporation
was amended to read in full as follows:
"FIRST: That the name of the Corporation is Image Guided
Technologies, Inc."
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the amendment shall be effected, is as follows:
N/A
If these amendments are to have a delayed effective date, please
list that date: N/A
-------
(Not to exceed ninety (90) days from the date of filing)
Pixsys, Inc.
By/S/ JEFFREY J. HILLER
---------------------------------
Its Vice President
<PAGE>
MAIL TO: SECRETARY OF STATE FOR OFFICE USE ONLY
CORPORATIONS SECTION
PLEASE INCLUDE A TYPED 1560 BROADWAY, SUITE 200
SELF-ADDRESSED ENVELOPE DENVER, CO 80202
(303) 894-2251
MUST BE TYPED FAX (303) 894-2242
FILING FEE: $10.00
MUST SUBMIT TWO COPIES
CERTIFICATE OF CORRECTION
Pursuant to the Colorado Business Corporation Act, the undersigned hereby
executes the following certificate of correction:
FIRST: The exact name of the corporation is IMAGE GUIDED TECHNOLOGIES,
--------------------------
INC. organized under the laws of COLORADO
------- -----------------------------
SECOND: Description of the documents being corrected (i.e. Articles of
Incorporation, Amendment, Merger or other) or an attached copy
of the document:
-----------------------------------------------
ARTICLES OF AMENDMENT
---------------------------------------------------------------
THIRD: Date document was filed APRIL 16 , 19 96 (FILING NO.
-------------- ---------------------
961052003)
---------------------------------------------------------------
FOURTH: Statement of incorrect information: Two references to "Article
First."
FIFTH: Statement of corrected information: All references in the
Articles of Amendment to "Article First" are hereby corrected to
say "Article I".
IMAGE GUIDED TECHNOLOGIES, INC., a
Colorado corporation
By/S/ JEFFREY J. HILLER
------------------------------------
Jeffrey J. Hiller
Vice President
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
ARTICLES OF AMENDMENT
TO
RESTATED AND AMENDED ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is Image Guided
Technologies, Inc.
SECOND: That Section 2.4 of Article II of the Articles of
Incorporation of the Corporation is hereby amended to reduce the number of
shares of Series A Preferred Stock authorized for issuance from 115,380 shares
to 83,332 shares.
THIRD: That the Amendment was adopted on July 2, 1996.
FOURTH: That the Amendment was duly adopted by the Board of
Directors of the Corporation without shareholder action and that no shareholder
action was required.
IN WITNESS WHEREOF, said Image Guided Technologies, Inc. has
caused these Articles of Amendment to be duly executed this _____ day of July,
1996.
IMAGE GUIDED TECHNOLOGIES, INC.
By:/S/ JEFFREY J. HILLER
-----------------------------------
Jeffrey J. Hiller
Vice President
<PAGE>
BYLAWS
OF
IMAGE GUIDED TECHNOLOGIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation shall initially be located in
Boulder, Colorado. The Board of Directors may from time to time designate
another location as the principal office. The Corporation may have such other
offices, either within or outside Colorado, as the Board of Directors may
designate from time to time. The Corporation shall continuously maintain in
Colorado a registered agent and a registered office.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held at such time as the Board of Directors may determine for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting.
Section 2. SPECIAL MEETINGS. Unless otherwise prescribed by
statute, special meetings of the shareholders may be called for any purpose by
the chairman of the Board, by the president, by any other person designated
herein as having authority to call such a meeting, or by the Board of Directors.
The chairman of the Board or the president shall call a special meeting of the
shareholders if the Corporation receives one or more written demands for the
meeting, stating the purpose or purposes for which it is to be held, signed and
dated by the holders of shares representing not less than one-tenth of all the
outstanding shares of the Corporation entitled to vote at the meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate
any place, either within or outside the State of Colorado, as the place for any
annual meeting or for any special meeting called by the Board of Directors. If
no designation is made, or if a special meeting is otherwise called, the place
of meeting shall be the principal office of the Corporation in Colorado. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or outside Colorado, as the place for such
meeting.
Section 4. NOTICE OF MEETING. Subject to the requirements of the
Colorado Business Corporation Act, written notice stating the place, day and
hour of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting. Notice may be
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given in person; by telegraph, teletype, electronically transmitted facsimile,
or other from of wire or wireless communication; or by mail or private carrier,
by or at the direction of the chairman of the Board, the president, the
secretary, or the person calling the meeting, to each shareholder of record
entitled to vote at such meeting; provided, however, that any other longer
notice period which may be required by the Colorado Business Corporation Act
shall be observed. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, addressed to the shareholder at his address
as it appears in the Corporation's current record of shareholders, with postage
thereon prepaid. If three successive letters mailed to the last-known address
of any shareholder are returned as undeliverable, no further notices to such
shareholder shall be necessary, until another address for such shareholder is
made known to the Corporation.
When a meeting is adjourned to another date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
is announced before adjournment at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business
which may have been transacted at the original meeting. If the adjournment is
for more than 120 days, or if a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
Section 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders of one or more voting groups entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive any distributions or payment of any dividend, or entitled to demand a
special meeting or to take any other action, or in order to make a determination
of shareholders of one or more voting groups for any other proper purpose, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
days, and, in case of a meeting of shareholders, not less than ten days, prior
to the date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section, such determination shall apply to any adjournment
thereof, unless the Board of Directors fixes a new record date, which it shall
do if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting. Notwithstanding the above, the record date for
determining the shareholders entitled to take action without a meeting or
entitled to be given notice of action so taken shall be the date a writing upon
which the action is taken is first received by the Corporation. The record date
for determining shareholders entitled to demand a special meeting shall be the
date of the earliest of any of the demands pursuant to which the meeting is
called.
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Section 6. VOTING RECORD. The officer or agent having charge of
the Corporation's stock transfer books shall make, at the earlier of ten days
before each meeting of shareholders or two business days after notice of the
meeting has been given, a complete record of the shareholders entitled to
vote at such meeting, or any adjournment thereof. The record shall be
arranged by voting groups, as defined in Section 7-101-401 of the Colorado
Business Corporation Act, and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares held by each shareholder. The
record, for a period beginning the earlier of ten days before such meeting or
two business days after notice of the meeting is given and continuing through
the meeting and any adjournment thereof, shall be kept on file at the
principal office of the Corporation or at a place (which shall be identified
in the notice) in the city where the meeting will be held, and shall be
subject to inspection by any shareholder, or such shareholder's agent or
attorney, for any purpose germane to the meeting at any time during usual
business hours. Such record shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder for any purpose germane to the meeting during the whole time of
the meeting.
The original stock transfer books shall be the prima facie evidence as
to who are the shareholders entitled to examine the record or transfer books and
to vote at any meeting of shareholders.
Section 7. QUORUM. A majority of the votes entitled to be cast on
a matter by a voting group, represented in person or by proxy, shall constitute
a quorum at any meeting of shareholders for that voting group for action on that
matter, except as otherwise provided in the Articles of Incorporation or the
Colorado Business Corporation Act. If less than a majority of such votes are
represented at a meeting, a majority of votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally called. The shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
If a quorum is present, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater proportion or number or voting by
classes is required by law or by the Articles of Incorporation or by these
Bylaws.
Section 8. PROXIES. A shareholder may vote the shareholder's
shares in person or by proxy. A shareholder may validly appoint a proxy to vote
or otherwise act for the shareholder, solely by the following means of such
appointment:
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(a) A shareholder may appoint a proxy by signing an appointment
form, either personally or by the shareholder's attorney-in-fact;
(b) A shareholder may appoint a proxy by transmitting or
authorizing the transmission of a telegram, teletype, telecopy, or other
electronic transmission providing a written statement of the appointment to
the proxy, to a proxy solicitor, proxy support service organization, or
other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the Corporation; except that the transmitted
appointment shall set forth or be transmitted with written evidence from
which it can be determined that the shareholder transmitted or authorized
the transmission of the appointment.
An appointment of a proxy is effective against the Corporation when
received by the Corporation, including receipt by the Corporation of an
appointment transmitted pursuant subsection (b) of this Section 8. An
appointment is valid for eleven months unless a different period is expressly
provided in the appointment form. Any complete copy, including an
electronically transmitted facsimile, of an appointment of a proxy may be
substituted for or used in lieu of the original appointment for any purpose for
which the original appointment could be used.
Section 9. VOTING OF SHARES. Subject to any limits set forth in
these Bylaws or the Articles of Incorporation, each outstanding share entitled
to vote shall be entitled to one vote, except in the election of directors, upon
each matter submitted to a vote at a meeting of shareholders, and each
fractional share shall be entitled to a corresponding fractional vote on each
such matter. Each record shareholder entitled to vote in the election of
directors has the right to vote all of the shareholder's votes for as many
persons as there are directors to be elected and for whose election the
shareholder has a right to vote.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. The following may
not be voted, directly or indirectly, at any meeting or counted in determining
the total number of outstanding shares at any given time: (a) treasury shares;
and (b) shares of the Corporation's own stock held by another corporation if the
majority of the shares entitled to vote for the election of directors of such
other corporation is held by this Corporation.
Shares standing in the name of another corporation may be voted by a
duly authorized officer, agent or proxy of such corporation.
The Corporation is entitled to reject a vote, consent, waiver, proxy
appointment, or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
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Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the date on which written notice of redemption has been mailed to
shareholders and a sum sufficient to redeem such shares has been deposited with
a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
therefor, unless other provision has been made in respect of such redemption.
Section 11. INFORMAL ACTION BY SHAREHOLDERS. Any action required
or permitted to be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof and received by the Corporation.
Section 12. MEETINGS BY TELECOMMUNICATIONS. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors, except as otherwise
provided by law or by the Articles of Incorporation.
Section 2. PERFORMANCE OF DUTIES. A director of the Corporation
shall perform his duties as a director, including his duties as a member of any
committee of the board upon which he may serve, in good faith, in a manner he
reasonably believes to be in the best interests of the Corporation, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. In performing his duties, a director shall be entitled
to rely on information, opinions, reports, or statements, including financial
statements and other financial data, in each case prepared or presented by
persons and groups listed in paragraphs A, B and C of this Section 2; but he
shall not be considered to be acting in good faith if he has knowledge
concerning the matter in questions that would cause such reliance to be
unwarranted. A person who so performs his duties shall not have any liability
by reason of being or having been a director of the Corporation. Those persons
and groups on whose information, opinions, reports, and statements a director is
entitled to rely upon are:
A. One or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and competent in the matters
presented.
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B. Counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such persons' professional
or expert competence; or
C. A committee of the board upon which he does not serve, duly
designated in accordance with the provision of the Articles of Incorporation or
the By-Laws, as to matters within its designated authority, which committee the
director reasonably believes to merit confidence.
Section 3. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the Corporation shall be fixed from time to time by the Board of
Directors, provided that the number of directors not be less than three nor more
than ten. Within the limits above specified, the number of directors shall be
determined by resolution of the Board of Directors, or by the shareholders at
the annual meeting. Each director shall hold office until the next annual
meeting of shareholders and until his successor shall have been elected and
qualified. Directors shall be eighteen years of age or older, but need not be
residents of the State of Colorado or shareholders of the Corporation.
Directors shall be removable in the manner provided by the Colorado Business
Corporation Act.
Section 4. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after
and at the same place as, the annual meeting of the shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the Board, the
president or any two directors. If there are two or fewer directors, any
director may call a special meeting of the Board of Directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
the place for holding any special meeting of the Board of Directors called by
them.
Section 6. NOTICE. Reasonable notice of any special meeting
(which need not in any event exceed two days) shall be given by mail, telegram,
telecopy, or telephone to each director at his last known business or residence
address. If mailed, such notice is effective at the earliest of: (1) the date
received; (2) five days after mailing; or (3) the date shown on the return
receipt, if mailed by registered or certified mail, return receipt requested,
and the receipt is signed by or on behalf of the addressee. If notice be given
by telegram, such notice shall be deemed to be given when the telegram is
delivered to the telegraph company. If notice be given by telecopy, such notice
shall be deemed given when sent if the sending telecopier receives automatic
notice the telecopy has been received, otherwise such notice shall be deemed
given when received by the receiving telecopier. The attendance of a director
at a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of business because the meeting is not lawfully
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called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors, except as provided
in Section 13 of this Article III, need be specified in the notice or waiver of
notice of such meeting.
Section 7. QUORUM AND MANNER OF ACTING. A majority of the number
of directors fixed in accordance with Section 3 of this Article III shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting of the Board of Directors at which a quorum
is present shall be the act of the Board. If less than a quorum is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice. Except as otherwise required by law or by the
Articles of Incorporation, the act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Section 8. COMPENSATION. By resolution of the Board of Directors,
any director may be paid any one or more of the following: his expenses, if
any, of attendance at meetings; a fixed sum for attendance at each meeting; a
stated salary as director; or such other compensation as the Corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
Section 9. PRESUMPTION OF ASSENT. A director of the Corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 10. COMMITTEES. The Board of Directors may, by resolution
adopted by a majority of the number of directors fixed in accordance with
Section 3 of this Article III, designate from among its members an executive
committee and one or more other committees. Each committee may, to the extent
provided in the resolution of the Board and except as may be limited by statute,
exercise all of the authority of the Board of Directors. Such delegation of
authority shall not relieve the Board or any member thereof from any
responsibility imposed by law.
Regular meetings of any such committee may be held without notice at
such times and places as the committee may fix from time to time by resolution.
Special meetings of any such committee may be called by any member thereof upon
not less than one day's notice stating the place, date and hour of the meeting,
such notice may be given by mail, telegram, telecopy, or telephone to each
director. If mailed, such notice shall be deemed to be given when
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deposited in the United States mail addressed to the member of the committee at
his business address or place of residence.
Section 11. MEETINGS BY TELECOMMUNICATION. Any director may
participate in a regular or special meeting by, or the Board of Directors may
conduct the meeting through the use of, any means of communication by which all
directors participating may hear each other during the meeting. A director
participating in a meeting by this means shall be deemed to be present in person
at the meeting.
Section 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if a consent in writing, or counterparts
thereof, setting forth the action so taken, shall be signed by all of the
directors or all of the committee entitled to vote with respect to the subject
matter thereof.
Section 13. RESIGNATION AND VACANCIES. Any director may resign at
any time by giving written notice to the chairman of the Board, president or
secretary of the Corporation. Such resignation shall take effect when the
notice is received by the Corporation unless the notice specifies a later
effective date; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any vacancy occurring
in the Board of Directors may be filled by the affirmative vote of a majority of
the remaining directors, regardless of whether the directors remaining in office
constitute fewer than a quorum of the Board of Directors. Any directorship to be
filled by reason of an increase in the number of directors shall be filled by
the affirmative vote of a majority of the directors then in office at a regular
meeting or at a special meeting called for that purpose, or by election at an
annual meeting or at a special meeting of shareholders called for that purpose.
A director chosen to fill a vacancy or a newly created directorship shall hold
office until the next annual meeting of the shareholders and until his successor
shall have been elected and qualified.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall be a
chairman of the Board, a president, a secretary, and a treasurer. The officers
shall be natural persons eighteen years of age or older. Any two or more
offices may be held by the same person. These officers shall be elected
annually by the Board of Directors at the first meeting of the Board held after
each annual meeting of the shareholders, or as soon thereafter as may be
convenient. The Board of Directors or an officer or officers authorized by the
Board of Directors may appoint such other officers or assistant officers as they
may consider necessary. The Board of Directors or an officer or officers
authorized by the Board of Directors shall from time to time determine the
procedure for the appointment of officers, their terms of office, their
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authorities, their duties, and their compensation. Each officer shall hold
office until the first of the following to occur: until his successor shall have
been duly elected and shall have qualified; or until his death; or until he
shall resign; or until he shall have been removed in the manner hereafter
provided.
Section 2. RESIGNATION, REMOVAL AND VACANCIES. An officer may
resign at any time by giving written notice of resignation to the Corporation.
The resignation is effective when the notice is received by the Corporation
unless the notice specifies a later effective date. Any officer may be removed
by the Board of Directors, or by the executive committee, if any, or by another
officer if so specified in these Bylaws or by the Board of Directors, whenever
in its judgment the best interests of the Corporation will be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the persons so removed. A vacancy in any office, however occurring, may be
filled by the Board of Directors, or by the officer or officers authorized by
the Board, for the unexpired portion of the term.
Section 3. CHAIRMAN OF THE BOARD. Unless otherwise determined by
the Board, the chairman of the Board shall be the chief executive officer of the
Corporation. He shall preside at all shareholder and director meetings.
Subject to the control and general supervision of the Board of Directors, the
chief executive officer shall have general charge and control of all its
business and affairs and shall perform all duties incident to the office of
chief executive officer.
Section 4. PRESIDENT. If the president is not the Corporation's
chief executive officer, he shall be its chief operating officer and shall
perform all duties incident to that office. In addition, he shall have such
other powers and shall perform such other duties as the Board of Directors shall
assign to him.
Section 5. SECRETARY. The secretary shall (i) prepare and
maintain as permanent records the minutes of the proceedings of the shareholders
and the Board of Directors, a record of all actions taken by the shareholders or
Board of Directors without a meeting, a record of all actions taken by a
committee of the Board of Directors in place of the Board of Directors on behalf
of the Corporation, and a record of all waivers of notice of meetings of
shareholders and the Board of Directors or any committee thereof, (ii) see that
all notices are duly given in accordance with the provisions of these bylaws and
as required by law, (iii) serve as custodian of the corporate records and of the
seal of the Corporation and affix the seal to all documents when authorized by
the Board of Directors, (iv) keep at the Corporation's registered office or
principal place of business a record which complies with Section 7-116-101(3),
C.R.S., containing the names and addresses of, and the number of shares of each
class or series held by, each shareholder, unless such a record shall be kept at
the office of the Corporation's transfer agent or registrar, (v) maintain at the
Corporation's principal office the originals or copies of the Corporation's
articles of incorporation, bylaws, minutes of all shareholder's meetings and
records of all action taken by the shareholders without a meeting for the past
three years, all written communications within the past three years to
shareholders as a group or to
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the holders of any class or series of shares as a group, a list of the names and
business addresses of the current directors and officers, a copy of the
Corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the Corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the Corporation, unless the
Corporation has a transfer agent, (vii) authenticate records of the Corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned by the chairman of
the Board, the president or the Board of Directors. Assistant secretaries, if
any, shall have the same duties and powers, subject to supervision by the
secretary. The Board of Directors and/or shareholders may respectively
designate a person other than the secretary or an assistant secretary to keep
the minutes of their respective meetings.
Section 6. TREASURER. The treasurer shall: (a) have custody of,
and when proper may pay out, disburse or otherwise dispose of, all funds and
securities of the Corporation which may have come into his hands; (b) receive
and give receipts for moneys due and payable to the Corporation, and deposit all
such moneys in the name of the Corporation in such banks, trust companies or
other depositaries as shall be selected in accordance with Article V of these
Bylaws; (c) enter or cause to be entered regularly in the books of the
Corporation kept for that purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him; and (d) in general perform all
duties incident to the office of treasurer and such other duties as may be
assigned to him from time to time by the Board of Directors, chairman of the
Board or the president.
Section 7. ADDITIONAL OFFICERS. The Corporation shall have such
other officers, including, but not limited to, one or more vice-presidents,
vice-chairman, assistant treasurers, and assistant secretaries, as the Board of
Directors may from time to time deem advisable. Unless otherwise specified by
the Board of Directors, all such officers shall be elected and shall hold office
in accordance with Section 1 of this Article IV. Such officers shall perform
all the duties normally incident to their office and shall perform such other
duties as may be assigned from time to time by the Board of Directors, the
chairman of the Board, or the president.
ARTICLE V
CHECKS AND DEPOSITS
Section 1. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or officers,
agent or agents or the Corporation and in such manner as shall from time to time
be determined by resolution of the Board of Directors.
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Section 2. DEPOSITS. All funds of the Corporation not otherwise
employed may be deposited from time to time to the credit of the Corporation in
such banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
STOCK
Section 1. REGULATION. The Board of Directors may make such rules
and regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the Corporation.
Section 2. CERTIFICATES. The certificates of stock of the
Corporation shall be in such form consistent with the law as shall be approved
by the Board of Directors. The certificates shall be consecutively numbered for
each class of shares, or series thereof. Each certificate shall state the name
of the Corporation, the fact that the Corporation is organized or incorporated
under the laws of the State of Colorado, the name of the person to whom the
shares are issued, the number of shares represented thereby, the date of issue,
and the par value of the shares represented thereby or a statement that such
shares are without par value. The certificate number, the name of the person to
whom the shares are issued, the date of issue and the number of shares issued,
shall be entered on the stock transfer books of the Corporation. Certificates
shall be signed by: (i) the president, a vice-president, the chairman or the
vice-chairman; and by (ii) the secretary, an assistant secretary, the treasurer
or an assistant treasurer. If any certificate is countersigned by a transfer
agent or registered by a registrar (either of which is other than the
Corporation or employee of the Corporation), the signature of any such officer
may be a facsimile. No certificate shall be issued until the shares represented
thereby are fully paid. A statement of the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class shall be set forth in full or summarized on the face or
back of the certificates which the Corporation shall issue, or in lieu thereof,
the certificate may set forth that such a statement or summary will be furnished
to any shareholder upon request without charge. Each certificate shall be
otherwise in such form as may be prescribed by the Board of Directors and as
shall conform to the rules of any stock exchange on which the shares may be
listed.
The Corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The Corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms and
conditions specified by the Board of Directors.
Section 3. UNCERTIFICATED SECURITIES. Notwithstanding anything to
the contrary in these Bylaws, the Board of Directors may authorize the issuance
of the shares of the
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Corporation without certificates. Such uncertificated shares, including without
limitation the issuances and transfers thereof, shall be governed by all
applicable provisions of Colorado law.
Section 4. LOST CERTIFICATES. In case of the alleged loss,
destruction or mutilation of a certificate of stock, the Board of Directors may
direct the issuance of a new certificate in lieu thereof upon such terms and
conditions in conformity with law as it may prescribe. The Board of Directors
may in its discretion require a bond in such form and amount and with such
surety as it may determine, before issuing a new certificate.
Section 5. TRANSFER OF SHARES. Upon compliance with any provisions
restricting the transfer or registration of transfer of shares of stock,
if any, and applicable statutory requirements, registration of transfers of
shares of stock of the Corporation shall be made on the books of the
Corporation, upon the surrender and cancellation of a certificate for a like
number of shares.
Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be
entitled to treat the holder of record of any share of stock as the holder in
fact thereof, and accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any person whether or
not it shall have express or other notice thereof.
Section 7. TRANSFER AGENTS, REGISTRARS AND PAYING AGENTS. The
Board may, at its discretion, appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture or other
security of the Corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such rights and duties, and shall
be entitled to such compensation, as may be agreed.
ARTICLE VII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. DIRECTORS AND OFFICERS. The Corporation shall indemnify
the directors and officers of the Corporation in their capacities as directors
and officers pursuant to the procedures set forth in, and to the fullest extent
authorized by, Colorado law as the same
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exists or may hereafter be amended. The right to indemnification provided
herein shall be a contract right and shall include the right to be paid by the
Corporation in accordance with Colorado law for expenses incurred in advance of
any proceeding's final disposition.
Section 2. EMPLOYEES AND AGENTS. The Corporation may indemnify
and advance expenses to employees and agents of the Corporation to the same
extent as is permitted for directors under Colorado law (and to a greater extent
if consistent with law). No such indemnification shall be made without the
prior approval of the Board of Directors and the determination by the Board of
Directors that such indemnification is permissible, except pursuant to a
contract approved by the Board of Directors unless prohibited by applicable law.
Section 3. INSURANCE. The Corporation may purchase and maintain
insurance for itself and on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the Corporation or who, while a
director, officer, employee, fiduciary, or agent of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, fiduciary, or agent of another foreign or domestic
corporation or of any partnership, joint venture, trust, other enterprise, other
person, or employee benefit plan against any liability asserted against or
incurred by him in any such capacity or arising from his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability.
Section 4. DEFINITION OF "DIRECTOR". The term "director" for
purposes of this Article means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, fiduciary, or agent of another foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise, other person, or
employee benefit plan. A director shall be considered to be serving an employee
benefit plan at the Corporation's request if his duties to the Corporation also
impose duties on, or otherwise involve services by, him to the plan or to
participants in or beneficiaries of the plan. The term "director" includes,
unless the context otherwise requires, the estate or personal representative of
a director.
Section 5. NON-EXCLUSIVITY OF RIGHTS. The foregoing rights of
indemnification and insurance shall not be exclusive of, or in any manner limit,
other rights to which any director, officer, employee, agent or fiduciary may be
entitled as a matter of law, or to the extent not prohibited by law by a
contract approved by the Board of Directors.
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ARTICLE IX
MISCELLANEOUS
Section 1. WAIVER OF NOTICE. Whenever notice is required by law,
by the Articles of Incorporation or by these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before, at or
after the time stated therein, shall be deemed the equivalent of giving such
notice.
Section 2. SEAL. The corporate seal of the Corporation shall be
in such form as the Board of Directors shall prescribe. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January and end on the last day of the next December,
unless otherwise determined by resolution of the Board of Directors.
Section 4. AMENDMENTS. The Bylaws may be altered, amended or
repealed by the Board of Directors at any regular meeting of the Board or at any
special meeting called for this purpose, subject to repeal or change by action
of the shareholders.
CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of fourteen (14) pages,
including this page, constitute the Bylaws of Image Guided Technologies, Inc.,
adopted by the Board of Directors of the Corporation as of July 2, 1996.
/S/ WALDEAN SCHULZ
---------------------------------------
Waldean Schulz, Secretary
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PIXSYS, INC.
1994 STOCK OPTION PLAN
I. PURPOSE
The PIXSYS, INC. 1994 STOCK OPTION PLAN ("Plan") provides for the grant of
Stock Options to employees, directors and consultants of Pixsys, Inc. (the
"Company"), and such of its subsidiaries (as defined in Section 424(f) of the
Internal Revenue Code of 1986 (the "Code") as the Board of Directors of the
Company shall from time to time designate ("Participating Subsidiaries") in
order to advance the interests of the Company and its Participating Subsidiaries
through the motivation, attraction and retention of key personnel.
II. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
a) Incentive Stock Options ("ISOs") which are intended to be
"Incentive Stock Options" as that term is defined in Section 422 of the Code; or
b) Nonstatutory Stock Options ("NSOs") which are intended to be
options that do not qualify as "Incentive Stock Options" under Section 422 of
the Code.
Subject to the other provisions of the Plan, a Participant may receive ISOs and
NSOs at the same time, provided that the ISOs and NSOs are clearly designated as
such, and the exercise of one does not affect the exercise of the other.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
the Company or, if the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), by a committee of two or more directors ("Committee") appointed by the
Board, each of whom shall be "disinterested" as defined in Rule
<PAGE>
16b-3 under the Exchange Act. The Committee or the Board of Directors, as the
case may be,shall have full authority to administer the Plan, including
authority tointerpret and construe any provision of the Plan and any Stock
Options granted thereunder, and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of the Code or in order that Stock Options that are intended to be
ISOs will be classified as incentive stock options under the Code, or in order
to conform to any regulation or to any change in any law or regulation
applicable thereto.
All actions taken and all interpretations and determinations made by the
Board or Committee in good faith (including determinations of Fair Market Value)
shall be final and binding upon all Participants, the Company and all other
interested persons. No member of the Board or Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Board and Committee shall, in
addition to their rights as directors, be fully protected by the Company with
respect to any such action, determination or interpretation. Rule 16b-3 under
the Exchange Act provides that the grant of a stock option to a director or
officer of a company will be exempt from the provisions of Section 16(b) of the
Act if the conditions set forth in said Rule are satisfied. Unless otherwise
specified by the Board or Committee, grants of Stock Options hereunder to
individuals who are officers or directors of the Company shall be made in a
manner that satisfies the conditions of said Rule.
IV. DEFINITIONS
4.1 "STOCK OPTION." A Stock Option is the right granted under the Plan to
an Employee, director, or consultant to purchase at such time or times, on such
terms and at such price or prices ("Option Price") as are determined by the
Board or Committee, the number of shares of Common Stock determined by the Board
or Committee.
4.2 "COMMON STOCK." A share of Common Stock means a share of authorized
but unissued or reacquired common stock of the Company.
4.3 "FAIR MARKET VALUE." If the Common Stock is traded publicly, the Fair
Market Value of a share of Common Stock on any date shall be the average of the
representative closing bid and asked prices, as quoted by the National
Association of Securities Dealers through NASDAQ (its automated system for
reporting quotes), for the date in question, or, if the Common Stock is
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listed on the NASDAQ National Market System or is listed on a national stock
exchange, the officially quoted closing price on NASDAQ or such exchange, as the
case may be, on the date in question. If the Common Stock is not traded
publicly, the Fair Market Value of a share of Common Stock on any date shall be
determined in good faith by the Board of Directors or the Committee after such
consultations with outside legal, accounting and other experts as the Board of
Directors or the Committee may deem advisable.
4.4 "EMPLOYEE." An Employee is an employee of the Company or any
Participating Subsidiary.
4.5 "PARTICIPANT." A Participant is an Employee, director or consultant
to whom a Stock Option is granted.
V. ELIGIBILITY AND PARTICIPATION
Grants of ISOs and NSOs may be made to Employees of the Company or any
Participating Subsidiary. Grants of NSOs may be made to Employees of, directors
of or consultants to the Company or any Participating Subsidiary. Any director
of the Company or of a Participating Subsidiary who is also an Employee shall
also be eligible to receive ISOs. The Board or Committee shall from time to
time determine the Participants to whom Stock Options shall be granted, the type
of Stock Option granted, the number of shares of Common Stock subject to each
Stock Option to be granted to each such Participant, the Option Price of such
Stock Option, and all other terms and conditions of the Stock Option, all as
provided in the Plan. The Option Price of any ISO shall be not less than the
Fair Market Value of a share of Common Stock on the date on which the Stock
Option is granted, but the Option Price of an NSO may be less than the Fair
Market Value on the date the NSO is granted if the Board or Committee so
determines. If an ISO is granted to an Employee who then owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company, the Option Price
of such ISO shall be at least 110% of the Fair Market Value of the Common Stock
subject to the ISO at the time such ISO is granted, and such ISO shall not be
exercisable after five years after the date on which it was granted. Each Stock
Option shall be evidenced by a written agreement ("Option Agreement") containing
such terms and provisions as the Board or Committee may determine, subject to
the provisions of the Plan.
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VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1 MAXIMUM NUMBER. Subject to adjustment as provided in Section 6.2
below, the maximum aggregate number of shares of Common Stock that may be made
subject to Stock Options shall be 800,000 shares of Common Stock. Such shares
may either be authorized but unissued or treasury shares of the Company. The
aggregate Fair Market Value (determined as of the time the ISO is granted) of
the stock as to all ISOs granted to an individual which may first become
exercisable in a particular calendar year may not exceed $100,000. If any
shares of Common Stock subject to Stock Options are not purchased or otherwise
paid for before such Stock Options expire, such shares may again be made subject
to Stock Options.
6.2 ADJUSTMENTS. In the event the outstanding shares of Common Stock of
the Company are increased, decreased, changed into or exchanged for a different
number or kind of securities of the Company, through reorganization,
recapitalization, reclassification, stock dividend, stock split, or other change
in corporate structure, an appropriate and proportionate adjustment shall be
made in the numbers, kinds, and prices of the Stock Options granted under the
Plan (but not in the aggregate purchase price), and in the total number of
shares of Common Stock with respect to which Stock Options may be granted
hereunder. If any adjustment shall result in a fractional share, the fraction
shall be disregarded, and the Company shall have no obligation to make any cash
or other payment with respect to such a fractional share. Any adjustment shall
be made by the Board, whose determination in that respect, and as to whether any
adjustment needs to be made, shall be final, binding and conclusive.
VII. EXERCISE OF STOCK OPTIONS
7.1 TIME OF EXERCISE. Subject to the provisions of the Plan, the Board or
Committee, in its discretion, shall determine the time when a Stock Option, or a
portion of a Stock Option, shall become exercisable, and the time when a Stock
Option, or a portion of a Stock Option, shall expire. Such time or times shall
be set forth in the Option Agreement evidencing such Stock Options. A Stock
Option shall expire, to the extent not exercised, no later than the tenth
anniversary of the date on which it was granted. The Board or Committee may
accelerate the vesting of any Participant's Stock Option by giving written
notice to the Participant and, with the consent of the holder thereof, modify,
amend or terminate any Stock Option. Upon receipt of such notice, the
Participant and the Company shall amend the Option Agreement to reflect the new
vesting schedule.
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The acceleration of the exercise period of a Stock Option shall not affect the
expiration date of that Stock Option.
7.2 EXCHANGE OF OUTSTANDING STOCK. The Board or Committee, in its sole
discretion, may permit a Participant to surrender to the Company shares of the
Common Stock previously acquired by the Participant as part or full payment for
the exercise of a Stock Option. Such surrendered shares shall be valued at
their Fair Market Value on the date of exercise.
7.3 PAYMENT. The exercise price shall be paid in full at the time of
exercise of the Stock Options in cash or in such other form of lawful
consideration as the Board of Directors or the Committee may approve from time
to time, including, without limitation, the transfer of outstanding shares of
Common Stock as provided in Section 7.2.
7.4 TERMINATION OF EMPLOYMENT BEFORE EXERCISE. If the employment of a
Participant who was an Employee of the Company or a Participating Subsidiary
when the Stock Option was granted shall terminate for any reason other than
the Participant's death or disability, any Stock Options then held by the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of his
employment for a period of three months (but not later than the specified
expiration date). If the Participant's employment is terminated because the
Participant is disabled within the meaning of Section 22(e)(3) of the Code,
any Stock Option then held by the Participant, to the extent then exercisable
under the applicable Option Agreement(s), shall remain exercisable after the
termination of his employment for a period of twelve months (but not later
than the specified expiration date). If the Participant dies while employed
by the Company or a Participating Subsidiary, or during the three-month or
twelve-month periods referred to above, his Stock Options may be exercised to
the extent that they were exercisable on the date of cessation of his
employment by his estate, or duly appointed representative, or beneficiary
who acquires the Stock Options by will or by the laws of descent and
distribution, and each of his Stock Options shall terminate on the first
anniversary of the date of his death (but not later than the specified
expiration dates). To the extent a Stock Option either (i) has not yet
become exercisable on termination of employment (I.E., not vested) or (ii) is
exercisable on such termination but is not exercised during the applicable
period, it shall be deemed to have been forfeited and of no further force or
effect. Notwithstanding anything in this Section 7.4 to the contrary, the
Board or Committee may, in its sole discretion, provide (whether by initial
grant or subsequent modification or amendment with the consent of the holder
thereof) other and different provisions with respect to termination,
expiration and exercisability for NSOs in the event of termination of
employment, engagement or term, as the case may be, death or disability of
any Employee, consultant or director (such provisions shall be set forth in
the Stock Option Agreements evidencing such NSOs).
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7.5 DISPOSITION OF FORFEITED STOCK OPTIONS. Any shares of Common Stock
subject to Stock Options forfeited by a Participant shall not thereafter be
eligible for purchase by the Participant, but may be made subject to Stock
Options granted to other Participants.
VIII. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or without cause. Nothing in this Article VIII shall
affect any rights or obligations of the Company or any Participant under any
written contract of employment.
IX. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in Section
6.2, no adjustment shall be made in the number of shares of Common Stock issued
to a Participant, or in any other rights of the Participant upon exercise of a
Stock Option by reason of any dividend, distribution or other right granted to
stockholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.
X. ASSIGNABILITY
No Stock Option granted under this Plan, nor any other rights acquired by
Participant under this Plan, shall be assignable or transferable by a
Participant, other than by will or the laws of descent and distribution, and
Stock Options issued to a Participant are exercisable during his lifetime only
by him. Notwithstanding the preceding sentence, the Board or Committee may, in
its sole discretion, permit the assignment or transfer of an NSO and the
exercise thereof by a person other than a Participant, on such terms and
conditions as the Board or Committee in its sole discretion may determine. Any
such terms shall be determined at the time the NSO is granted, and shall be set
forth in the Option Agreement. In the event of his death, the Stock Option may
be exercised by the Personal Representative of the Participant's estate or by
the successor or successors in
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interest determined under the Participant's will or under the applicable laws of
descent and distribution.
XI. MERGER OR LIQUIDATION OF THE COMPANY
11.1 LIQUIDATION. In the event of a dissolution or liquidation of the
Company, all Stock Options shall terminate immediately prior to the consummation
of such dissolution or liquidation, unless otherwise provided by the Board. The
Board may, in the exercise of its sole discretion, give each Participant the
right to exercise his or her Stock Option(s) as to Shares as to which the Stock
Option(s) would not otherwise be exercisable.
11.2 SALE OF ASSETS, MERGER OR CONSOLIDATION. In the event of a sale of
all or substantially all of the assets of the Company, or the merger or
consolidation of the Company with or into another corporation in a transaction
in which the Company does not survive, the Board, in its sole discretion, may
provide for the acceleration of the exercise date of some or all of the
non-exercisable portion of any outstanding Stock Options, and/or may provide for
the termination of any Stock Options immediately prior to the consummation of
the transaction, and/or may provide for the replacement of any Stock Options
with comparable options to purchase stock of such other corporation.
XII. AMENDMENT
The Board of Directors may from time to time alter, amend, suspend or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable in order that ISOs will be classified as
incentive stock options under the Code, or in order to conform to any regulation
or to any change in any law or regulation applicable thereto; provided, however,
that no such action shall adversely affect the rights and obligations with
respect to Stock Options at any time outstanding under the Plan; and provided
further that no such action shall, without the approval of the stockholders of
the Company, (i) increase the maximum number of shares of Common Stock that may
be made subject to Stock Options (unless necessary to effect the adjustments
required by Section 6.2), (ii) materially increase the benefits accruing to
Participants under the Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
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XIII. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended, or unless, in the opinion of the
Company, the proposed purchase of such optioned shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended, and from
the registration or qualification requirements of applicable state securities
laws. As a condition to the exercise of a Stock Option, the Company may impose
various conditions, including a requirement that the person exercising such
Stock Option represent and warrant, at the time of such exercise, that the
Shares are being purchased for investment and without any present intention to
sell or distribute the Shares to be received.
XIV. WITHHOLDING TAXES
The Company or Participating Subsidiary shall take such steps as it shall
deem necessary or appropriate for the withholding of any taxes which the Company
or the Participating Subsidiary is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign to
withhold in connection with any Stock Options. All withholding taxes may, at
the sole discretion of the Company, be satisfied by the withholding of a
sufficient number of exercised Shares which, valued at Fair Market Value on the
date of exercise, would be equal to the total withholding obligation of the
Optionee for the exercise of such Stock Option.
XV. BROKERAGE ARRANGEMENTS
The Board or Committee, in its discretion, may enter into arrangements with
one or more banks, brokers, or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Stock Options including, without
limitation, arrangements for the simultaneous exercise of Stock Options and the
sale of shares acquired upon exercise.
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XVI. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitations on the power or authority of the Board of
Directors to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board of Directors may deem necessary or
desirable or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe benefits to employees,
consultants or directors generally, or to any class or group of employees, which
the Company or any Participating Subsidiary now has lawfully put into effect,
including, without limitation, any retirement, pension, savings and stock
purchase plan, insurance, death and disability benefits and executive short-term
incentive plans.
XVII. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on
March 15, 1994, subject to the approval of the Company's shareholders within
twelve (12) months thereafter. No Stock Options shall be granted subsequent to
ten years after the effective date of the Plan. Stock Options outstanding
subsequent to ten years after the effective date of the Plan shall continue to
be governed by the provisions of the Plan.
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IMAGE GUIDED TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
Reflects 12/9/94 Stock Split*
THIS STOCK OPTION AGREEMENT is issued to ((FULLNAME)) (the "Optionee"), pursuant
to the 1994 Stock Option Plan (the "Plan") of Image Guided Technologies, Inc., a
Colorado corporation (the "Corporation").
1. OPTIONEE; BASIC TERMS. The Optionee is hereby granted an option to
purchase the number of fully paid and non-assessable shares of the Common
Stock, no par value, of the Corporation at the option price set forth
below, subject to the following additional terms and conditions:
(a) DEFINITIONS.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "Incentive Stock Option" shall mean an option described in
Section 422 of the Code. To qualify for favorable tax
treatment provided by an Incentive Stock Option, the shares
purchased upon exercise must be held for a period of two
(2) years from the date of the option grant and for a
period of one (1) year after the shares are transferred to
Optionee.
(iii) "Non-Statutory Option" shall mean an option other than an
Incentive Stock Option, the exercise of which generally
results in an immediate taxable event.
(iv) Unless otherwise indicated, all capitalized terms set forth
in this Agreement shall have the meaning provided to them
under the Plan, a copy of which Optionee acknowledges
having received.
(b) GRANT OF OPTION.
(i) The Corporation hereby grants to the Optionee an option
(the "Option") to purchase ((SHARES)) shares of the Common
Stock of the Corporation, upon the terms and conditions set
forth below. The date of grant of the Option is
((GRANTDATE)) (the "Grant Date").
(ii) This Option is a(n):
/ / Incentive Stock Option (to be received only by
EMPLOYEES of the Corporation).
/ / Non-Statutory Option.
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*The number of shares granted and the price per share as set forth in this Stock
Option Agreement both reflect the four-for-one stock split on 12/9/94, and thus
no further adjustment for such stock split is required.
<PAGE>
(iii) The Optionee is a(n) (if applicable, check more than one):
/ / Employee
/ / Consultant
/ / Director
(c) DURATION OF OPTION. This Option shall expire five (5) years from
the Grant Date; provided, however, for any Optionee who owns more
than ten percent (10%) of the total combined voting power or value
of all classes of stock of the Corporation, the duration of an
Incentive Stock Option shall be five (5) years.
(d) EXERCISE PRICE. The purchase price for the shares subject to the
Option shall be $((PRICE)) per share.
2. EXERCISABILITY. Subject to the provisions relating to termination, death
or permanent disability as set forth in the Plan and paragraph 6 herein,
this Option shall vest over a three-year period, in equal quarterly
installments, beginning after six months from Grant Date, I.E., one-sixth
of the option shares shall be exercisable six months after the Grant
Date, and one twelfth of the option shares shall be exercisable at the
end of each quarter thereafter. Under these provisions, the Option is
fully exercisable 36 months after the Grant Date. The holder of the
Option shall not have any of the rights of a shareholder with respect to
the Shares covered by the Option except to the extent that one or more
certificates for such Shares shall be delivered to him or her upon the
due exercise of the Option.
3. METHOD OF EXERCISING OPTION.
(a) Subject to the terms and conditions of this Option Agreement, the
Option may be exercised by written notice to the Corporation, at
its principal office, in substantially the form of Exhibit A
attached hereto. Such notice shall be accompanied by payment of
the full purchase price of such shares, and the Corporation shall
deliver a certificate or certificates representing such shares as
soon as practicable after the notice is received.
(b) Optionee agrees to have withheld from any remuneration payable to
him or her by the Corporation and/or to pay to the Corporation, at
the time of exercise of the Option, an amount which is required to
be withheld or paid pursuant to any Federal, State or local tax or
revenue laws or regulations, as may be determined by the
Corporation.
(c) The certificate or certificates for the shares as to which the
Option shall have been exercised shall be registered in the name
of the person or persons exercising the Option. In the event the
Option shall be exercised pursuant to the Plan by any person or
persons other than the Optionee, such notice shall be accompanied
by appropriate proof of the right of such person or persons to
exercise the Option. All shares that shall be purchased upon the
exercise of the Option as provided herein shall be fully paid and
nonassessable.
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4. NONTRANSFERABILITY. The Option shall not be transferable otherwise than
by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or
his or her legal representative. The Option shall be null and void and
without effect upon any attempted assignment or transfer, except as
hereinabove provided, including without limitation, any purported
assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof.
5. DISCLOSURE AND RISK. The Optionee represents and warrants to the
Corporation as follows:
(a) This Option and the Shares will be acquired by the Optionee for
Optionee's own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) The Optionee understands that: (i) at time of grant and exercise,
the Option and the Shares have not been and probably will not have
been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act, and that
they must be held by the Optionee indefinitely; (ii) that the
Optionee must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from
registration; (iii) that Rule 144, the usual exemption from
registration, is only available after the satisfaction of certain
holding periods and in the presence of a public market for the
Shares, that there is no certainty that a public market for the
Shares will exist, and that otherwise it will be necessary that
the Shares be sold pursuant to another exemption from registration
which may be difficult to satisfy.
(c) That because of Optionee's position with or relationship to the
Corporation and as a result of inquiries made by Optionee and
information furnished to Optionee by the Corporation, Optionee has
as of the Grant Date and will have as of the date of exercise,
reviewed all information necessary to make an informed investment
decision.
(d) That Optionee understands that each certificate representing the
Shares shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THE CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE
"RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY."
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The Corporation need not register a transfer of any of the Shares unless
one of the conditions specified in the foregoing legend is satisfied.
6. TERMINATION, DEATH, DISABILITY. In the event of the termination, death
or disability of the Employee, the Option granted to the Employee
hereunder shall expire as provided in Section 7.4 of the Plan. If the
Optionee is a consultant or director, to the extent any Option (or
portion thereof) has not yet become exercisable (I.E., not vested) on the
Optionee's ceasing to be engaged as a consultant by or ceasing to be a
director of the Corporation, the Option (or portion thereof) not then
exercisable on the occurrence of such event shall be deemed to have been
forfeited and of no further force or effect.
7. NOTIFICATION UPON TRANSFER OF ISO SHARES. If this Option is an Incentive
Stock Option, the Optionee understands that, under certain conditions,
disposition of the Shares subject to this Option Agreement could result
in adverse tax consequences because of failure to meet prescribed holding
period requirements. Moreover, if this Option is an Incentive Stock
Option, the Optionee hereby agrees to notify the Corporation in writing
within three (3) days after any sale, transfer or other disposition of
shares acquired upon the exercise of this Option which occurs within
either twelve (12) months following the date of exercise or twenty-four
(24) months following the Grant Date.
IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be duly
executed by its officers thereunto duly authorized, and the Optionee has
executed this Agreement, all as of the Grant Date set forth in paragraph 1(b)
(i) above.
OPTIONEE IMAGE GUIDED TECHNOLOGIES, INC.
By:
- ----------------------------------- --------------------------------
((FullName))
Title:
-----------------------------
Date of Execution: Date of Execution:
----------------- -----------------
Optionee acknowledges he or she has reviewed a copy of the Plan, and represents
that Optionee is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof. Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Corporation's Board of Directors or a Committee thereof
upon any questions arising under the Plan.
Dated:
----------------------------- -----------------------------------
((FullName)), Optionee
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<PAGE>
EXHIBIT A
IMAGE GUIDED TECHNOLOGIES, INC.
NOTICE OF EXERCISE OF OPTION
The undersigned hereby gives notice to Image Guided Technologies, Inc. (the
"Company"), of his intent to exercise his right and option to purchase
((SHARES)) shares of the Company's common stock under the Company's 1994 Stock
Option Plan (the "Plan"), and granted to him pursuant to a Stock Option granted
((GRANTDATE)), 1994 ("Option Agreement").
The undersigned hereby specifically reaffirms the representations, warranties,
and acknowledgments contained in paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice this _____ day of
_______________, 19_____.
-----------------------------------
(Signature)
-----------------------------------
((FullName))
-----------------------------------
(Social Security Number)
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Agreement is made and entered into as of this 8th day of July,
1994, among Pixsys, Inc., a Colorado corporation (the "Company"), and the
undersigned holders of the Company's Series A Preferred Stock (the "Series A
Holders").
In consideration of the mutual promises contained herein, the parties
hereto do hereby agree as follows:
1. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) CERTAIN DEFINITIONS. As used in this Section 1, the
following terms shall have the following respective meanings:
"BLUE SKY LAWS" shall mean the securities regulation laws of
any political subdivision of the United States.
"COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"HOLDER" shall mean any holder of Registrable Securities.
For purposes of Section 1(g) entitled indemnification," "Holder" includes each
of the Holder's officers, directors, partners, and each person controlling the
Holder.
"INITIATING HOLDERS" shall mean, unless otherwise provided,
the holders of at least a majority of the aggregate of all the outstanding
Registrable Securities requesting a registration under Section 1(d) below.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means (i) any shares of the
Company's Common Stock, no par value (the "Common Stock"), issued or issuable
upon conversion of the Series A Preferred Stock purchased by the Series A
Holders, and (ii) any other securities issued with respect to any of the above
securities by way of dividends, stock-splits, recapitalization, merger,
consolidation or other reorganization. Registrable Securities do not include
any of the above securities (i) which have been registered pursuant to a
registration statement under the Act and
<PAGE>
sold pursuant thereto or (ii) where the Holder owns less than three percent (3%)
of the Company's outstanding Common Stock (including any Registrable Securities
convertible into Common Stock) and such Registrable Securities may be sold
pursuant to Rule 144(k).
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with this Agreement, including, by way of illustration
only and without limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company,
underwriting expenses not included in Selling Expenses, the expense of any
audits or financial statement reviews incident to or required by any such
registration (including the expense of any cold comfort letters), and Blue Sky
fees and expenses (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean the underwriting discounts and
selling commission applicable to the sale of Registrable Securities.
(b) LIMITATIONS ON DISPOSITION. The Holder of each certificate
representing Registrable Securities, by accepting those securities, agrees to
comply in all respects with the following provisions:
(1) Prior to any proposed disposition of any Registrable
Securities (other than under circumstances described in Sections 1(c) and 1(d)
below), the Holder of those Registrable Securities shall give written notice to
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition; provided, however, that the Holder need not provide such notice
with respect to Registrable Securities for which the Company has previously
issued unlegended certificates.
(2) Except with respect to transactions not involving a
change in beneficial ownership or transactions involving the distribution
without consideration of Registrable Securities by any of the Holders to any of
its partners, retired partners, or any estate of its partners or retired
partners, or transfer by gift, will or intestate succession by any partner to
his spouse or lineal descendants or ancestors, or to any stockholder, affiliate
or affiliated venture capital partnership, such notice shall, if reasonably
requested by the Company, also be accompanied by a written opinion of legal
counsel (who shall be reasonably satisfactory to the Company and its counsel)
stating that the proposed disposition of the Registrable Securities may be
effected without registration under the Securities Act and without Blue Sky
qualification. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
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<PAGE>
(3) Having satisfied Subsection 1(b)(2) above, the Holder
of such Registrable Securities shall be entitled to transfer the Registrable
Securities in accordance with the terms of the notice delivered by the Holder to
the Company; provided, however, that such transferee shall agree to be bound by
the terms of this Agreement.
(4) Each certificate evidencing the Registrable Securities
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially in the following form
in addition to any legend required under applicable state securities laws:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Company shall remove such restrictive legend upon the request of any Holder
if (i) the Company has received an opinion of counsel who is reasonably
acceptable to it and its counsel to the effect that registration of any and all
future transfers is not required, (ii) an appropriate registration statement
with respect to such Registrable Securities has been filed by the Company with
the Commission and been declared effective by the Commission, or (iii) such
transfer may be made in compliance with the requirements of Rule 144 or its
successor. In these events, the Company shall cause new certificates without
the above legend to be issued promptly to the Holder in exchange for outstanding
legended certificates.
(c) COMPANY REGISTRATION.
(1) NOTICE AND PIGGYBACK RIGHTS. If at any time after
twelve (12) months after the effective date of the Company's initial public
offering the Company shall decide to register any of its securities, the Company
shall:
(A) promptly give to each Holder written notice of the
registration (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable Blue
Sky laws); and
(B) include in such registration (and any related Blue
Sky qualification or other compliance reasonably requested by Holders in order
to sell such securities), and in any underwriting involved, all the Registrable
Securities specified in a written request, made within 30 days after receipt of
such written notice from the Company, by any Holder or Holders, except as set
forth in Subsection 1(c)(2) below.
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<PAGE>
The provisions of this subsection do not apply to any of the
following: (i) a registration on any registration form which would not permit
secondary sales by a Holder, (ii) a registration which relates solely to
employee benefit plans, or (iii) a registration which relates solely to a
Commission Rule 145 transaction.
(2) UNDERWRITING; LIMITS. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Subsection 1(c)(l). All Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriters selected
by the Company. Notwithstanding any other provision of this Section (c), if the
underwriter determines that marketing factors require a limitation of the amount
of securities to be registered, the Company shall include in such registration,
prior to the inclusion of any other securities which are not Registrable
Securities (except those held by the Company), the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold, pro rata among the respective Holders on the basis of the amount of
Registrable Securities requested to be registered by each Holder. In any event,
all limitations on the number of Registrable Securities to be included in the
applicable underwriting shall be pro rata with respect to the number of
Registrable Securities requested to be registered as between Holders as of the
date of the notice provided pursuant to Subsection 1(c)(1)(A). If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter within five (5)
days after receipt of such notice, and any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from registration.
(d) REGISTRATION AT THE REQUEST OF THE HOLDERS.
(1) ONE REQUEST; MECHANICS. At any time after twelve (12)
months after the effective date of the Company's initial public offering,
Initiating Holders may, upon delivery of written notice to the Company
specifying this Section 1(d), require the Company to use its best efforts to
prepare and file a registration statement and other qualifications or
compliances with respect to all or part of the Registrable Securities.
In the event of such a request, the Company shall:
(A) Promptly give written notice of the proposed
registration, qualification, or compliance to all other Holders.
(B) Use its diligent best efforts to file as soon as
practicable, but in any event within ninety (90) days after receipt of the
request or requests of the Initiating Holders, all such registrations,
qualifications, and compliances as may be so requested and as would facilitate
the sale and distribution of all or such portion of the Holders' Registrable
Securities as are specified in their request.
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<PAGE>
(C) Include in such registrations, qualifications, and
compliances the Registrable Securities of any Holders who ask in writing, within
thirty (30) days after receipt of notice under Subsection 1(d)(1)(A), to join in
such request.
(D) The Company may be required to prepare, file, and
keep effective a registration statement under this Section 1(d) on no more than
one (1) occasion.
(2) EXCEPTIONS. The Company shall not be obligated to
effect any registration, qualification, or compliance requested by a Holder with
respect to a proposed distribution of Registrable Securities by a Holder under
this Section 1(d):
(A) if the Company has not previously effected an
initial public offering; or
(B) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance; or
(C) within six (6) months following the effective
date of any public offering to the general public of the Company's securities
for its own account; or
(D) the Company has effected one (1) such registration
pursuant to this Section 1(d) and such registration has been declared and
ordered effective.
If the Company shall furnish to such Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company and its
shareholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement under this Section 1(d) shall be deferred for a period during which
such filing of a registration statement would be seriously detrimental, provided
that this period will not exceed sixty (60) days.
(3) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 1(d).
(A) The Company shall include such information in the
written notice referred to in Subsection 1(d)(1)(A).
(B) The Initiating Holders shall negotiate with an
underwriter selected by the Initiating Holders and reasonably approved by the
Company, with regard to the underwriting of the requested registration. But if
a majority in interest of the initiating Holders have not agreed with the
underwriter as to the terms and conditions of the underwriting within
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<PAGE>
ten (10) days following commencement of such negotiations, a majority in
interest of the Initiating Holders may select another underwriter of their
choice.
(C) The right of any Holder to include his Registrable
Securities in a registration pursuant to Section 1(d) shall be conditioned upon
the Holder's participation in such underwriting, on the terms and conditions of
such underwriting and upon the inclusion of the Holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed by a majority in interest
of the Initiating Holders and such Holder).
(D) 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 underwriter or underwriters
selected for the underwriting by a majority in interest of the Initiating
Holders.
(E) Notwithstanding any other provision of this
Section 1(d), if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, the Initiating Holders shall so advise all holders of Registrable
Securities. The Company shall then include in such registration, prior to the
inclusion of any other securities which are not Registrable Securities, the
number of shares of Registrable Securities that the underwriter believes may be
included in the registration in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held at that time by such Holders.
(F) If any Holder of Registrable Securities
disapproves of the terms of the underwriting, he may elect to withdraw from the
underwriting by written notice to the Company, the underwriter and the
Initiating Holders within five (5) days of notice to such Holder of the terms of
the underwriting. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter's marketing limitation or withdrawn
from the underwriting shall be withdrawn from the registration.
(e) EXPENSES OF REGISTRATION.
(1) REGISTRATION EXPENSES. All Registration Expenses
incurred in connection with registration, filing, qualification, and compliance
under Section 1(c) and the registration under Section 1(d)(1) shall be borne by
the Company provided that Holders of securities being registered pursuant to
Section 1(c) agree that they will pay (on a pro rata basis among those Holders
selling Registrable Securities in a particular state) all Blue Sky fees
associated with the registration of Registrable Securities in those states in
which the Company is not otherwise registering or qualifying shares of its stock
for sale in such registration.
(2) SELLING EXPENSES. All Selling Expenses incurred in
connection with these transactions shall be borne by the Holders of the
securities so registered pro rata on the basis of the amount of Common Stock so
registered.
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<PAGE>
(3) LEGAL EXPENSES. Each Holder shall bear its own
expenses, if any, for the fees and disbursements of counsel to such Holder
incurred in connection with these transactions.
(4) INEFFECTIVE REQUESTED REGISTRATION. The Company shall
not be required to pay any Registration Expenses if the registration statement
does not become effective as a result of the withdrawal of a request for
registration by the Initiating Holders pursuant to Subsection 1(d)(1), which
withdrawal was not caused by the Company's failure to comply with applicable
registration requirements and regulations. In such case, the Initiating Holders
shall bear such Registration Expenses pro rata on the basis of the number of
shares of each Initiating Holder included in the registration request, and such
registration shall not be counted as a registration pursuant to Subsection
1(d)(1), or the Initiating Holders will not bear such expenses and such
registration shall be counted as a registration pursuant to Subsection 1(d)(1).
(f) REGISTRATION PROCEDURES. In the case of each registration,
qualification, or compliance effected by the Company pursuant to this Agreement,
the Company shall keep each Holder advised in writing as to the initiating of
each registration, qualification, and compliance and as to the completion
thereof. At its expense the Company shall:
(1) Keep such registration statement effective until the
Holders have completed the distribution described in the registration statement
but for not more than one hundred twenty (120) days (or, if the registration is
underwritten, ninety (90) days).
(2) Furnish such number of prospectuses (including
preliminary prospectuses) and other documents incident to the registration as a
Holder from time to time may reasonably request.
(3) At the time when any registration statement becomes
effective, and at the time when any post-effective amendment becomes effective,
furnish to the Holders registering securities, an opinion of counsel
satisfactory to the Holders relating to those matter as to which opinions of
counsel are customarily provided at the time of such registration.
(4) Notify each Holder of Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and at the request of any such Holder, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
-7-
<PAGE>
(5) Cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the NASD automated quotation
system.
(6) Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement.
(7) Obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the Holders may
reasonably request (provided that such Registrable Securities constitute at
least 10% of the securities covered by such registration statement).
(g) INDEMNIFICATION.
(1) COMPANY'S OBLIGATION TO INDEMNIFY.
(A) GENERALLY. With respect to any registration,
qualification, or compliance which has been effected pursuant to this
Agreement, the Company shall indemnify each Holder, its officers, directors, and
partners and each person controlling such Holder, each legal counsel, and each
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue or alleged untrue
statement of, or omission or alleged omission of a material fact contained in,
or required to be stated in, any registration statement, including any
preliminary or final prospectus, offering circular or other document incident to
any such registration, qualification, or compliance. The Company shall further
indemnify them against any violation or alleged violation by the Company of any
rule or regulation promulgated under the Securities Act or any applicable state
securities law in connection with any such registration, qualification, or
compliance.
(B) REIMBURSEMENT. The Company shall promptly
reimburse each such Holder, and each of its officers, directors, partners, and
controlling persons, each legal counsel and each such underwriter, for any legal
and any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating or defending any such claim, loss, damage,
liability, or action.
(C) LIMITS OF OBLIGATION. The Company shall not be
liable in any such case to the extent that any claim, loss, damage, liability,
or expense arises out of any untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in such registration statement, including
any preliminary or final prospectus, offering circular or other document, is
based upon written information furnished to the Company by an instrument duly
executed by such Holder or underwriter, and which is stated to be specifically
for use therein.
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<PAGE>
(D) SURVIVAL OF OBLIGATION. The obligations of the
Company under this Section 1(g) shall survive the completions of the offerings
of Registrable Securities under the registration statements and otherwise.
(2) HOLDER'S OBLIGATION TO INDEMNIFY.
(A) GENERALLY. If Registrable Securities held by any
Holder are included in the securities as to which the registration,
qualification, or compliance is being effected, each such Holder shall indemnify
the Company, each of its officers and directors, each legal counsel and
independent accountant of the Company, each underwriter of the Company's
securities covered by such a registration statement, each person who controls
the Company within the meaning of the Act and each other such Holder, each of
its officers, directors and partners, each person controlling such Holder, and
each legal counsel against all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue or alleged
untrue statement of, or omission or alleged omission of a material fact
contained in, or required to be stated in, any registration statement, including
any preliminary or final prospectus, offering circular, or other document.
(B) REIMBURSEMENT. Furthermore, each such Holder
shall promptly reimburse the Company, such Holders, underwriters, legal counsel
and independent accountants and all of their respective officers, directors,
partners, and controlling persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability, or action.
(C) LIMITS OF OBLIGATION. In any case, (i) any
Holder's obligation under this Subsection 1(g)(2) shall extend only so far as
the untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, including any preliminary or
final prospectus, offering circular, or other document in reliance upon written
information furnished to the Company by an instrument duly executed by such
Holder and which is stated to be specifically for use therein; and (ii) any
Holder's liability under this Section 1(g)(2) shall not exceed the amount of
proceeds to the Holder from the sale of its Registrable Securities in that
offering.
(D) SURVIVAL OF OBLIGATION. The obligations of the
Holders under this Section 1(g) shall survive the completions of the offerings
of Registrable Securities under the registration statements and otherwise.
(3) INDEMNIFYING PARTY MAY ASSUME DEFENSE.
(A) GENERALLY. Each party entitled to indemnification
under this Section 1(g) (the "Indemnified Party") shall give written 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. Unless in such Indemnified
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<PAGE>
Party's reasonable judgment a conflict of interest between such Indemnified and
Indemnifying Parties may exist with respect to such claim, the Indemnified Party
shall permit the Indemnifying Party to assume the defense of any such claim or
any resulting litigation; provided, however, 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 be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense. Failure by the Indemnified Party to provide such written notice shall
not relieve the Indemnifying Party from its obligation under this Section 1(g).
(B) SETTLEMENT APPROVAL, RELEASE REQUIRED. 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 the giving by the claimant or plaintiff to the Indemnified Party of a
release from all liability in respect to such claim or litigation. Furthermore,
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement.
(4) CONTRIBUTION.
(A) If recovery is not available under the foregoing
indemnification provisions of this section for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution for liabilities and expenses, except to the
extent that contribution is not permitted under the Securities Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by each party
from the offering of the securities (taking into account the portion of the
proceeds of the offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the party who supplied or failed to supply the information as to which
the claim is asserted, the opportunity to correct and prevent any statement or
omission, and any other equivalent considerations appropriate under the
circumstances; provided that in no event will any Holder be required to
contribute an amount in excess of the proceeds to the Holder from the sale of
its Registrable Securities included in that offering. The Company and the
Holders agree that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocations.
(h) INFORMATION BY HOLDER. The Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding the Holders and the distribution proposed by the 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
Agreement.
(i) RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable
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<PAGE>
Securities to the public without registration, the Company agrees that at all
times after ninety (90) days after the effective date of the first registration
statement filed by the Company for a public offering of its securities the
Company shall:
(1) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act.
(2) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(3) So long as a Holder owns any Registrable Securities,
furnish to such Holder upon request: (i) a written statement by the Company as
to its compliance with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act; (ii) a copy of the most recent annual or quarterly
report of the Company; and (iii) such other reports and documents so filed by
the Company as such person may reasonably request in availing itself of any rule
or regulation of the Commission allowing that person to sell any such securities
without registration.
(j) TRANSFER OF REGISTRATION RIGHTS. The right to cause the
Company to register Registrable Securities pursuant to this Section may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who (1) is a partner, shareholder, affiliate, equity
holder or officer of the transferor Holder; or (2) after such assignment or
transfer, holds at least 300,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations), provided the Company is, within ten (10) business days
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
(k) TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 1 shall terminate with respect to any
particular Registrable Securities upon the earlier to occur of: (i) July 7,
1999; or (ii) the date on which such Registrable Securities are eligible for
resale pursuant to the provisions of Rule 144(k) of the Commission (so long as
the Holder of such Registrable Securities owns less than 3% of the Company's
outstanding Common Stock, including any Registrable Securities convertible into
Common Stock).
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2. MISCELLANEOUS
(a) SURVIVAL OF COVENANTS; SUCCESSORS AND ASSIGNS. All
covenants, agreements, representations and warranties made by the parties in
this Agreement shall survive the closing of the transactions contemplated by
this Agreement. All such covenants, agreements, representations and warranties
will inure to the benefit of, and be binding upon, any successors, assigns,
heirs, transferees, executors, and administrators of the parties hereto.
(b) ASSIGNABILITY OF RIGHTS. The Company may not assign any of
its rights or delegate any of its duties under this Agreement without the
written consent of Holders of greater than 50% of the voting power of the then
outstanding Registrable Securities.
(c) COMMUNICATIONS AND NOTICES. Except as otherwise provided
for in this Agreement, all communications and notices provided for in this
Agreement shall be in writing and will be given by telegram, facsimile (with
delivery confirmed by the party giving notice), express courier holding itself
out as able to make delivery within one business day of receipt, hand delivery
receipted by the addressee, or by mail (postage-paid, certified mail, return
receipt requested) to such address and for such attention, as any party may from
time to time designate by notice in writing to the Company or to the Holders, as
the case may be. Notice will be effective one business day after delivery to a
telegraph company or express courier, three business days after deposit in the
U.S. Mail as provided above, or upon receipt if hand-delivered or facsimile-
delivered, as the case may be.
(d) LAW GOVERNING. This Agreement shall be governed by the Laws
of the State of Colorado in all respects, as such laws are applied to agreements
among Colorado residents entered into and to be performed entirely within
Colorado.
(e) SUBSEQUENT INSTRUMENTS AND ACTS. The parties agree that
they will execute any further instruments and perform any acts that may become
necessary to carry out this Agreement.
(f) SEVERABILITY. If any term, provision, covenant, or
condition of this Agreement, or its application to any person or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such term, provision, covenant, or
condition as applied to other persons or circumstances shall remain in full
force and effect.
(g) ENTIRE AGREEMENT; AMENDMENTS.
(1) This Agreement and the other documents and agreements
delivered pursuant hereto constitute the full and entire agreement and
understanding among the parties with regard to the subjects hereof and thereof.
-12-
<PAGE>
(2) This Agreement may not be amended orally. Amendment to
this Agreement, or of any supplement, and of the rights and obligations of the
Company and of the Holders, may be made with the consent of the Company and the
affirmative vote or written consent of the holders of greater than 50% of the
voting power of the Registrable Securities then outstanding. But no such
amendment shall alter the provisions of this Agreement so as to reduce the
percentage of Registrable Securities which is required to consent to any such
amendment, without the vote or consent of the Holders of all of the then
outstanding Registrable Securities.
(h) DELAYS, OMISSIONS, AND WAIVERS. No delay or omission to
exercise any right, power or remedy (with the exception of a delay by an
Indemnified Party in providing notice to the Indemnifying Party pursuant to
Section 1(g)(3) hereof) accruing to the Company or any Holder, upon any breach
or default of any party hereto under this Agreement, will impair any such right,
power or remedy of the Company or such Holder nor will it be construed to be a
waiver of any such breach or default, or an acquiescence therein, nor will any
similar breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring; nor will any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or any Holder of any breach or default
under this Agreement or any waiver on the part of the Company or any Holder of
any provisions or conditions of this Agreement, must be in writing and will be
effective only to the extent specifically set forth in such writing. No waiver
by the Holders of any provision of this Agreement will be effective without a
written consent signed by Holders of greater than 50% of the voting power of the
then outstanding Registrable Securities.
(i) AUTHORIZATION. Each of the undersigned representatives of
the parties warrants and represents that he is duly authorized to execute this
Agreement on behalf of the respective party for which he signs, that the
organization on whose behalf he signs is currently in good standing in the
jurisdiction where organized.
(j) GENDER, NUMBER, AND TENSE. Throughout this Agreement, as
the context may require:
(1) The masculine gender includes the feminine and neuter;
and the neuter gender includes the masculine and feminine;
(2) The singular number includes the plural, and the plural
number includes the singular; and
(3) The past tense includes the present, and the present
tense includes the past.
(k) HEADINGS. The headings of the Sections and Subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part of this Agreement.
-13-
<PAGE>
(l) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(m) REMEDIES. No remedy herein conferred upon the parties
hereto is intended to be exclusive of any other remedy herein or provided by
law, but each shall be cumulative and shall be in addition to every other remedy
set forth in this Agreement or existing at law, in equity, or by statute. The
parties specifically acknowledge that under certain circumstances the parties
may be entitled to specific performance and/or injunctive relief where without
such remedies the damage to the injured parties may be irreparable and money
damages inadequate. Moreover, in any suit between or among the parties hereto
for such breach of the provisions hereof, the prevailing party in such suit
shall be entitled to receive from the breaching party, reasonable attorneys'
fees and disbursements incurred in the prosecution of such suit.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first written above.
THE COMPANY: PIXSYS, INC.
By:/S/ PAUL L. RAY
--------------------------------
Paul L. Ray, President
THE HOLDERS: /S/ DERACE SCHAFFER
-----------------------------------
Derace Schaffer
Paradigm Capital Network, Ltd.
By:/S/ CHESTER M. WINTER
--------------------------------
Chester M. Winter
Edgewater Private Equity Fund, L.P.
By:/S/ JAMES A. GORDAN
--------------------------------
James A. Gordon, President
Gordon Management, Inc.
-14-
<PAGE>
/S/ FRITZ KEEFNER
-----------------------------------
Fritz Keefner
FBL Ventures of South Dakota
By:/S/ JEFF TOLLEFSON
---------------------------------
Jeff Tollefson
Investment VP - Alternative
Investments
/S/ JOHN PAPPAJOHN
-----------------------------------
John Pappajohn
-15-
<PAGE>
IMAGE GUIDED TECHNOLOGIES, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement will confirm our mutual understanding in
connection with our providing, and your receipt, of information regarding Image
Guided Technologies, Inc. (the Company).
1. "Information" means all oral or written data, reports, records or materials
obtained from the Company. Information does not include any information
which is, or becomes, readily available to the public or is already in your
possession.
2. Information is being furnished solely in connection with your interest in
the Company, its' products and technology and shall be treated as "secret"
and "confidential" and no portion of it shall be disclosed to others for a
period of five (5) years from the date of this agreement.
3. The undersigned further agrees that it will not interfere with any business
of the Company through the use of any information or knowledge acquired
under this Agreement nor use any such information for its own account.
4. It is understood that the Company is the intended party and beneficiary
whose rights are being protected and may enforce the terms of this
Confidentiality Agreement as if it were a party to the Agreement.
5. Should you decide that you do not wish to pursue a relationship with the
Company, you must promptly advise a representative of the company of the
fact and deliver to the Company all confidential information furnished to
you without keeping copies, summaries, analyses or extracts thereof.
6. It is understood that (a) no representations or warranties are being made
as to the completeness or accuracy of any information and (b) any and all
representations and warranties shall be made solely by the Company in a
signed acquisition agreement or purchase contract and then be subject to
the provisions thereof.
Name of Individual: Title:
--------------------- ------------------------------
Please Print
Organization:
---------------------------------------------------------------
Address: Telephone:
-------------------------------- --------------------------
Date:
- ---------------------------------------- -------------------------------
(City, State, Zip code)
Signature: Fax:
------------------------------ -------------------------------
(Authorized Representative)
ACCEPTED BY:
----------------------------
Image Guided Technologies, Inc.
<PAGE>
NON-DISCLOSURE AND INVENTIONS AGREEMENT
This Non-Disclosure and Inventions Agreement (the "Agreement") is made and
entered into as of the date set forth below, between ____________________
("Employee") and Image Guided Technologies, Inc., a Colorado corporation ("Image
Guided Technologies").
RECITALS
WHEREAS, Employee has been employed by Image Guided Technologies; and
WHEREAS, Employee agrees that the purpose of his employment would be
hindered by the disclosure by him of any Confidential Information or Inventions
of Image Guided Technologies to any person outside of Image Guided Technologies;
and
WHEREAS, the parties accordingly desire to enter into this Agreement
and to educe their full agreement and understanding to writing.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, together with the mutual covenants contained herein, it is
agreed as follows:
CONFIDENTIAL INFORMATION AND MATERIALS. Employee hereby agrees
that all information, processes, know-how, technologies, trade secrets, ideas
and material, in tangible or intangible form, formerly, now or hereafter
created, whether by or for Image Guided Technologies, which is not generally
known to the public and which relates to the past, present or future businesses,
customers, products, supplies, plans or technology of Image Guided Technologies,
shall be deemed Confidential Information, whether or not such information, ideas
or material have been formally marked or identified as confidential.
Confidential Information shall further include material, ideas or information
provided to Image Guided Technologies by a third party pursuant to an agreement
to treat such information as confidential.
GENERAL KNOWLEDGE. Information publicly available or generally
known within the industries or trades in which Image Guided Technologies
competes is not considered Confidential Information.
NON-DISCLOSURE. During Employee's employment by Image Guided
Technologies, Employee will have access to the Confidential Information and will
occupy a position of trust and confidence with respect to the Confidential
Information and the affairs and business of Image Guided Technologies. Employee
agrees to take the following steps to preserve the confidential and proprietary
nature of the Confidential Information:
3.1 NON-DISCLOSURE AND NON-USE. Notwithstanding Section 10.3
hereof, during and after Employee's employment by Image Guided Technologies,
Employee will not use or disclose any of the Confidential Information other than
as required in the performance of Employee's duties with Image Guided
Technologies. Employee understands that he or she is not allowed to sell,
license, market or otherwise exploit any products or services which embody in
whole or in part any Confidential Information.
3.2 PREVENT DISCLOSURE. Employee will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
3.3 ABIDE BY IMAGE GUIDED TECHNOLOGIES' RESTRICTIONS.
Employee will treat as confidential and proprietary any information or materials
from outside Image Guided Technologies which Image Guided Technologies is
obligated to treat as confidential or proprietary, in accordance with Image
Guided Technologies' reasonable instructions to Employee.
3.4 RETURN ALL MATERIALS. Upon the Date of Termination (as
hereinafter defined), Employee will deliver to Image Guided Technologies all
tangible materials embodying the Confidential Information, including without
limitation any documentation, records, listings, notes, data, sketches,
drawings, customer lists, memoranda, models, accounts, reference materials,
samples, human or machine-readable media and equipment and any other materials
which in any way relate to the Confidential Information, to the Employee's
employment by Image Guided Technologies, or to the customers of Image Guided
Technologies. Employee agrees not to retain any copies of any of the above
materials.
IDEAS AND INVENTIONS. Employee agrees to assign to Image Guided
Technologies all of Employee's right, title and interest in or to any and all
ideas, concepts, know-how, techniques, processes, inventions, discoveries,
developments, works of authorship, innovations and improvements ("Inventions")
conceived or made by Employee, whether alone or with others, whether patentable
or not, except those that the Employee developed entirely on Employee's own time
without using the equipment, supplies, facilities, or trade secret information
of Image Guided Technologies and which neither (a) relate at the time of
conception or reduction to practice of the Invention to any of the businesses of
Image Guided Technologies, or actual or demonstrably anticipated business of
Image Guided Technologies, nor (b) result from any work performed by the
Employee or any other employees of Image Guided Technologies for Image Guided
Technologies. Employee agrees to promptly inform and disclose all Inventions to
Image Guided Technologies in writing,
<PAGE>
and to provide all assistance reasonably requested by Image Guided Technologies
in the establishment, preservation and enforcement of Image Guided Technologies'
interests in the Inventions (such as by executing documents, testifying, etc.),
such assistance to be provided at Image Guided Technologies' expense but without
any additional compensation to Employee.
RESERVED INVENTIONS. All ideas, concepts, know-how, techniques,
processes, inventions, discoveries, developments, innovations and improvements
which Employee made, conceived or acquired prior to Employee's employment by
Image Guided Technologies, or which are excepted from this Agreement by the
terms of Section 4, above, and all patents and patent applications relating
thereto (collectively referred to as "Employee's Rights") shall be excluded from
this Agreement, unless Employee transfers or otherwise assigns such rights to
Image Guided Technologies.
COPYRIGHTS. Employee agrees that any work prepared by Employee during
the course of Employee's employment or engagement with Image Guided Technologies
which is eligible for United States copyright protection or protection under the
Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos
Aires Copyright Convention shall be a "work made for hire." In the event any
such work is deemed not to be a work made for hire, Employee hereby assigns all
right, title and interest in and to the copyright in such work to Image Guided
Technologies, and agrees to provide all assistance reasonably requested in the
establishment, preservation and enforcement of its copyright in such work, such
assistance to be provided at Image Guided Technologies' expense but without any
additional compensation to Employee.
LIMITATION ON OUTSIDE ACTIVITIES. Until the Date of Termination,
Employee agrees not to solely or jointly with others, undertake or join any
planning for or organization of any business activity competitive with any of
the businesses of Image Guided Technologies, engage in activities or render
services similar or reasonably related to those in which Image Guided
Technologies is engaged in (or plans to be engaged in) or otherwise take part in
activities which could in any way jeopardize the competitive position of any of
the businesses engaged in (or to be engaged in) by Image Guided Technologies.
RESERVATION OF RIGHT TO TERMINATE EMPLOYMENT. Except as may
specifically be provided in an employment contract between Image Guided
Technologies and Employee, Image Guided Technologies and Employee agree that the
Employee's employment may be terminated at any time, with or without cause, at
the option of either Image Guided Technologies or Employee. Such termination
shall be effective immediately upon oral or written notice to such other party.
FORMER EMPLOYMENT. Employee acknowledges and agrees that he has not
brought and will not bring with him or use in the performance of his
responsibilities at Image Guided Technologies any materials or documents of any
former employer which are not generally available to the public, unless he has
obtained written authorization from such former employer for their possession
and use. Employee also understands and agrees that, in his employment with
Image Guided Technologies, he is not to breach any obligation of confidentiality
or duty that he has to former employers, and agrees that he will fulfill all
such obligations during his employment with Image Guided Technologies.
MISCELLANEOUS.
10.1 DATE OF TERMINATION. For purposes of this Agreement,
"Date of Termination" shall mean the date that Employee is no longer employed by
or serving Image Guided Technologies in any capacity, including as a director,
officer, or employee or consultant.
10.2 ASSIGNMENT. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of any
successor or successors of Image Guided Technologies by reorganization, merger
or consolidation, and any assignee of all or substantially all of Image Guided
Technologies' businesses and properties, but, except as to any such successor or
assignee, neither this Agreement nor any rights or benefits hereunder may be
assigned by Image Guided Technologies or by Employee.
10.3 TERM. The term of this Agreement shall commence on the
date hereof and continue until the Date of Termination. Notwithstanding the
foregoing, upon the expiration of such term, such obligations of Employees as
shall, by the provisions of this Agreement, continue beyond such term, shall so
continue after the expiration of the term.
10.4 GOVERNING LAW. This Agreement is made under and shall be
governed by the laws of the State of Colorado applicable to contracts made and
to be performed entirely within Colorado.
10.5 INTERPRETATION. 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 provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
-2-
<PAGE>
10.6 REMEDIES FOR BREACH. Employee acknowledges that a remedy
at law for any breach or threatened breach by him of the provisions of this
section would alone be inadequate and Employee therefore agrees that Image
Guided Technologies shall be entitled to a preliminary restraining order and/or
injunctive relief in case of any such breach of threatened breach.
Notwithstanding any of the above, nothing in this Agreement shall be construed
to prohibit Image Guided Technologies from pursuing any other available remedies
either at law or in equity, for such breach or threatened breach, including the
recovery of monetary damages from Employee.
10.7 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties. This Agreement may not be amended, supplemented
or waived except by a writing signed by the party against whom such amendment,
supplement or waiver is sought to be enforced.
10.8 NON-WAIVER. No delay or failure by Image Guided
Technologies in exercising any right under this Agreement, and no partial or
single exercise of that right, will constitute a waiver of that or any other
right.
10.9 INDEMNITY. Employee agrees to indemnify and hold Image
Guided Technologies harmless from and against any and all damages, loss or
expenses, including attorneys' fees, relating to any breach of the covenants set
forth herein.
10.10 NOTICES. Any notice required or permitted to be given
hereunder shall be effective when received and shall be sufficient if in writing
and if personally delivered or sent by prepaid cable, telex or registered air
mail, return receipt requested, to the party to receive such notice at its
address set forth at the end of this Agreement or at such other address as a
party may by notice specify to the other.
10.11 BINDING EFFECT. This Agreement shall be binding on the
successors and assigns of the parties hereto.
10.12 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which is an original but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
IMAGE GUIDED TECHNOLOGIES, INC.
___________________________________ ___________________________________
Signed Signed
Date: _____/_____/_____ Date: _____/_____/_____
-3-
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES ACTS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS
THEY ARE REGISTERED AND QUALIFIED UNDER SUCH ACTS OR THE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE SELLER (CONCURRED IN BY COUNSEL FOR THE CORPORATION)
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT
FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH ACTS.
NOTE
$ Boulder, Colorado
, 1995
Pixsys, Inc., a Colorado corporation (the "Corporation"), for value
received, promises to pay to the order of (NAME) at his office at
__________________, _____________ (number of ) Dollars ($________), payable in
one principal payment payable on demand, with interest from the date hereof on
the unpaid principal balance at the rate of eleven percent (11%) per annum.
This Note or any portion thereof may be prepaid at any time prior to the due
date thereof, together with all accrued and unpaid interest to and including the
date of such prepayment.
This Note is secured by a Security Agreement dated as of March 24,
1995.
The Corporation waives presentment for payment, notice of dishonor,
protest and notice of protest and all other notices of every kind, to the
fullest extent permitted by law. No delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of such rights. If
this Note is not paid when due, the Corporation agrees to pay all reasonable
costs of collection, including, without limitation, reasonable attorneys' fees
incurred or paid by holder in enforcing this Note on default and in connection
with the foreclosing of any of the security which secures this Note.
The terms and conditions of this Note shall be governed by, and
construed in accordance with, the laws of the State of Colorado. This Note
shall be binding upon, and inure to the benefit of, the parties hereto, their
personal representatives, heirs, devisees, successors and assigns.
PIXSYS, INC.
By:
-------------------------------------
Title: President
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES ACTS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS
THEY ARE REGISTERED AND QUALIFIED UNDER SUCH ACTS OR THE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE SELLER (CONCURRED IN BY COUNSEL FOR THE CORPORATION)
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT
FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH ACTS.
NOTE
$(amount) Boulder, Colorado
August 14, 1995
Pixsys, Inc., a Colorado corporation (the "Corporation"), for value
received, promises to pay to the order of [NAME]at his office at ______________,
_______________ (amount) ($____), payable in one principal payment due on
February 13, 1996, with interest from the date hereof on the unpaid principal
balance at the rate of eleven percent (11%) per annum payable on February 13,
1996. This Note or any portion thereof may be prepaid at any time prior to the
due date thereof, together with all accrued and unpaid interest to and including
the date of such prepayment.
This Note is secured by a Security Agreement dated as of March 24,
1995.
The Corporation waives presentment for payment, notice of dishonor,
protest and notice of protest and all other notices of every kind, to the
fullest extent permitted by law. No delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of such rights. If
this Note is not paid when due, the Corporation agrees to pay all reasonable
costs of collection, including, without limitation, reasonable attorneys' fees
incurred or paid by holder in enforcing this Note on default and in connection
with the foreclosing of any of the security which secures this Note.
The terms and conditions of this Note shall be governed by, and
construed in accordance with, the laws of the State of Colorado. This Note
shall be binding upon, and inure to the benefit of, the parties hereto, their
personal representatives, heirs, devisees, successors and assigns.
PIXSYS, INC.
By:
-------------------------------------
Title: President
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES ACTS AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS
THEY ARE REGISTERED AND QUALIFIED UNDER SUCH ACTS OR THE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE SELLER (CONCURRED IN BY COUNSEL FOR THE CORPORATION)
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT
FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH ACTS.
NOTE
$(amount) Boulder, Colorado
March 24, 1995
Pixsys, Inc., a Colorado corporation (the "Corporation"), for value
received, promises to pay to the order of [NAME] at their office at
____________, _____________ (amount) ($________), payable in one principal
payment due on September 23, 1995, with interest from the date hereof on the
unpaid principal balance at the rate of eleven percent (11%) per annum payable
on September 23, 1995. This Note or any portion thereof may be prepaid at any
time prior to the due date thereof, together with all accrued and unpaid
interest to and including the date of such prepayment.
This Note is secured by a Security Agreement dated as of March 24,
1995.
The Corporation waives presentment for payment, notice of dishonor,
protest and notice of protest and all other notices of every kind, to the
fullest extent permitted by law. No delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of such rights. If
this Note is not paid when due, the Corporation agrees to pay all reasonable
costs of collection, including, without limitation, reasonable attorneys' fees
incurred or paid by holder in enforcing this Note on default and in connection
with the foreclosing of any of the security which secures this Note.
The terms and conditions of this Note shall be governed by, and
construed in accordance with, the laws of the State of Colorado. This Note
shall be binding upon, and inure to the benefit of, the parties hereto, their
personal representatives, heirs, devisees, successors and assigns.
PIXSYS, INC.
By:
-------------------------------------
Title: President
<PAGE>
EXTENSION AGREEMENT
Extension Agreement, dated as of March 31, 1996, between Image Guided
Technologies, Inc., a Colorado Corporation ("Maker") and [NAME] ("Payee").
WHEREAS, Maker executed and delivered to Payee a promissory note ("Note"),
dated (date), 1995, for $(amount), which note had previously been extended to
March 31, 1996;
WHEREAS, Maker and Payee desire further to extend the date on which
principal and interest is due on the Note;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. The payment date for interest and principal due on the Note is hereby
extended from March 31, 1996 to the earlier of (i) June 30, 1997 or (ii) thirty
days after the closing of an underwritten public offering of the shares of
Common Stock of Maker pursuant to a registration statement filed under the
Securities Act of 1933, as amended, with aggregate offering proceeds from the
public of not less than $5,000,000.
2. All other terms and conditions of the Note shall remain the same.
IMAGE GUIDED TECHNOLOGIES, INC.
By:
-------------------------------------
Jeffrey J. Hiller
Chief Financial Officer
[NAME]
By:
-------------------------------------
<PAGE>
EXTENSION AGREEMENT
Extension Agreement, dated as of March 31, 1996, between Image Guided
Technologies, Inc., a Colorado Corporation ("Maker") and [NAME] ("Payee").
WHEREAS, Maker executed and delivered to Payee a promissory note ("Note"),
dated (date), 1995, for $(amount), which note had previously been PAYABLE ON
DEMAND;
WHEREAS, Maker and Payee desire further to extend the date on which
principal and interest is due on the Note;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. The payment date for interest and principal due on the Note is hereby
extended from PAYABLE ON DEMAND to the earlier of (i) June 30, 1997 or (ii)
thirty days after the closing of an underwritten public offering of the shares
of Common Stock of Maker pursuant to a registration statement filed under the
Securities Act of 1933, as amended, with aggregate offering proceeds from the
public of not less than $5,000,000.
2. All other terms and conditions of the Note shall remain the same.
IMAGE GUIDED TECHNOLOGIES, INC.
By:
-------------------------------------
Jeffrey J. Hiller
Chief Financial Officer
[NAME]
By:
-------------------------------------
<PAGE>
EXTENSION AGREEMENT
Extension Agreement, dated as of FEBRUARY 13, 1996, between Image Guided
Technologies, Inc., a Colorado Corporation ("Maker") and [NAME] ("Payee").
WHEREAS, Maker executed and delivered to Payee a promissory note ("Note"),
dated (date), 1995, for $(amount), due on FEBRUARY 13, 1996;
WHEREAS, Maker and Payee desire further to extend the date on which
principal and interest is due on the Note;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. The payment date for interest and principal due on the Note is hereby
extended from FEBRUARY 13, 1996 to the earlier of (i) June 30, 1997 or (ii)
thirty days after the closing of an underwritten public offering of the shares
of Common Stock of Maker pursuant to a registration statement filed under the
Securities Act of 1933, as amended, with aggregate offering proceeds from the
public of not less than $5,000,000.
2. All other terms and conditions of the Note shall remain the same.
IMAGE GUIDED TECHNOLOGIES, INC.
By:
-------------------------------------
Jeffrey J. Hiller
Chief Financial Officer
[NAME]
By:
-------------------------------------
<PAGE>
Pixsys, Inc.
SECURITY AGREEMENT
FOR VALUE RECEIVED, as security for the obligations
defined below, the receipt and sufficiency of which is hereby
acknowledged, the undersigned Debtor, Pixsys, Inc., a Colorado
corporation hereby grants to ___________________ ("Secured Party")
a security interest in the following described property: All of
Debtor's inventory now owned or hereafter acquired; All of
Debtor's accounts, now existing or hereafter arising, together
with all interest of Debtor in any goods, the sale or lease of
which give rise to any of Debtor's accounts, and all chattel
paper, documents, and instruments relating to said accounts; All
of Debtor's general intangibles now owned or hereafter acquired;
All of Debtor's equipment now owned or hereafter acquired; All of
Debtor's fixtures on the real estate described in paragraph two
(2) below; and, All of Debtor's intellectual property, including
any patents, either applied for or issued, designs, processes,
trade secrets, licenses, copyrights, trademarks, service marks,
trade names or any other intangible rights of any nature
pertaining to a product or process (Without limiting the
foregoing, the term specifically includes a patent for a method
and apparatus for three dimensional non-contact shape sensing,
covered by application number 5,198,877 with the U.S. Patent
Office, filed March 30, 1993 and all other U.S. and foreign
patents held or issued to Debtor) now owned or hereafter acquired
together with the proceeds, products, increase, issue, accessions,
attachments, accessories, parts, additions, repairs, replacements
and substitutes of, to and for all of the foregoing. Debtor will
promptly deliver to Secured Party duly endorsed when necessary,
all such chattel paper, documents and instruments and related
guaranties now on hand or hereafter received. All such property
in which a security interest is granted is herein called the
"Collateral."
1. Obligations. The aforesaid security interests secure
payment of the following liabilities: Promissory Note executed
contemporaneously with the execution of this security agreement in
the amount of $ __________________ , together with all extensions,
interest, and costs associated with that obligation.
2. Real Estate. Any collateral attached to, or grown
upon, land will be grown upon or attached to the following
described real estate located in ______N/A______ County:____
______________________ not applicable _____________________
and the name of the record title owner of such real estate if
other than the Debtor is ___________________________________.
3. Filing. In the event a financing statement is not
filed, a carbon, photocopy or other reproduction of this Security
Agreement may be filed as a financing statement. If for fixtures,
<PAGE>
timber or minerals, such a filing shall be filed of record in the
real estate records of the county wherein said collateral is
situated.
4. Debtors. Each of the undersigned debtors, if more than
one, execute this Security Agreement as his, her, its, or their
joint and several obligation and it shall be binding upon and
fully enforceable against either or both, or any or all of them,
and reference herein to "Debtor" shall in such case be deemed to
be plural provided however that nothing contained herein shall
extend personal liability under any of the Obligations as to which
such Debtor is not otherwise liable.
5. Collateral. Debtor represents, warrants and agrees:
a. All Collateral is bona fide and genuine and
Debtor is authorized to grant a security interest in said
Collateral free and clear of all liens and encumbrances, except
the security interest created herein and except potentially for
other security agreements which are the subject of a Parity
agreement, and which have equal priority to this agreement.
b. Debtor's principal place of operation is at
the address shown herein, and Debtor shall promptly give Secured
Party written notice of any change thereof, unless prior written
consent of Secured Party is obtained. All Collateral and all of
the Debtor's business records are now kept, and shall continue to
be kept, at such address.
Pixsys, Inc., Debtor _________________________
secured party
BY: _________________________ BY: _____________________
Paul Ray, President
5680-B Central Ave.
Boulder, Colorado
Date:_________________________
THIS AGREEMENT SPECIFICALLY INCLUDES ALL OF THE ADDITIONAL
PROVISIONS SET FORTH ON THE REVERSE SIDE HEREOF. DEBTOR
ACKNOWLEDGES RECEIPT OF A FULLY COMPLETED COPY OF THIS SECURITY
AGREEMENT.
ADDITIONAL PROVISIONS
1. Representations and Agreements. Debtor represents and
agrees as follows:
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a. If a corporation or other business entity,
Debtor is duly organized, existing and is qualified in good
standing in all states in which it is doing business, and the
execution, delivery and performance of this Security Agreement are
within Debtor's powers, having been duly authorized, and are not
in contravention of law or the terms of Debtor's charter, bylaws,
if any, or any indenture, agreement, or undertaking to which
Debtor is a party, or by which it is bound. If an individual,
Debtor is of legal age. Debtor will not change his, her or its
name, or identity unless written notice is given in advance to
Secured Party.
b. Debtor shall maintain insurance upon the
Collateral which is tangible property against all customarily
insured risks for the full insurable value thereof (and furnish
Secured Party with duplicate policies if Secured Party so
requests), loss to be payable to Debtor and Secured Party as their
respective interests may appear. In the event of any loss or
damage to any Collateral, Debtor will give Secured Party written
notice thereof forthwith, promptly file proof of loss with the
appropriate insurer and take all other steps necessary or
appropriate to collect such insurance. If Secured Party so
elects, Secured Party shall have full authority to collect all
such insurance and to apply any amount collected to amounts owed
hereunder, whether or not matured. Secured Party shall have no
liability for any loss which may occur by reason of the omission
or the lack of coverage of any such insurance.
c. Debtor shall at all times maintain Collateral
which is tangible property in good condition and repair, defend at
Debtor's expense all Collateral from all adverse claims and shall
not use any of the Collateral for any illegal purpose.
d. Debtor shall (i) keep such books and records
pertaining to the Collateral and to Debtor's business operations
as shall be satisfactory to Secured Party; (ii) permit
representatives of Secured Party at any time to inspect the
Collateral and inspect and make abstracts from Debtor's books and
records; and (iii) furnish to Secured Party such information and
reports regarding the Collateral and Debtor's business operations
and its financial status, as Secured Party may from time to time
reasonably require. Secured Party is hereby authorized to request
confirmation of such information or additional information of any
kind whatsoever.
e. Debtor shall give such notice in writing
(including but not limited to notice of assignment or notice to
pay Secured Party directly) as Secured Party may require at any
time to any or all account debtors, with respect to accounts which
are Collateral, and, if Secured Party shall so request, deliver to
Secured Party copies of any and all such notices.
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<PAGE>
f. Debtor shall promptly transmit to Secured
Party all information that it may have or receive with respect to
Collateral or with respect to any account debtor which might in
any way affect the value of the Collateral or Secured Party's
rights or remedies with respect hereto.
g. Unless in default under this Agreement,
Debtor may sell inventory in the ordinary course of business and
consume any raw materials or supplies, the use and consumption of
which are necessary to carry on Debtor's business. Debtor shall
not otherwise consume, assign or transfer any Collateral without
prior written consent of Secured Party. The provision of this
Agreement granting a security interest in proceeds shall not be
construed to mean that Secured Party consents to any sale or
disposition of any Collateral.
h. Debtor shall pay when due all taxes,
assessments, and any other governmental levy which is, or may be,
levied against any Collateral, and shall otherwise maintain the
Collateral free of all liens, charges, and encumbrances (except
liens set forth herein and the security interest created hereby).
i. Debtor shall not store any Collateral with
any warehouseman without Secured Party's consent.
j. Debtor shall promptly, unless Secured Party
shall waive such requirement in writing, deliver to Secured Party
all certificates of title, if any, (or any other documents
evidencing title) to all Collateral with such proper notations,
assignments, or endorsements as may be necessary or appropriate to
create, preserve or protect Secured Party's security interest in
the Collateral.
k. Debtor shall, at its cost and expense,
execute, deliver, file or record, in any such manner or form as
the Secured Party may require, any assignment, financing statement
or other paper that may be necessary or desirable, or that Secured
Party may request, in order to create, preserve or perfect any
security interest granted hereby or to enable Secured Party to
exercise and enforce its rights hereunder or under any Collateral.
Secured Party is further granted the power, coupled with an
interest, to sign on behalf of Debtor as attorney-in-fact and to
file one or more financing statements under the Uniform Commercial
Code naming Debtor as debtor and Secured Party as secured party
and describing the Collateral herein specified.
2. Expenses. Debtor upon demand shall pay to Secured
Party forthwith the amounts of all expenses, including reasonable
attorney's fees and legal expenses, incurred by Secured Party, in
seeking to collect any sums secured hereunder or to enforce any
rights in the Collateral. Such amounts shall be secured hereby,
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and if not paid on demand shall bear interest at the highest rate
payable on any of the Obligations.
3. Collection Authority on Accounts. Debtor hereby
irrevocably appoints Secured Party its true and lawful attorney,
with full power of substitution, in Secured Party's name, Debtor's
name or otherwise, for Secured Party's sole use and benefit, but
at Debtor's cost and expense, to exercise, if Secured Party shall
elect after an event of default has occurred (whether or not
Secured Party then elects to exercise any other of its rights
arising upon default) all or any of the following powers with
respect to all or any Accounts which are Collateral:
a. To execute on Debtor's behalf assignments of
any or all Accounts which are Collateral to Secured Party, and to
notify account debtors thereunder to make payments directly to
Secured Party;
b. To demand, sue for, collect, receive, and
give acquittance for any and all moneys due or to become due upon
or by virtue thereof;
c. To receive, take, endorse, assign and deliver
any and all checks, notes, drafts, documents and other negotiable
and non-negotiable instruments and chattel paper taken or received
by Secured Party in connection therewith;
d. To settle, compromise, compound, prosecute or
defend any action or proceeding with respect thereto;
e. To sell, transfer, assign or otherwise deal
in or with the same or the proceeds thereof or the relative goods,
as fully and effectually as if Secured Party were the absolute
owner thereof; and
f. To extend the time or payment of any or all
thereof and to make any allowance and other adjustments with
reference thereto.
Any funds collected pursuant to such powers shall be applied to
the payment of the Obligations. The exercise by Secured Party of,
or failure to so exercise, any of the foregoing authority, shall
in no manner affect Debtor's liability to Secured Party on any of
the Obligations. Secured Party shall be under no obligation or
duty to exercise any of the powers hereby conferred upon it and it
shall be without liability for any act or failure to act in
connection with the collection of or the preservation of any
rights under any such accounts. Secured Party shall not be bound
to take any steps necessary to preserve rights in any instrument
or other chattel paper against prior parties.
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<PAGE>
4. Set-Off. In the event of default hereunder, Secured
Party at its option at any time, and without notice to Debtor, may
apply against the Obligations any property of Debtor held by
Secured Party. As additional security for payment of the
Obligations, Debtor hereby grants to Secured Party a security
interest in any funds or property of Debtor now or hereafter in
possession of Secured Party and with respect hereto Secured Party
will have all rights and remedies herein specified.
5. Waiver. Debtor waives protest, notice of dishonor, and
presentment of all commercial paper at any time held by Secured
Party on which Debtor is in any way liable, notice of non-payment
at maturity of any account or chattel paper, and notice of any
action taken by Secured Party except where notice is expressly
required by this Agreement or cannot by law be waived.
6. Default. Debtor will be in default upon the occurrence
of any of the following events: (a) failure to make payment when
due and payable, of any of the Obligations; (b) failure of the
performance of any obligation or covenant contained or referred to
herein, after failing to cure same upon 15 days notice; (c) any
warranty, representation or statement made or furnished to Secured
Party by or on behalf of Debtor proves to have been false in any
material respect when made or furnished; (d) any event which
results in the acceleration of the maturity of the indebtedness of
Debtor or any guarantor or co-maker of any of the Obligations to
others under any indenture, agreement or undertaking; (e) loss,
theft, damage, destruction or encumbrance to, or of, the
Collateral or the making of any levy, seizure of attachment
thereof or thereon; (f) death of, dissolution of, termination of
existence of, insolvency of, business failure of, appointment of a
receiver of any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding
under any bankruptcy or insolvency law by or against, Debtor or
any guarantor or co-maker of any of the Obligations; (g) the
occurrence or nonoccurrence of any event or events which causes
the Secured Party, in good faith, to deem itself insecure for any
reason whatsoever.
In any such event Secured Party may at its option declare any
or all of the Obligations to be due and payable and such sums
shall then be due and payable immediately, without notice or
demand.
7. Rights and Remedies on Default. After the occurrence
of any event of default, Secured Party may exercise at any time
and from time to time any rights and remedies available to it
under applicable law, including but not limited to the right to
sell, lease or otherwise dispose of the collateral, and the right
to take possession of the Collateral. For that purpose, Secured
Party may enter upon any premises on which the Collateral or any
part thereof may be situated and remove it. Secured Party may
require Debtor to
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<PAGE>
assemble the Collateral and make it available at a place to be designated by
Secured Party which is reasonable convenient to both parties. If at the time of
repossession any of the Collateral contains other personal property not included
in the Collateral, Secured Party may take such personal property into
custody and store it at the risk and expense of Debtor. Debtor agrees to notify
Secured Party within forty-eight (48) hours after repossession of the Collateral
of any such other personal property claimed, and failure to do so will release
Secured Party and its representatives from any liability for loss or damage
thereto. Any notice or of intended disposition of any of the Collateral
required by law shall be deemed reasonable if such notice is given at least
seven (7) days before the time of such disposition. Any proceeds of any
disposition by Secured Party of any of the Collateral may be applied by it to
the payment of expenses in connection with the Collateral, including but not
limited to repossession expenses and reasonable attorney fees and legal
expenses, and any balance of such proceeds shall be then applied against the
Obligations and other amounts secured hereby in such order of application as
Secured Party may elect.
8. General Provisions.
a. Secured Party may, at its option, pay any
tax, assessment, or other Governmental levy, or insurance premium
or any other expense or charge relating to Collateral which is
payable by Debtor and not timely paid by it, and further may pay
any filing or recording fees. Any amount or amounts so pay, with
interest thereon at the highest rate payable on any of the
Obligations from the date of payment until repaid shall be secured
hereby and shall be payable upon demand.
b. Secured Party shall not be deemed to have
waived any of its rights hereunder or under any other agreement,
instrument, or paper signed by Debtor unless such waiver be in
writing and signed by Secured Party. No delay or omission on the
part of Secured Party in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion.
c. Any note, if mailed, shall be deemed
reasonable and given when mailed postage prepaid, addressed to the
Debtor at the address shown above, or at any other address of
Debtor appearing on Secured Party's records.
d. Covenants, representations, warranties and
agreements herein set forth shall be binding upon Debtor, its
legal representatives, successors, and assigns. This Agreement
may be assigned by Secured Party and all rights and privileges of
Secured
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<PAGE>
Party under this Agreement shall then inure to the benefit
of its successors and assigns.
e. If any provision of this Agreement shall be
for any reason held to be invalid or unenforceable, such
invalidity or unenforceability shall not effect any other
provisions hereof, but this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained
herein.
f. If Debtor is a guarantor, endorser, co-maker,
or an accommodation party with respect to the Obligations, Debtor
hereby waives the benefit of any and all defenses and claims of
damage which are dependant upon Debtor's character as a party
other than the maker. Each party to any of the Obligations hereby
consents to and waives notice of (1) any and all extensions,
whether or not for longer than the original period, granted as to
the time of payment of any or all of the Obligations, and (2) any
renewal of any or all of the Obligations.
g. This Agreement and all rights and duties
hereunder, including but not limited to all matters of
construction, validity, and performance shall be governed by the
law of the State of Iowa and any suit hereon may be instituted in
Des Moines, Polk County, Iowa.
h. Unless otherwise defined or the context
otherwise requires, all terms used herein which are defined in the
Iowa Uniform Commercial Code shall have the meanings therein
stated. The rights and remedies herein conferred upon Secured
Party shall be in addition to, and not in substitution or in
derogation of, rights and remedies conferred by the Iowa Uniform
Commercial Code and other applicable law.
i. All words and phrases used herein shall be
construe as in the singular or plural number, and as masculine,
feminine or neuter gender, as the context may require. Captions
are inserted for convenience only and shall not be taken as
altering the text.
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<PAGE>
THIS WARRANT AND THE SHARES OF STOCK TO BE RECEIVED UPON ITS EXERCISE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES ACTS. THIS WARRANT
AND SUCH STOCK MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OFFERED FOR SALE OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION AND QUALIFICATION UNDER
SUCH ACTS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH
REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
Right to purchase ________ shares
of Common Stock (subject to
adjustment) of Pixsys, Inc.
PIXSYS, INC.
COMMON STOCK PURCHASE WARRANT
Pixsys, Inc., a Colorado corporation (the "Company"), hereby certifies
that, for value received, _____________________________________________, or
registered assigns, is entitled, subject to the terms set forth below, to
purchase at any time after the date hereof and on or before March 15, 2000,
__________ fully paid and nonassessable shares of common stock, no par value
(the "Common Stock"), of the Company at $1.00 per share (the "Exercise Price").
The Exercise Price and number of shares are subject to adjustment as
provided herein.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in full or in part by the
holder hereof by surrender of this Warrant, with the form of subscription at the
end hereof duly executed by such holder, to the Company, at its principal
office, accompanied by payment, in cash or by check payable to the order of the
Company, in the amount obtained by multiplying the number of shares so purchased
times the Exercise Price.
(b) In lieu of delivering the Exercise Price in cash or check
the holder may elect to receive shares equal to the value of the Warrant or
portion thereof being exercised ("Net Issue Exercise"). If the holder wishes to
elect the Net Issue Exercise, the holder shall notify the Company of its
election in writing at the time it delivers to the Company the subscription
form. In the event the holder shall elect Net Issue Exercise, the holder shall
receive the number of shares of Common Stock equal to the product of (i) the
number of shares of Common Stock purchasable under the Warrant, or portion
thereof being exercised, and (ii) the current market price per share, as defined
below, of one share of Common Stock minus the Exercise Price, divided by (iii)
the current market price per share, as defined below, of one share of Common
Stock. For the purpose of the above computation, the current market price per
share of Common Stock at any date shall be deemed to be the lower of (i) the
average of the daily closing prices for 30 consecutive business days before
<PAGE>
such date or (ii) the closing price on the business day immediately preceding
date. The closing price for each day shall be the last sale price regular way
or, in case no such reported sale takes place on such day, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on such exchange, the average of
the highest reported bid and lowest reported asked prices as reported by NASDAQ,
or other similar organization if NASDAQ is no longer reporting such information,
or if not so available, the fair market price as determined by the Board of
Directors.
(c) If this Warrant is exercised for less than all the shares of
the Common Stock covered hereby, the holder shall be entitled to receive a new
Warrant covering the number of shares for which this Warrant shall not have been
exercised. This Warrant will expire at 5:00 p.m., Boulder, Colorado Time on
March 15, 2000, at which time all rights evidenced by this Warrant shall cease
and this Warrant shall become null and void.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant, the Company will cause to be
issued in the name of and delivered to the holder hereof, or as such holder may
direct (subject to the legend set forth on the face hereof), a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock to which such holder shall be entitled upon such exercise. The Company
may place a legend on any certificate issued hereunder which it, in its sole
discretion, deems necessary to comply with any applicable law and the Company
may provide any conditions to exercise that it, in its sole discretion, deems
necessary to comply with any applicable law, including, a requirement that the
holder represent that the Common Stock is being purchased only for investment
and without any present intention to sell or distribute the same. All
documentary stamp taxes payable on account of such issue shall be paid for by
the Company.
3. RESERVATION OF COMMON STOCK. The Company will at all times keep
reserved out of the authorized and unissued shares of Common Stock a number of
shares sufficient to provide for the exercise of the Warrant.
4. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number of securities purchasable upon the exercise of the Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made successively whenever any
event listed above shall occur.
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(b) In case the Company shall issue shares of its Common Stock
[excluding shares issued (i) in any of the transactions described in Subsection
(a) above or Subsection (c) below, (ii) upon exercise of options granted to the
Company's officers, employees, directors and consultants under a plan or plans
adopted by the Company's Board of Directors, if such shares would otherwise be
included in this Subsection (b), (iii) upon exercise of options and warrants
outstanding at March 15, 1995, and this Warrant (and any warrants with the same
terms as this Warrant) and (iv) to shareholders of any corporation which merges
into the Company in proportion to their stock holdings of such corporation
immediately prior to such merger, upon such merger, but only if as a result of
such merger no adjustment is required pursuant to any other specific subsection
of this Section 4 (without regard to Subsection (f) below) with respect to the
transaction giving rise to such rights] for a consideration per share (the
"Offering Price") less than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of
issuance by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection (e) below) for the
issuance of such additional shares would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
(c) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock [excluding options and warrants which
are governed by Subsection (b) above] for a consideration per share of Common
Stock (the "Conversion Price") initially deliverable upon conversion or exchange
of such securities (determined as provided in Subsection (e) below) less than
the Exercise Price, the Exercise Price shall be adjusted immediately thereafter
so that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the number of shares of
Common Stock which the aggregate consideration received (determined as provided
in Subsection (e) below) for such securities would purchase at the Exercise
Price in effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities and the maximum
number of shares of Common Stock of the Company deliverable upon conversion of
or in exchange for such securities at the initial conversion or exchange price
or rate. Such adjustment shall be made successively whenever such an issuance
is made.
(d) Whenever the Exercise Price payable upon exercise of the
Warrant is adjusted pursuant to Subsections (a), (b) and (c) above, the number
of Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Shares initially issuable upon exercise of
this Warrant by the Exercise Price in
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effect on the date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(e) For purposes of any computation respecting consideration
received pursuant to Subsections (b) and (c) above, the following shall apply:
(1) In the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith;
(2) In the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined in
good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive; and
(3) In the case of the issuance of securities convertible
into or exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be determined in the same
manner as provided in clauses (1) and (2) of this Subsection (e)).
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by reason
of this Subsection (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 4 shall be made to the nearest cent or to
the nearest share, as the case may be.
(g) The anti-dilution provisions set forth in Subsections 4(b)
and 4(c) above shall terminate (and such Subsections shall thereafter have no
force or effect) immediately prior to the closing of an underwritten public
offering of the Common Stock of the Company pursuant to a registration statement
filed under the Securities Act of 1933. All calculations of the number of
shares of Common Stock outstanding for purposes of this Section 4 shall assume
the conversion of all outstanding Series Preferred Stock, and any other
preferred stock of the Company, into Common Stock.
5. LIQUIDATION, MERGER, ETC. Upon the effective date of the
liquidation, dissolution or winding-up of the Company or of a merger or
consolidation of the Company with one or more corporations in which the Company
is not the surviving corporation, the Warrant and any right to purchase shares
thereunder shall terminate, but the holder shall have the right immediately
prior to such effective date to purchase the full (or any part thereof) number
of shares under the Warrant which the holder would otherwise have been entitled
to purchase during the remaining term of the Warrant.
6. NOTICE. The Company may not (i) declare any dividends (other
than stock dividends) or make any other distributions upon its Common Stock,
(ii) liquidate, dissolve or wind up, or (iii) merge or consolidate with or into
another corporation where it is not the surviving entity, without in each case
giving the holder hereof 20 days' written notice
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<PAGE>
in advance of such event. All notices shall be in writing and shall be deemed
given when delivered personally or when deposited in the United States mail,
postage prepaid, addressed to the holder at such holder's address appearing on
the books of the Company.
7. TRANSFER OF WARRANTS, ETC. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by the taking
hereof consents and agrees:
(a) Transfer of this Warrant is subject to the legend set forth
on the face hereof;
(b) Subject to the foregoing, title to this Warrant may be
transferred on the books of the Company, which the Company will maintain for
such purpose at its principal office, by the registered holder hereof or by such
registered holder's attorney; and
(c) Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner and holder hereof for all purposes, notwithstanding any notice to the
contrary.
This Warrant does not confer upon the holder hereof any right whatsoever as a
stockholder of the Company.
8. REGISTRATION RIGHTS. The holder hereof shall have the
registration rights provided in Section 1(c) of that certain Registration Rights
Agreement, dated as of July 8, 1994, between the Company and the holders of its
Series A Preferred Stock and such registration rights shall be subject to the
other applicable provisions therein, subject to the following: (i) the term
"Registrable Securities" for purposes herein shall mean any shares of the
Company's Common Stock issued or issuable upon exercise of the Warrant; and (ii)
the termination date for the registration rights set forth in subpart (i) of
Section 1(k) of the Registration Rights Agreement is changed from July 7, 1999
to March 15, 2000.
IN WITNESS WHEREOF, Pixsys, Inc. has caused this Warrant to be signed
by its President and attested by its Secretary.
Dated as of , 1995.
-----------------------------
PIXSYS, INC.
By:
-----------------------------------------
President
(Corporate Seal)
ATTEST:
- ----------------------------------
Secretary
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<PAGE>
FORM OF SUBSCRIPTION
To: Pixsys, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________ shares of Common Stock of Pixsys, Inc. and
herewith makes payment of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to,
___________________________________________, whose address is
_____________________________________________________________________________.
Dated: ____________________________________, ______.
-------------------------------------------------
(The signature must conform in all respects to the
name of holder as specified on the face of the
Warrant.)
<PAGE>
STRATEGIC ALLIANCE AGREEMENT
Agreement, dated as of February 27, 1995, between Pixsys, Inc., a
Colorado corporation ("Pixsys"), and Surgical Navigation Technologies, Inc., a
Delaware corporation ("SNT").
WHEREAS, Pixsys manufactures and sells 3-D optical digitizers which
are used in the image guided therapy ("IGT") market (the digitizer sold by
Pixsys is referred to herein as the "Pixsys Digitizer");
WHEREAS, SNT has developed and sells an integrated hardware/software
system using the Pixsys Digitizer that indicates the position of a surgical
probe within a human body on an image of that portion of the body (the "SNT
System");
WHEREAS, SNT has been granted the exclusive worldwide right and
license to make, use and sell systems utilizing U.S. Patent 5,383,454 ("U.S.
Patent") and related foreign and domestic patents which may issue, including
divisions, continuations and reissues thereof (collectively with the U.S.
Patent, the "SNT Patents"); and
WHEREAS, the parties hereto desire to enter into a strategic alliance
to more effectively pursue the opportunities in the IGT market.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
and their mutual undertakings hereinafter set forth, do hereby agree as follows:
<PAGE>
1. PIXSYS DIGITIZER.
a. Pixsys agrees to supply the Pixsys Digitizer with any
necessary licenses to SNT and SNT agrees to purchase from Pixsys all its
requirements for 3-D optical digitizers for the IGT market; provided the Pixsys
Digitizer meets mutually agreed upon specifications and delivery schedules and
required industry quality standards.
b. In connection with the sale of the Pixsys Digitizer, Pixsys
will grant SNT any necessary licenses (at a reasonable royalty) to any patents
which are hereafter acquired by Pixsys in order for SNT to make, use and sell
systems incorporating the Pixsys Digitizer and other Pixsys products to the IGT
market (excluding the ENT Market as hereinafter defined). Included with the
Pixsys Digitizer will be (i) a nonexclusive, personal and nontransferable
license to use the Pixsys software which is part of the Pixsys Digitizer for the
purpose of incorporating the Pixsys software into SNT's product and (ii) a right
to sublicense the Pixsys software to SNT's customers for use with the Pixsys
Digitizer pursuant to Pixsys' standard sublicense agreement.
c. Pixsys will only sell the Pixsys Digitizer for IGT
applications (other than the ENT Market) to purchasers which, to Pixsys'
knowledge, will not use it to infringe any SNT patent. (If SNT disagrees with
Pixsys' position, SNT may submit the disagreement to a mutually acceptable
third-party arbitrator, knowledgeable as to patents, and if the arbitrator
agrees that
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<PAGE>
the purchaser's use is infringing, Pixsys will no longer have the
right to sell the Pixsys Digitizer to that purchaser for that use). SNT agrees
to discuss a license with GE Medical Systems for the SNT Patents for use with GE
Medical Systems' "open" magnetic resonance products and, notwithstanding
anything herein to the contrary, Pixsys shall have the right to (i) continue to
sell the Pixsys Digitizer to GE Medical Systems during the period of such
discussions and for one year thereafter if no license is granted and (ii) to
continue to service any digitizer sold to GE Medical Systems, and any other
person, that was not sold in violation of this Agreement. Without any
implication that the SNT Patents cover applications outside of the IGT market,
Pixsys is hereby granted a non-exclusive, world-wide, royalty-free right to
make, use and sell its Digitizer (incorporated into systems or alone and with
the right to sublicense) in the nonmedical market.
2. SNT SYSTEM.
a. SNT hereby (i) agrees to supply Pixsys with its SNT System
for incorporation into a Pixsys product for sale in the ear, nose and throat
medical market ("ENT Market"), and (ii) grants Pixsys the exclusive worldwide
right to sell the SNT System to the ENT Market. The SNT System will be based
upon a PC platform with a software user interface that is specifically
customized for Pixsys in the ENT market and will meet mutually agreed upon
specifications and delivery schedules and required industry quality standards.
Pixsys and SNT will mutually agree upon further product differentiation for the
ENT Market vis-a-vis
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<PAGE>
the Neuro and Spine markets. The localization/navigation method shall be
identified and referred to in all Pixsys marketing literature or journal
articles as the "Bucholz Free-Hand-TM-" method and all instruments which
are specifically designed by Dr. Bucholz shall be referred to and identified as
"Bucholz" instruments.
b. In connection with the sale of the SNT System, SNT hereby
grants Pixsys the exclusive worldwide right to make, use and sell products and
systems covered by the SNT Patents in the ENT Market, including, to the extent
necessary, the right to sublicense the SNT Patents to end users in the ENT
Market. SNT will also grant to Pixsys any necessary licenses (at a reasonable
royalty) to any patents other than the SNT Patents which are hereafter acquired
by SNT in order for Pixsys to make, use and sell products incorporating the SNT
System and other SNT products to the ENT Market. With the prior approval of
SNT, which shall not be unreasonably withheld, Pixsys shall have the right, but
not the obligation, to utilize legal and judicial proceedings to protect and
enforce the SNT Patents in the ENT Market. Included within SNT's System will be
(i) a nonexclusive, personal and nontransferable license to use SNT software
which is part of the SNT System for the purpose of incorporating the SNT System
into the Pixsys product being sold in the ENT Market and (ii) a right to
sublicense the SNT software to Pixsys' customers in the ENT Market for use with
the SNT System pursuant to SNT's standard sublicense agreement.
-4-
<PAGE>
c. SNT will not grant any other person or entity a right to
make, use or sell products covered by the SNT Patents in the ENT Market nor will
it itself make, use or sell products into the ENT Market that will alone, or
when combined with other products, be covered by the SNT Patents. SNT may
terminate the exclusive rights (in which case Pixsys will retain the
non-exclusive rights) granted to Pixsys pursuant to this paragraph 2 at any time
within sixty (60) days after the end of any calendar year in the event that
Pixsys fails to order the minimum quantity of SNT Systems set forth in Schedule
A attached hereto for such year, provided (i) Pixsys is given written notice of
termination for such failure from SNT during such sixty (60) day period and (ii)
such failure continues for 60 days after Pixsys receives such notice.
3. PATENT REPRESENTATION AND ABANDONMENT.
a. SNT represents and warrants that (i) it owns, and has been
granted by St. Louis University, the exclusive worldwide right to make, use, and
sell systems covered by the U.S. Patent and the SNT Patents, and (ii) it has
granted Sofamor Danek Group ("Danek") the exclusive right to sell the SNT System
in the Neuro and Spine markets and the right of first refusal for all other
medical fields of use except the ENT Market.
b. SNT and Pixsys agree to cause Schedule B attached hereto to
be executed by the appropriate parties.
-5-
<PAGE>
4. TERMS OF SALE.
a. Transfer price per unit to Pixsys for the SNT System
including any required licensing for the ENT Market is $43,000, plus cost of
hardware, subject to annual review by the parties.
b. Transfer price per unit to SNT for the Pixsys Digitizer
including any required licensing is $15,000 subject to annual review by the
parties.
c. Payment terms are net thirty days.
d. Each party hereto agrees to use its best efforts to deliver
according to purchase orders received from the other party.
e. Each party hereto shall provide to the other rolling monthly
forecasts of its anticipated order volume for the other's products for the
subsequent six (6) months.
5. CUSTOMER SERVICE AND SUPPORT.
a. SNT will provide technical support to each third party
purchaser of the Pixsys ENT system. The cost that SNT will charge Pixsys in the
United States for this technical support is (i) in the first year after
purchase, $9,300 which includes installation and (ii) in each subsequent year
after purchase, $5,500; a reasonable portion of both of which is to be paid to
Pixsys for digitizer support. The cost to Pixsys for the technical support
outside of the United States shall be mutually determined by Pixsys and SNT.
Pixsys and SNT agree to adjust these prices periodically as market conditions
require.
-6-
<PAGE>
b. Pixsys will provide technical support to each third party
purchaser of SNT systems that incorporate the Pixsys Digitizer. The cost that
Pixsys will charge SNT for this technical support shall be mutually determined
by Pixsys and SNT.
c. Subject to the foregoing and as part of the strategic
alliance between the two companies, the parties hereto agree to work out the
other necessary maintenance and support arrangements recognizing that their
respective products will be used in the clinical treatment of individuals.
6. FDA. The parties hereto agree to cooperate to obtain FDA
approval for their respective products, including, making available the FDA
applications and supporting data to each other prior to submission. Promptly
after the execution of this Agreement and in connection with their submissions
to the FDA, the parties agree to work out documentation, notification, response
procedures and other matters for their respective products for FDA regulatory
purposes.
7. DIGITIZER TECHNOLOGY. SNT will provide its present 3-D optical
digitizer technology ("SNT Digitizer Technology") to Pixsys for inclusion in the
Pixsys Digitizer. Pixsys and SNT will form a joint development team to further
improve the Pixsys Digitizer. SNT agrees that the processes, know-how, trade
secrets and other technology and the software in the Pixsys Digitizer, except
the SNT Digitizer Technology and the jointly developed technology, is and will
be proprietary in, and owned exclusively by, Pixsys and may not be used by SNT
except
-7-
<PAGE>
with the Pixsys Digitizer as permitted under the terms of this Agreement.
8. REVERSE ENGINEERING; COPIES. Each party agrees not to reverse
engineer, reverse compile or reverse assemble the other's products. Neither
party shall make any copies of the other's software except for the purposes of
the licenses granted pursuant to the Agreement, and all copies are the sole
property of the party whose software is copied and such copies shall not be made
available to any third parties.
9. CONFIDENTIALITY. Each party acknowledges that the other's
products (including software) contain trade secrets, processes, know-how and
other proprietary information belonging to the other and that this information
may be communicated or otherwise made available in connection with this
Agreement. Each party agrees to keep all such information received from the
other confidential, not to publish or disclose such information to others, not
to use such information except as permitted under the terms of this Agreement,
and to protect such information with the same degree of care used by it to
protect and safeguard and maintain its own trade secrets and confidential
information. Such safeguards shall include at least the precautions of
restricting access to only those persons in their employ and their consultants
who have a need to know, instructing those employees and consultants
-8-
<PAGE>
of their obligation to maintain the confidentiality and secret nature of the
information and having executed agreements in place with such employees and
consultants legally binding them to those obligations, providing reasonable
security precautions for areas and computers where software, trade secrets and
other proprietary information is being used or stored, and completely erasing or
deleting all software from any disk, tape, or other media being discarded,
disposed, or converted to different uses.
10. DIRECTORS. Paul Ray will be appointed a director of SNT and Marc
Buntaine will be appointed a director of Pixsys.
11. COMPLIANCE WITH LAWS. Each party agrees to obey all laws and
regulations of any country in which it sells any product of the other. Each
party further understands that it is subject to regulation by agencies of the
Unites States Government, including the United States Department of Commerce,
and warrants that it will not sell the other's product to any country not
approved under applicable United States laws and regulations.
12. TERM. This Agreement will remain in effect until the last to
expire of the SNT Patents, unless sooner terminated pursuant to the terms
hereof.
13. TERMINATION.
a. Either party may terminate this Agreement on sixty (60) days
written notice in the event of a material default by the other party of any of
its obligations hereunder, provided (i) the defaulting party receives written
notice of termination containing a reasonably complete description of the
default and (ii) the default continues for sixty (60) days after receiving
-9-
<PAGE>
such notice. On termination, all licenses and rights granted hereunder shall
expire, except such licenses and rights shall continue with products purchased
by any party from the other until such products are sold and except that, on
termination by Pixsys as a result of SNT's default, the obligations of SNT
pursuant to, and the exclusive rights granted to Pixsys by, paragraph 2 of this
Agreement shall continue unless Pixsys otherwise elects. The provisions of
paragraphs 3, 7, 8 and 9 and Schedule B shall survive termination of this
Agreement.
b. The rights and remedies granted under paragraph 13a. shall
not be exclusive of any other right or remedy, either at law or equity, that may
be available and the exercise of one right or remedy shall not be deemed a
waiver of any other right or remedy.
14. GOOD FAITH. This Agreement is intended to set forth the basic
terms of a strategic alliance between the parties. As the business relationship
between the parties develops, there will inevitably be issues that were not
considered at the time this Agreement was entered into and the parties hereto
agree to cooperate in good faith to work out mutually acceptable solutions to
these issues.
15. MISCELLANEOUS.
a. All notices in connection with this Agreement shall be in
writing and shall be sent to the addresses given below or to such other
addresses as the parties may hereafter specify, in person, by certified mail,
return receipt requested,
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<PAGE>
or by telecopier. Such notice shall be deemed to be given (i) when personally
delivered to a party, (ii) three days after mailing by certified mail, return
receipt requested, or (iii) upon confirmation of receipt of facsimile
transmission:
IF TO PIXSYS: Pixsys, Inc.
5680-B Central Avenue
Boulder, CO 80301
Attn: President
and
IF TO SNT: Surgical Navigation Technologies,
Inc.
530 Compton Street
Broomfield, CO 80020
Attn: President
b. Neither party may assign this Agreement nor any of its
rights or obligations hereunder without the prior written consent of the other
party.
c. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
d. This Agreement shall be null and void and of no effect if
SNT does not sign its agreement with Danek by March 1, 1995. TIME IS OF THE
ESSENCE.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
PIXSYS, INC.
By: /S/ JEFFREY J. HILLER
--------------------------------------
Title:V.P. CHIEF FINANCIAL OFFICER
-----------------------------------
SURGICAL NAVIGATION TECHNOLOGIES,
INC.
By: /S/ SIGNATURE
--------------------------------------
Title:CHIEF TECHNICAL OFFICER
-----------------------------------
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<PAGE>
SCHEDULE A
Minimum No. of SNT Systems
Calendar Year No. of SNT Systems
------------- ------------------
1995 7
1996 14
1997 18
1998 24
1999 30
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<PAGE>
SCHEDULE B
AGREEMENT
1. Pixsys, Inc. (Pixsys), a Colorado corporation, and Waldean A. Schulz (Dr.
Schulz), an individual, each:
a. agree to revoke all prior appointments of attorney(s) and to appoint any one
or more attorneys designated by St. Louis University with exclusive power of
attorney to represent Pixsys and Dr. Schulz before the United States Patent and
Trademark Office with respect to U.S. patent application serial number
08/052,042 filed April 22, 1993 (the U.S. `042 application) for the sole and
exclusive purpose of abandoning that application without refile of any kind;
b. agree to assign and do hereby assign to St. Louis University throughout the
world whatever rights, title and interest they may have in U.S. patent 5,383,454
(the U.S. `454 patent) and in so much of any divisions or continuations thereof
having the same effective filing date;
c. agree to abandon and do hereby abandon the U.S. `042 application and whatever
rights, title and interest they may have in the invention claimed in the U.S.
`454 patent;
d. warrant that:
I) Pixsys and/or Dr. Schulz and/or its (their) assignees have only two
pending patent applications in the world, a U.S. application which claims, or
will be amended or refiled to claim, priority from the U.S. `042 application,
and a PCT application partially corresponding thereto;
ii) this pending U.S. patent application is in the sole name of Dr.
Schulz, and it will not be amended or refiled to add the name of Dr. Bucholz as
a coinventor;
iii) this pending U.S. patent application does not claim, nor will it be
amended or refiled to claim, priority from the U.S. `454 patent;
iv) this pendinq U.S. patent application does not claim, nor will it be
amended or refiled to claim, subject matter disclosed or claimed in the U.S.
`454 patent;
v) Pixsys and/or Dr. Schulz and/or their assignees do (does) not have any
pending patent application, nor will they (it) file any patent application which
claim(s), or will be amended or refiled to claim, subject matter which
interferes with, or will interfere with, the U.S. `454 patent;
vi) in the event that any interference is declared between the claims of
the U.S. `454 patent and any patent
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<PAGE>
application or patent naming Dr. Schulz as a patentee/applicant, and/or which is
owned or controlled by Pixsys, Pixsys and Dr. Schulz hereby specifically concede
priority in such interference; and
vii) except for the U.S. `042 application, no presently pending patent
application, which has at any time been, or at any time will be, assigned to
Pixsys, and/or names Dr. Schulz as a sole or coinventor, now claims an invention
which relies, or will in the future be claimed to rely, on an effective filing
date, which is:
A)earlier than its actual filing date, and
B) at least as early as the effective filing date of the U.S. `454
patent;
e. agree that neither Pixsys, nor Dr. Schulz, nor their respective assigns will
take any action inconsistent with this Agreement;
f. warrant that neither Pixsys, nor Dr. Schulz, nor their assigns has filed
and/or agree that neither will file any other patent applications, or take any
other action, challenging St. Louis University's ownership of the U.S. `454
patent;
g. agree to cooperate with SNT and St. Louis University by executing any
documents or taking any action, to confirm that throughout the world whatever
rights, title and interest they may have in the U.S. `454 patent and in so much
of any divisions and continuations thereof, which are entitled to the same
effective filing date, are owned by St. Louis University;
h. agree not to contest the designation of Dr. Bucholz as the sole
inventor/patentee of the U.S. `454 patent; and i. agree that SNT and/or St.
Louis University may enforce any provision of this Agreement by seeking an
injunction or court order in any court of competent jurisdiction and hereby
consent to the jurisdiction of such court; and
2. St. Louis University and Surgical Navigational Technologies, Inc. (SNT), a
Delaware corporation, each:
a. warrant that they will cause the intentional abandonment of the U.S.
`042 application to become effective simultaneously with the execution of this
agreement;
b. warrant that neither they nor their assigns will, upon the execution of
this agreement and/or thereafter, cause any patent application to be filed
anywhere in the world claiming priority in the U.S. `042 application; and
c. agree that Pixsys may enforce any provision of this Agreement by seeking
an injunction or court order in any
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<PAGE>
court of competent jurisdiction and hereby consent to the jurisdiction of such
court.
5. This Agreement, which is Schedule B to the Pixsys/SNT agreement, shall be a
separate, distinct and independent agreement from the Pixsys/SNT agreement and
shall survive any termination or expiration of the Pixsys/SNT agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
latest date stated below:
PIXSYS, INC. (PIXSYS)
By: /S/ PAUL L. RAY
-----------------------------
NAME: Paul L. Ray
TITLE: President
DATE: 2-27-95
SURGICAL NAVIGATIONAL TECHNOLOGIES, INC. (SNT)
BY: /S/ KURT R. SMITH
-----------------------------
NAME: Kurt R. Smith
TITLE: Chief Technical Officer
DATE: 2-24-95
WALDEAN A. SCHULZ (DR. SCHULZ)
BY: /S/ WALDEAN A. SCHULZ
-----------------------------
NAME: Waldean A. Schulz
TITLE: Chief Technical Officer
DATE: 1995 Feb 27
ST. LOUIS UNIVERSITY
By: /S/ DR. ROBERT M. SWANSON
-----------------------------
NAME: Dr. Robert M. Swanson
TITLE: Associate Vice President, Health Services
DATE: February 28, 1995
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<PAGE>
SURGICAL NAVIGATION
April 24, 1996
Mr. Paul Ray
Chairman
Image Guided Technologies, Inc.
Boulder, CO
Dear Paul:
As you may have heard, Mark Hunter has recently placed, and IGT has confirmed
acceptance of, an order for 20 more 5000's for delivery over the course of the
Spring/Summer. This is in response to our continuing demand for
StealthStations, and trying to stay slightly ahead of the curve. Things
continue to go well for us out in the field as well, with minimal recent
problems related to the 5000 performance.
The SNT Board of Directors recently met, at which time we again reviewed the
SNT/IGT history and your and my most recent correspondence. At a formal level,
I am now able to express SNT's full agreement with the Strategic Alliance
termination proposal contained in your letter to me dated November 29, 1995. My
Board has now agreed, the SNT/IGT Strategic Alliance Agreement is terminated and
no longer valid.
As I suggested to you earlier, I would like to begin discussions to explore an
OEM arrangement on digitizer supply from IGT for SNT. I will follow up with Bob
Silligman on this topic and hope to begin discussions with you sometime in May
when I am next in Colorado.
I look forward to talking with you again soon.
With best regards,
/S/ MARC BUNTAINE
Marc Buntaine
President and CEO
cc: Kurt Smith
Bob Silligman
Surgical Navigation Technologies, Inc., 337 Fiske Street, Holliston, MA 01746
508.429.6111 FAX 508.429.1767
<PAGE>
November 29, 1995
TO: Marc Buntaine, SNT
FROM: Paul Ray, IGT
Dear Marc:
To confirm our conversation this morning, the Strategic Alliance Agreement
between Surgical Navigation Technologies and Image Guided Technologies was
terminated at our meeting in San Francisco in October and the subsequent actions
taken by our respective Boards. The only provisions of the Agreement surviving
termination are those noted in the last sentence of paragraph 13a of the
Agreement. In reliance on the termination, we withdrew from the business of
selling systems to the ENT Market and have returned the exclusive rights for
this market to SNT.
We would like you to consider a long-term OEM Agreement with us to address our
future commercial relationship. This will lock-in your access to our FP5000
digitizer or a more customized proprietary product and allow us to continue our
supplier relationship with a valued customer. Under the OEM Agreement, we would
of course grant you any necessary licenses (at a reasonable royalty) to any
patents which are hereafter acquired by us in order for you to make, use and
sell your system incorporating our digitizer.
Please get back to me on the OEM Agreement.
Best Regards,
/S/ PAUL RAY
Paul Ray
Chief Executive Officer
<PAGE>
EQUIPMENT LEASE AGREEMENT
LEASE NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LESSEE SELLER
- --------------------------------------------------------------------------------
NAME NAME
Image Guided Technologies, Inc. Machinery Systems, Inc.
- --------------------------------------------------------------------------------
ADDRESS ADDRESS
5860-B Central Ave. 614 East State Parkway
- --------------------------------------------------------------------------------
CITY STATE ZIP CITY STATE ZIP
Boulder CO 20301 Schaumburg IL 60173
- --------------------------------------------------------------------------------
TAXPAYER I.D. NO. CONTACT PHONE CONTACT PHONE
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION OF EQUIPMENT (GIVE MANUFACTURER,
MODEL NO., SERIAL NO. ETC.)
- --------------------------------------------------------------------------------
1 Refurbished Zeiss DB 900 4860-36 Coordinate Measuring
Machine
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOCATION OF EQUIPMENT IF DIFFERENT THAN ABOVE
- --------------------------------------------------------------------------------
TERM OF LEASE COMMENCEMENT DATE ADVANCE PAYMENTS TO BE APPLIED TO
58 MONTHS OF LEASE 3600.00 First Payment
- --------------------------------------------------------------------------------
LEASE PAYMENT SCHEDULE
See Below PAYMENTS OF $ See Below PLUS TAX $ TOTAL $ See Below
- --------------- --------------- ------ ----------------
- --------------------------------------------------------------------------------
FOLLOWED BY (WHEN APPLICABLE)
PAYMENTS OF $ PLUS TAX TOTAL $
- --------------- --------------- ------ ----------------
- --------------------------------------------------------------------------------
A $3,830.00 FOLLOWED BY: 9 @ $1,277.00 FOLLOWED BY: 12 @ $2,340.00 FOLLOWED
BY: 36 @ $3,830.00
TERMS AND CONDITIONS OF LEASE AGREEMENT
1. TERM AND RENT. Lessor agrees to lease the above described equipment (the
"Equipment") to the Lessee for the term and rental as set forth, payment of the
rental installments to begin on the date of delivery to Lessee. As long as no
event of default exists, Lessor will not interfere with Lessee's possession, use
and quiet enjoyment of the Equipment.
2. PURCHASE AND ACCEPTANCE. Lessee requests Lessor to purchase the Equipment
from the Seller and arrange for delivery to Lessee, at Lessee's expense.
Delivery shall be deemed complete upon the Commencement Date. LESSOR SHALL
NOT BE LIABLE FOR LOSS OR DAMAGE OR FOR THE DELAY OR FAILURE OF SELLER TO
FILL OR DELIVER THE ORDER FOR THE EQUIPMENT. THE LESSEE REPRESENTS THAT
LESSEE HAS SELECTED THE EQUIPMENT DESCRIBED ABOVE BEFORE HAVING REQUESTED
LESSOR TO PURCHASE SAME FOR LEASING TO LESSEE.
3. NON-CANCELLABLE LEASE. THIS IS A NON-CANCELLABLE LEASE. When Lessee signs
and delivers a certificate of acceptance for the Equipment, its obligations
to pay all rent and other amounts when due for the Equipment and otherwise to
perform as required under the lease are unconditional, irrevocable and
independent. These obligations are not subject to cancellation, termination,
modification, repudiation, excuse or substitution by Lessee. Lessee is not
entitled to any abatement, reduction, offset, defense or counterclaim with
respect to these obligations for any reason whatsoever, whether arising out
of default or other claims against Lessor or the manufacturer or supplier of
the Equipment, defects in or damage to the Equipment, its loss or destruction
or otherwise.
4. DISCLAIMER OF WARRANTIES BY LESSOR; RIGHTS OF LESSEE. LESSOR MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE, AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT "AS-IS."
UNDER NO CIRCUMSTANCES SHALL LESSOR BE RESPONSIBLE FOR ANY INCIDENTAL, OR
CONSEQUENTIAL DAMAGES IN CONNECTION WITH THIS LEASE AND/OR THE EQUIPMENT
THEREUNDER, LESSEE IS ENTITLED TO THE PROMISES AND WARRANTIES, INCLUDING
THOSE OF ANY THIRD PARTY, PROVIDED TO LESSOR BY THE SELLER IN CONNECTION WITH
OR AS PART OF THE CONTRACT BY WHICH LESSOR ACQUIRED THE EQUIPMENT OR THE
RIGHT TO POSSESSION AND USE OF THE EQUIPMENT, LESSEE MAY COMMUNICATE WITH THE
SELLER AND RECEIVE AN ACCURATE AND COMPLETE STATEMENT OF THOSE RIGHTS,
PROMISES AND WARRANTIES, INCLUDING ANY DISCLAIMERS AND LIMITATIONS OF THEM OR
OF REMEDIES.
5. CLAIMS AGAINST SELLER; SELLER NOT AN AGENT OF LESSOR. If the Equipment is
not properly installed, does not operate as represented or warranted by the
Seller or is unsatisfactory for any reason, Lessee shall make any claim on
account thereof solely against the Seller and shall nevertheless pay Lessor all
rent payable under this Lease. Lessor agrees to assign to Lessee, solely for
the purpose of making and prosecuting any such claim, any rights it may have
against the Seller for breach of warranty or representation respecting the
Equipment. Notwithstanding any fees that must be paid to Seller or any agent of
Seller, Lessee understands and agrees that neither the Seller nor any agent or
employee of the Seller is an agent or employee of the Lessor and that neither
the Seller nor its agent or employee is authorized to waive or alter any term or
condition of this Lease.
6. PAYMENTS. Lessee agrees to pay all Lease payments on the date designated
by Lessor and to pay such other payments and charges as provided herein.
These payments shall be increased by any cost or expense Lessor incurs to
preserve the Equipment or to pay taxes, assessments, fees, penalties, liens
or encumbrances. IF THE ACTUAL TOTAL COST OF THE EQUIPMENT VARIES FROM THE
ESTIMATE UPON WHICH THIS LEASE IS BASED, LESSEE AUTHORIZES LESSOR TO ADJUST
THE LEASE PAYMENTS PROPORTIONATELY, UPWARD OR DOWNWARD, NOT TO EXCEED TEN
PERCENT (10%), TO COMPENSATE FOR SUCH VARIATION. Each payment received will
be applied first, at the Lessor's discretion, to the oldest charge due under
the Lease. Without Lessor's prior written consent, the acceptance by Lessor
of a smaller sum than due at any time under this Lease shall not constitute a
release or an accord and satisfaction of any greater sum due or to become due
regardless of any endorsement restriction.
7. TITLE; LOCATION OF THE EQUIPMENT; TERMINATION. Title to the Equipment is in
the Lessor and under no circumstances shall pass to Lessee. The Equipment shall
be kept at Lessee's address indicated on this Lease and shall not be removed
without the written consent of Lessor. At the termination of this Lease or upon
Lessee's default, Lessee, its own expense, shall assemble and deliver the
Equipment to Lessor at such place Lessor may designate in writing, in good order
and repair, ordinary wear and tear excepted. Lessee shall give Lessor 90 days
written notice prior to termination that it is returning the Equipment.
8. NO ASSIGNMENT BY LESSEE; ASSIGNMENT BY LESSOR. NEITHER THIS LEASE NOR
THE RIGHTS HEREUNDER SHALL BE ASSIGNED BY THE LESSEE, NOR SHALL ANY OF THE
EQUIPMENT BE SUBLEASED BY THE LESSEE WITHOUT THE WRITTEN CONSENT OF THE
LESSOR. Lessor may at any time sell or assign to any bank, or other
financial institution, or any person, firm, or corporation all or part of its
right, title and interest in and to this Lease and in and to each item of
Equipment and monies to become due to the Lessor hereunder, and Lessor may
grant security interest in the Equipment, subject to the Lessee's rights
therein as set forth in this Lease, and in such events, all the provision of
this Lease for the benefit of Lessor shall inure to the benefit of and be
exercised by or on behalf of such assignee, but the assignee, shall not be
liable for or be required to perform any of Lessor's obligations to Lessee.
All rental payments due and to become due under this Lease and assigned by
Lessor shall be paid directly to assignee, upon written notice of such
assignment to Lessee and the right of the assignee to the payment of assigned
rentals and performance of all Lessee's obligations and to exercise any other
of Lessor's rights hereunder shall not be subject to any defense,
counterclaim or setoff which the Lessee may have or assert against the Lessor
and the Lessee hereby agrees that it will not assert any such defenses,
setoffs, counterclaims and claims against the assignee.
9. INSURANCE; HOLD HARMLESS BY LESSEE. Lessee shall keep the Equipment
insured against loss by fire, theft and all other hazards (comprehensive
coverage) at replacement cost by insurers and in form, amount and coverage
satisfactory to Lessor. Lessee appoints Lessor as Lessee's attorney in fact
to endorse any loss payment or returned premium check and to make any claim
under such insurance. Said policies shall be endorsed with Lessor as a loss
payee and additional insured and shall contain provisions (a) that such
insurance shall not be cancelled except upon ten days notice to Lessor and
(b) that the interest of Lessor shall not be invalidated by any act of
Lessee. The policies of insurance or endorsement certificates shall be
delivered to Lessor within 30 days of the Commencement Date. In the event of
loss, destruction or theft of, or damage to, any of the Equipment, Lessee
will immediately notify Lessor.
The loss, destruction, theft of or damage to the Equipment shall not relieve
the Lessee from its obligation to pay the full rentals payable hereunder and
Lessor's remaining residual interest. Any sums collected from insurance for
the total loss of any of the Equipment shall be credited to the final
installments of rent payable hereunder and Lessor's remaining residual
interest. If any of the Equipment is partially damaged, Lessee shall repair
such damage at its own cost and expense and any sums collected on insurance
on account of such damage shall be applied to the cost thereof, but on
default of the Lessee in repairing such damage within 30 days of the
occurrence thereof, the sums collected therefor shall be applied to the last
maturing installments of rent payable hereunder or to the repair of the
Equipment at Lessor's sole option.
Lessee shall insure the Lessor and Lessee with respect to liability for
personal injuries, damage to or loss of use of property resulting from the
ownership, use and operation of the Equipment with insurers satisfactory to
Lessor in amounts of at least $500,000 per individual and $1,000,000 per
occurrence for personal injuries and $100,000 for property damage and deliver
the policies or certificates thereof to Lessor.
If Lessee shall default in obtaining any insurance described above, Lessor may
place such insurance. Any premiums paid by Lessor shall be additional rent
payable on demand with interest at the highest legal rate from the date of
payment.
<PAGE>
Lessor's sole option, such amounts together with interest may be added to the
lease balance to be paid by Lessee as additional monthly rental.
NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH, LESSEE WILL SAVE AND HOLD
LESSOR HARMLESS AGAINST ANY CLAIM OR LIABILITY (INCLUDING ATTORNEYS' FEES AND
COSTS AND EXPENSES FOR THE DEFENSE THEREOF) ARISING OUT OF THE OWNERSHIP, USE
OR OPERATION OF THE EQUIPMENT DURING THE PERIOD OF THIS LEASE AND UNTIL THE
EQUIPMENT IS RETURNED TO AND ACCEPTED BY THE LESSOR.
10. REPAIRS; USE; ALTERATIONS. Lessee, at its own expense, shall keep the
Equipment maintained in good repair, condition and working order; shall use
the Equipment lawfully and shall not alter the Equipment without the Lessor's
prior written consent. All items which become attached to or a part of the
Equipment become the property of Lessor.
11. TAXES. Lessee shall reimburse the Lessor (or pay directly if, but only if
instructed by Lessor) for all charges and taxes (local, state and federal)
which may now or hereafter be proposed or levied upon the Lease, rental,
operation, leasing, sale, ownership, possession or use of the Equipment
excluding all taxes based upon income or gross receipts of Lessor.
12. DEFAULT. Any of the following shall constitute an event of default by
Lessee: a) Lessee is to pay when due, any rent or other amount required by
this Lease; b) Lessee breaches any covenant of this Lease or fails to
promptly perform any of its terms or conditions, including but not limited to
return of the Equipment oat the expiration of the lease term; c) Lessee makes
an assignment for the benefit of creditors; d) a petition is filed by or
against Lessee in bankruptcy or for the appointment of a receiver; e)
dissolution or suspension of Lessee's usual business; f) Lessee makes a bulk
transfer or sale of furniture, furnishings, fixtures or other equipment or
inventory; g) any representation, warranty, or signature made by Lessee in
this Lease or related document is incorrect, fraudulent or breached; or h)
Lessee or any guarantor gives Lessor reasonable cause to be insecure about
Lessee's or guarantor's willingness or ability to perform the obligations
under this Lease.
13. LESSOR'S REMEDIES UPON DEFAULT BY LESSEE. If an event of default occurs,
Lessee's right to continue in possession of the Equipment shall immediately
cease, and Lessor shall have the right to execute any one or more of the
following remedies in order to protect its interests and reasonably expected
profits and benefits of bargains with the Lessee: a) cancel this Lease;
b)take possession of the Equipment without liability to Lessee for any
damages occasioned by such taking; c) recover from Lessee, with or without
repossessing the equipment, the sum of (1) accrued and unpaid rent and other
amounts payable as of the date of default, (2) the present value (as of the
date of payment) of the rent for the remaining term of this Lease agreement
at 5% per annum; and (3) the residual value of the equipment as measured by
its anticipated fair market value as of the expiration of the lease term;
provided, however that upon repossession or surrender of the Equipment,
Lessor shall either sell, lease or otherwise dispose of the Equipment in a
commercially reasonable manner, with or without notice and on public or
private bid, and apply the net proceeds (after deducting all expenses,
including attorneys' fees incurred in connection therewith), the sum of (2)
and (3) above, or Lessor may retain any repossessed Equipment and credit its
fair market value to the sums of (2) and (3) above; or d) exercise any other
right or remedy available to Lessor at law or in equity.
In the event Lessor assigns its right to receive rentals under this agreement
(but not its individual interest) and in the further event of default by
Lessee, Lessee remains liable to Lessor for Lessor's remaining residual
interest in the Equipment as measured above. This liability of Lessee is
unconditional and is not affected by Lessor's assignee repossessing and/or
selling the Equipment to wholly or partially satisfy assignee's right to
receive the assigned rentals.
14. RENEWAL. If the Equipment is not delivered to Lessor at the termination
hereof in accordance with paragraph 7, then this Lease shall renew from month
to month upon the same terms and conditions, subject to the right of Lessor
or Lessee to terminate the renewed Lease on 30 days written notice, in which
event, the Equipment shall immediately be returned to Lessor. No other
renewal shall exist except and unless a separate written agreement is entered
into between Lessor and Lessee.
15. LATE CHARGES. Without limiting Lessor's remedies above, if Lessee shall
fail to pay any amount of rental or other payment for a period of ten days
after its due date, Lessee agrees to pay Lessor a late charge of 5% of each
such payment or installment.
16. FINANCING STATEMENTS. The Lessor is authorized to file a financing
statement signed by the Lessor in accordance with the Uniform Commercial Code
or one signed by Lessor, as Lessee's attorney in fact.
17. FINANCIAL REPORTS. Upon request by Lessor, Lessee will promptly furnish
to Lessor for the most recent quarterly period, a balance sheet and a
statement of profit, loss and surplus from the beginning of that fiscal year
to the end of that period certified as correct by an authorized agent of the
Lessee and such other financial information, books and records the Lessor
may deem necessary.
18. JURISDICTION; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS. LESSEE CONSENTS TO THE JURISDICTION OF THE COURTS OF
ILLINOIS. NO PROVISION WHICH MAY BE CONSTRUED AS UNENFORCEABLE SHALL IN ANY
WAY INVALIDATE ANY OTHER PROVISION, ALL OF WHICH SHALL REMAIN IN FULL FORCE
AND EFFECT.
19. WARRANTIES BY LESSEE. Lessee warrants and represent that: (a) the
Equipment is being leased for business purposes; (b) all signatures are genuine;
(c) the person signing the Lease is authorized to do so: (d) if more than one
Lessee is named, the liability of each is agreed to be joint and several.
20. INDEMNITY BY LESSEE. Lessee agrees to indemnify and hold Lessor or any
assignee harmless from any and all claims, actions, proceedings, expenses,
damages, and liabilities, including attorneys' fees, arising out of or in any
manner pertaining to the Equipment or this Lease including, without
limitation, the ownership, selection, possession, purchase, delivery,
installation, leasing, operation, use, control, maintenance and return of the
Equipment and the recovery of claims under insurance policies.
In addition, notwithstanding any other provision of this Lease, if as to any
Equipment the modified accelerated cost recovery system or depreciation
deductions allowed under the Internal Revenue Code of 1986, as amended, ("The
Code") shall be lost, disallowed, eliminated, reduced, recaptured or
otherwise unavailable to Lessor for any reason, then Lessee shall pay to
Lessor as additional rent within 30 days after such a loss an amount which
shall be equal to the sum of (i) the additional federal, state, local and
foreign income or any other taxes payable as a result of such loss,
disallowance, elimination, reduction, recapture or unavailability of
accelerated cost recovery or depreciation deductions plus (ii) the amount of
any interest, penalties or additions to tax payable by the Lessor as a result
of such additional tax.
Lessee acknowledges that the Equipment to be leased by Lessor to Lessee
pursuant to this agreement is owned by Lessor ("Owner"). It is the intent of
Owner/Lessor and Lessee that this Lease constitute a true lease for Federal
income tax purposes so that, for the purpose of determining its liability for
Federal income taxes, Owner shall be entitled to the tax benefits as are
provided by the Code to an owner of personal property.
The indemnities given and liabilities assumed by the Lessee pursuant to this
Section 20 shall continue in full force and effect notwithstanding the
expiration or other termination of this Lease.
21. NOTICES. Any notice to a party hereunder shall be sufficiently given if
mailed to said party by certified mail, return receipt requested, at its
address set forth herein or such other address as either may designate for
itself in such written notice to the other.
22. LABELS AFFIXED TO EQUIPMENT. Lessor shall have the right, but not the
obligation, to affix or attach ownership identification labels to the Equipment.
Lessee agrees to not remove any such labels.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and expenses,
including reasonable attorneys' fees and the fees of any collection agencies,
incurred by Lessor in enforcing any of the terms, conditions, or provisions
hereof or in protecting Lessor's rights herein. These costs and expenses shall
include, without limitation, any costs or expenses incurred by the Lessor in any
bankruptcy, reorganization, insolvency or other similar proceeding.
24. ENTIRE AGREEMENT. This Lease constitutes the entire agreement of the parties
in connection with the Equipment. Neither party relies on any other statements,
understandings, representations or assurances, the same, if any, having been
merged into this agreement. This agreement cannot be modified except by a
writing signed by each party. This agreement inures to the benefit of the
heirs, executors, administrators, successors and assigns of the parties.
25. WAIVER OF JURY TRIAL. Lessor and Lessee, after consulting or having had
the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this Lease or any related
instrument or agreement or any of the transactions contemplated by this Lease
or any related instrument or agreement, or any course of conduct, dealing,
statements (whether oral or written), or actions of either of them. Neither
Lessor nor Lessee shall seek to consolidate, by counterclaim or otherwise,
any such action in which a jury trial has been waived with any other action
in which a jury trial cannot be or has not been waived. These provisions
shall not be deemed to have been modified in any respect or relinquished by
either Lessor or Lessee except by a written instrument executed by both of
them.
THIS LEASE AGREEMENT SHALL NOT BE BINDING ON LESSOR UNTIL IT HAS BEEN ACCEPTED
AND EXECUTED BY AN OFFICER OF LESSOR AT ITS OFFICE. THE UNDERSIGNED AGREE TO
ALL OF THE TERMS AND CONDITIONS ABOVE WHICH ARE PART OF THIS LEASE AGREEMENT.
LESSEE IMAGE GUIDED TECHNOLOGIES, INC.
---------------------------------
ACCEPTED BY
LESSOR MACHINERY SYSTEMS, INC. BY /S/Jeffery Hiller TITLE V.P.
------------------------ ----------------------- --------
BY TITLE BY Jeffery Hiller, V.P. TITLE
------------------ ----- ----------------------- --------
LEASE DATE DATE
-------------------- ----------------------------------
- --------------------------------------------------------------------------------
GUARANTY
In consideration of the Lessor leasing to the Lessee and other good and
valuable consideration, the receipt of which is acknowledged, the undersigned
guarantee performance of all the covenants, conditions, and payments when due,
whether by acceleration or otherwise, of the above Lease by the Lessee. In the
event of default, the undersigned waive notice of any modification, amendment or
extension of the lease.
The undersigned agree that, if this guaranty is executed by two or more
guarantors, the obligation shall be joint and several.
- ----------------------An Individual -----------------------An Individual
(Signature) (Signature)
Home Address Home Address
------------------------- --------------------------
- ----------------------------------- ------------------------------------
Dated: Dated
------------------------------ -------------------------------
<PAGE>
CERTIFICATE OF ACCEPTANCE
Lease Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LESSEE SELLER
- --------------------------------------------------------------------------------
Name Name
Image Guided Technologies, Inc. Machinery Systems, Inc.
- --------------------------------------------------------------------------------
Address Address
5680-B Central Ave. 614 East State Parkway
- --------------------------------------------------------------------------------
City State Zip Code City State Zip Code
Boulder CO 80301 Schaumburg IL 60173
- --------------------------------------------------------------------------------
Taxpayer I.D. No. Contact Phone Contact Phone
- --------------------------------------------------------------------------------
QUANTITY DESCRIPTION OF EQUIPMENT (GIVE MANUFACTURER, MODEL NO.,
SERIAL NO. ETC.)
- --------------------------------------------------------------------------------
1 Refurbished Zeiss DB 900 4860-36 Coordinate Measuring
Machine
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Location of Equipment if different than above
- --------------------------------------------------------------------------------
Term of Lease Commencement Date of Lease Advance Payments To be applied to
58 months 3600.00 First Payment
- --------------------------------------------------------------------------------
Lease Payment Schedule
See Below Payments of $ See Below Plus Tax $ Total $ See Below
-------------- ----------- ------ ----------
- -------------------------------------------------------------------------------
Followed By (When applicable)
Payments of $ Plus Tax $ Total $
-------------- ----------- ------ ----------
- --------------------------------------------------------------------------------
1 @ $3,830.00 Followed By: 9 @ $1,277.00 Followed By: 12 @ $2,340.00
Followed By: 36 @ $3,830.00
LESSEE'S ACKNOWLEDGEMENT & DELIVERY RECEIPT
The undersigned (also referred to as "Lessee") acknowledges receipt in good
condition of all the above listed property (the "Equipment") and accepts
Equipment in accordance with all the terms and conditions of the lease
agreement dated ________________ between Lessor and the undersigned (the
"Lease"). Lessee agrees that the Lessor has fully and satisfactorily
performed all covenants and conditions to be performed under the Lease.
Lessee acknowledges Lessor's right to sell or assign its interests under the
Lease, consents to any such sale or assignments and in consideration of the
assignee having advanced funds to the Lessor to finance the Equipment
described in the Lease, agrees as follows: (a) that its obligation to pay
directly the assignee the amounts (whether designated as rentals or
otherwise) which become due from the Lessee as set forth in the Lease so
assigned shall be absolutely unconditional and shall be payable whether or
not the Lease is terminated by operation of law, any act of the parties, or
otherwise, and it promises to pay such sums notwithstanding any defense,
set-off or counterclaim whatsoever, whether by reason of breach of the Lease
or otherwise, which it may or might now or hereafter have against the Lessor
(the Lessee reserving its right to have recourse directly against the Lessor
on account of any such defense, set-off or counterclaim), and (b) that,
subject to and without impairment of the Lessee's leasehold rights in and to
the Equipment described in the Lease, Lessee holds the Equipment for the
assignee to the extent of the assignee's rights in the Equipment.
Dated: 2-22-96 Lessee: Image Guided Technologies, Inc
------------------ -------------------------------------------
By: /s/ J.H.
-------------------------------------------
Title: JEFFREY HILLER, V.P.
-------------------------------------------
<PAGE>
Image Guide Technologies, Inc.
5680-B Central Ave
Boulder, CO 80301
January 11, 1996
Dear ___________:
Machinery Systems, Inc. (also referred to as "Lessor") grants to you Image
Guide Technologies, Inc. (also referred to as "Lessee") whose address is
5680-B Central Ave Boulder CO 80301 the option to purchase the machinery,
equipment and other personal property (the "Equipment") described in Lease
dated 1-11, 1996, or in any amendment to the lease (the "Lease") for a
purchase price equal to ONE-AND 00/100 DOLLAR ($1.00) plus any applicable
sales or use taxes payable in connection with such titles and any unpaid
property taxes assessed or levied against the Equipment.
This option is expressly conditioned upon all the following:
1. You have made all payments in full to Lessor or its assignee due under
the Lease;
2. No event of default under the Lease has occurred or is continuing under
the Lease;
3. You purchase all the Equipment described in the Lease;
4. You exercise your option to purchase on the day immediately following the
date of expiration of the Lease or the expiration date of any applicable
renewal period, by delivery to Lessor of payment of the purchase price by
cash, cashier's check or certified check plus any applicable sales or use
taxes payable in connection with such sales and any unpaid property taxes
assessed or levied against the Equipment.
Upon payment of the purchase price, Lessor shall execute and deliver to
Lessee a Bill of Sale for the Equipment, Purchase of the Equipment under this
option is on an AS IS, WITH ALL FAULTS BASIS.
Upon exercise of this option, Lessor will transfer title to Lessee. Lessor
warrants title to be free of any and all liens, encumbrances and claims
arising by, through and under Lessor and not otherwise.
THE LESSEE REPRESENTS THAT LESSEE HAS SELECTED THE EQUIPMENT PRIOR TO HAVING
REQUESTED THE LESSOR TO PURCHASE THE SAME FOR LEASING TO THE LESSEE, AND
LESSEE AGREES THAT THE LESSOR HAS MADE AND MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED,
AS TO ANY MATTER WHATSOEVER INCLUDING THE SUITABILITY OF SUCH EQUIPMENT, ITS
DURABILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, ITS MERCHANTABILITY, ITS
CONDITION, AND/OR ITS QUALITY.
Lessee may not assign this option nor any of its rights under this option.
This option shall be governed by Illinois law. Accepted and agreed on 1/16/95
--------
LESSOR: LESSEE:
Machinery Systems, Inc. Image Guide Technologies
- ----------------------------- -----------------------------------
By: By: /s/ J.H.
-------------------------- -------------------------------
- ----------------------------- -----------------------------------
Its: Its: V.P.
------------------------- ------------------------------
Private Label Form
<PAGE>
DESIGNATION OF AUTHORITY
Pursuant to the Resolutions adopted by the Board of Directors of Image Guide
Technologies, Inc. (the Corporation) on December 8, 1995, I, being the
President of the Corporation, do hereby designate the following employee(s)
of the Corporation, whose name(s), title(s) (if any) and specimen
signature(s) (is/are) set forth below, to execute and deliver for and on
behalf of the Corporation (lessee) and any rental schedules, certificate of
inspection and acceptance, and other agreements, documents and instrument, in
connection with the lease and any future leases.
NAME OF DESIGNEE TITLE OF DESIGNEE SIGNATURE OF DESIGNEE
JEFFREY J. HILLER V.P. /s/ J.H.
- ---------------- ---------------- ----------------
________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________
IN WITNESS WHEREOF, I have hereunto set my hand this 17 day of JANUARY, 1996.
NAME OF OFFICER /s/ ROBERT E. SILLIGMAN
--------------------------------
SIGNATURE /s/ Robert E. Silligman
--------------------------------
TITLE President SEAL
--------------------------------
<PAGE>
COMMERCIAL-INDUSTRIAL LEASE
1. PARTIES. This lease, dated, this 11th day of January, 1996, made by and
between Life Investors Insurance Company of America, by AEGON USA Realty
Management, Inc., its authorized agent as agent for the owner of the
premises (herein called "Lessor") and Image Guided Technologies, Inc., a
Colorado Corporation (herein called "Lessee").
2. PREMISES. In consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Lessee to be observed
and performed, Lessor hereby leases to Lessee and Lessee hereby rents from
Lessor, those certain premises (herein the "Premises") consisting of a space
having measurements of approximately feet in width and feet
in depth, totaling 12,844 square feet, as designated on the plan attached
hereto as Exhibit "A", now or hereafter constructed in the Gemini II
Building, Suite 5710, first floor located in the city of Boulder, County
Boulder, State of Colorado and more particularly described on Exhibit "B"
attached hereto, for the term and upon the conditions and agreements
hereinafter set forth, and Lessor and Lessee hereby agree as follows:
3. TERM.
3.1 TERM. The term of this Lease shall be for Three (3) years
commencing on February 1, 1996 and ending on January 31, 1999 unless
sooner terminated pursuant to any provision hereof.
3.2 DELAY IN COMMENCEMENT. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall failure
affect the validity of this Lease or the obligations of Lessee hereunder or
extend the term hereof, but in such case Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder. If
Lessee occupies the Premises prior to said commencement date, such occupancy
shall be subject to all provisions hereof; such occupancy shall not advance the
termination date, and Lessee shall pay rent for such period at the initial
monthly rates set forth below. If Lessor, by reason outside the reasonable
control of Lessor, cannot deliver said premises within ninety (90) days from
said commencement date, Lessor may, at Lessor's option, by notice in writing
within ten (10) days thereafter, cancel this Lease.
4. RENT. Lessee shall pay Lessor, without any prior demand therefor and
without any right of deduction or set-off whatsoever, a monthly rental of
****See Rider**** ($ ), in advance, upon the first day of
each calendar month for each and every month of the Lease. The Lessee further
agrees to pay, in addition to the rent as provided herein, all privilege,
sales, excise, and other taxes (except income taxes) imposed by State,
Federal, or municipal authorities upon the rentals herein provided to be paid
by the Lessee to the Lessor. Said payment shall be in addition to and
accompanying each rental payment made by Lessee to Lessor.
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Rent shall be payable to
Lessor at the address stated herein or to such other persons or at such other
places as Lessor may designate in writing. The rent due under terms of this
Paragraph may be modified by Paragraph Eleven (11) below.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor, upon execution
hereof, $12,000.00 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply, or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damage which Lessor may suffer
thereby. If Lessor so uses or applies all of or any portion of said deposit,
Lessee shall, within ten (10) days after written demand therefor, deposit
cash with Lessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated, and Lessee's failure to do so shall be a material
breach of this Lease. Lessor shall not be required to keep said deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use; to Lessee (or, at Lessor's option,
to the last assignee, if any , of Lessee's interest hereunder) at the
expiration of the term hereof, as it may be altered or amended and after
Lessee has vacated the Premises.
6. USE
6.1 USE. The Premises shall be used and occupied only for general office
use, electronic R&D and manufacturing and Lessee shall not use or occupy the
Premises or permit the same to be used for any other purpose.
6.2 COMPLIANCE WITH LAW. Lessee shall, at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by Lessee of the Premises. Lessee shall not use or permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant of the building
containing the Premises, which shall tend to disturb such other tenants.
6.3 CONDITION OF PREMISES. Lessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the suitability of the Premises for the conduct
of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraph 9 and
except for damage caused by any negligent or intentional act or omission of
Lessee, Lessee's agents, employees or invitees, Lessor, at Lessor's expense,
shall keep in good order, condition and repair the foundations, exterior
walls and the exterior roof of the Premises. The Lessee shall give the Lessor
prompt notice of any defects or breakage in the structure, equipment, fixture
or of any unsafe conditions upon or within the Premises. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair.
7.2 LESSEE'S OBLIGATIONS.
(a) Lessee shall, at its expense throughout the term of this Lease,
maintain, service, replace and keep in good repair the interior structures and
mechanical equipment, including such items as floors, ceilings, walls, doors,
glass, plumbing, painting, heating and cooling equipment, air conditioning,
partitions, electrical and electrical fixtures, and surrender same upon the
expiration of the term herein or renewal thereof in the same condition as
received, ordinary wear and use excepted.
(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
broom clean, ordinary wear and tear excepted. Lessee shall repair any damage to
the Premises occasioned by the removal of its trade fixtures, furnishings and
equipment pursuant to Paragraph 7.3 which repair shall include the patching and
filling of holes and repair of structural damage.
7.3 ALTERATIONS AND ADDITIONS.
(a) Alterations may not be made to the Premises without the prior
written consent of the Lessor, and any alterations of the Premises, excepting
movable furniture and machinery and trade fixtures, shall become part of the
realty and belong to the Lessor upon termination of this Lease. However, this
shall not prevent the Lessee from installing trade fixtures, machinery or
other trade equipment in conformance with the local ordinances, provided the
Premises are not damaged by the removal thereof. The Lessee shall keep the
Premises, the building and the property in which the Premises are situated
free from any liens arising out of any work performed for, material furnished
to or obligations incurred by the Lessee. It is further understood and agreed
that under no circumstance is the Lessee to be deemed the agent of the Lessor
for any alteration, repair or operation of the building upon the Premises,
the same being done at the sole expense of the Lessee, and all contractors,
materialmen, mechanics and laborers are hereby charged with notice that they
must look to the Lessee only for the payment of any charge for work done and
materials furnished upon the Premises during the term of this Lease.
(b) Lessor shall have the right to require removal of alterations and
additions but absent such demand, all improvements, additions and utility
installations, except trade fixtures and machines, shall remain the property of
Lessor.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Lessor and Lessee against any liability arising
out of the ownership, use, occupancy, or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be in an amount of not less
than $100,000 for injury to or death of one person in any one accident or
occurrence and in an amount of not less than $300,000 for injury to or death
of more than one person in any one accident or occurrence. Such insurance
shall further insure Lessor and Lessee against liability for property damage
of at least $50,000. The limits
<PAGE>
of said insurance shall not, however, limit the liability of Lessee hereunder.
In the event that the Premises constitute a part of a larger property, said
insurance shall have a Lessor's Protective Liability endorsement attached
thereto. If Lessee shall fail to procure and maintain said insurance, Lessor
may, but shall not be required to, procure and maintain the same, but at the
expense of Lessee.
8.2 INSURANCE POLICIES. Insurance required hereunder shall be in
companies rated AAA or better in "Best's Insurance Guide." Lessee shall
deliver to Lessor copies of policies of liability insurance required under
Paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance with loss payable clauses satisfactory to Lessor. No such policy
shall be cancellable or subject to reduction of coverage or other
modification except after the expiration of such policies at which time
Lessee must furnish Lessor with renewals or "binders" thereof, or Lessor may
order such insurance and charge the cost thereof to Lessee which amount shall
be payable by Lessee upon demand. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in
Paragraph 8.3.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Premises in the amount of the full replacement value thereof, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief and special extended perils
(all risk).
8.4 WAIVER OF SUBROGATION. Lessee and Lessor each hereby waives any and
all rights of recovery against the other or against the officers, employees,
agents and representatives of the other for loss of or damage to such waiving
party or its property or the property of others under its control, where such
loss or damage is insured under any insurance policy in force at the time of
such loss or damage. Lessee and Lessor shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
8.5 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises or from
the conduct of Lessee's business or from any activity, work, or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere, and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease or
arising from any negligence of the Lessee or any of the Lessee's agents,
contractors or employees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in the defense of any such claim or any
action or proceeding brought thereon and in case any action or proceeding be
brought against Lessor by reason of any such claim. Lessee, upon written
notice from Lessor, shall defend the same at Lessee's expense with counsel
satisfactory to Lessor. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons
in, upon or about the Premises arising from any cause and Lessee hereby
waives all claims in respect thereof against Lessor.
8.6 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or for any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, construction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or light fixtures or from any
other cause whether the said damage or injury results from conditions arising
upon the Premises or upon other portions of the building of which the Premises
are a part or from other sources or places, and regardless of whether the cause
of such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, occupant, if any, of the building in which the
Premises are located. It shall be the sole obligation of Lessee to insure its
property, trade fixtures and equipment located on the Premises from any and all
loss or damage.
9. DAMAGE OR DESTRUCTION.
9.1 DAMAGE OR DESTRUCTION. If, during the term of this Lease or extension
thereof, all or part of the building or structures now or hereafter located upon
the Premises should be destroyed partially or totally by fire or other casualty,
this Lease shall continue thereafter in full force and effect except as
hereinafter provided, and the Lessor may cause the reconstruction of said
building within 180 days following such destruction to substantially the same
condition in which it did exist at the time immediately preceding such
destruction. The Lessee's obligation to pay rental to the Lessor hereunder shall
abate from the date of such destruction until completion of such reconstruction,
and the terms hereof shall be automatically extended for a period of time
equivalent to that during which rent is abated as aforesaid. In the event the
Lessor does not commence reconstruction, repair or replacement of the
improvements within 60 days after loss or damage, this Lease shall be deemed
terminated and of no further force or effect.
9.2 ABATEMENT OF RENT: LESSEE'S REMEDIES. Except for abatement of rent, if
any, Lessee shall have no claim against Lessor for any damage suffered by reason
of any such damage, destruction, repair or restoration.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAX. Lessor shall pay all real property taxes applicable
to the Premises; provided, however, that Lessee shall pay, as Additional Rent,
its prorata share of all taxes and assessments levied and passed upon the real
property of which the Premises are a part during the Lease Term hereof. Such
payment shall be made by Lessee within thirty (30) days after receipt of
Lessor's written statement setting forth the payment due and the reasonable
computation thereof. If the Lease Term shall not expire concurrently with the
expiration of the tax fiscal year, Lessee's liability for taxes for the last
partial Lease Year shall be prorated on an annual basis. For purposes of this
Paragraph and otherwise in this Lease, "Taxes" shall mean real estate taxes,
assessments (whether general or special), sewer rents, rates and charges,
transit taxes, taxes based on the receipt of rent, and any other federal, state
or local government charge, general, special, ordinary or extraordinary, that
may now or hereafter be levied or assessed against the Building(s) of which the
Premises are a part, or the land on which the Building(s) stands.
10.2 LESSEE'S "PROPORTIONATE SHARE" OF REAL PROPERTY TAX. Lessee's
"ProRata Share" shall mean a fraction, the numerator of which shall be the
number of square feet in the Premises and the denominator of which shall be the
total number of square feet of real property in the entire complex of which the
Premises are a part.
10.3 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within ten (10) days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.
11. COST OF LIVING ADJUSTMENT TO RENT. The rent, as set forth in this Lease or
as provided for in any amendment or extension thereof, shall be increased yearly
by the percentage increase, if any, in the Consumer Price Index, as published by
the United States Department of Labor's Bureau of Labor Statistics.
The base for determining the adjustment shall be the index figure for
the month which is three months prior to the month in which the Lease commences
as shown in the Consumer Price Index for all Urban Consumers, U.S. City Average,
All Items (1967 = 100) CPI-U as compared to the index figure which is three
months prior to each anniversary date of this Lease. Should the aforementioned
index be discontinued, the Lessor may substitute any official index published by
the United States Department of Labor or similar governmental agency as may then
be in existence.
In the event that the U.S. Department of Labor, Bureau of Labor
Statistics, changes the publication frequency of the Price Index (as defined in
this section) so that a Price Index is not available to make a cost-of-living
adjustment of annual rent, the cost-of-living adjustment shall be based on the
percentage difference between the Price Index for the closest preceding month
for which a Price Index is available and the Price Index for the Base Month.
12. BUILDING OPERATING EXPENSES. In addition to the rental herein provided to
be paid by Lessee to Lessor, Lessee shall pay to the Lessor, on or before the
first day of each month, as Additional Rent, Lessee's proportionate share of
Building Operating Expenses, as hereinafter defined, based upon a fraction,
the numerator of which shall be the number of square feet in the Premises and
the denominator of which shall be the total number of square feet of real
property in the entire complex of which the Premises are a part.
This figure shall be adjusted annually based upon Lessor's best
estimate of costs of the then current year. Within ninety(90) days after the
end of each calendar year, Lessee shall receive an accounting statement
showing the adjustment, the actual Annual Operating Costs for the prior year
and the amount actually paid by Lessee. If the amount paid by Lessee exceeds
Lessee's share of actual costs, the excess shall be credited against Lessee's
next payment(s) of Operating Costs. If the amount paid by Lessee is less than
Lessee's proportionate share of actual costs, Lessee shall pay the deficit
within ten (10) days of Lessee's receipt of the statement.
For purposes of this Section, Building Operating Expenses, which is
inclusive of common areas, shall mean the sum of all expenses incurred by Lessor
in connection with the operation, management, repair and maintenance of the
Building(s) and common areas including, but not limited to, rubbish and snow
removal, window cleaning, utilities, janitorial service, maintenance of all
parking lots, driveways, landscaping, streets and perimeter berms, including any
governmental surcharge, fee or assessment imposed with respect to the parking
facilities to the extent paid by Lessor and not passed on to users of said
parking facilities and all fire and extended coverage and other insurance
covering the Building(s). Without limiting the generality of the foregoing,
Building Operating Expenses shall also include all materials and supplies,
salaries, wages and other expenses incurred with respect to maintenance,
gardening, landscaping, repaving, repainting, cleaning, security and fire
protection and an amount equal to ten percent (10%) of all such expenses to
cover Lessor's administrative and overhead expenses. Lessor may, in addition to
any other remedy, impose a reasonable charge for excess usage of Building(s)
facilities and services, which express usage is occasioned by greater than
normal usage of utilities or by use of the Premises. Executive salaries, general
overhead and depreciation of improvements shall not be included in the foregoing
expenses.
13. UTILITIES. Lessee shall pay for all gas, heat, light, power, telephone
and other utilities and services supplied to the Premises, together with any
taxes thereon.
14. ASSIGNMENT AND SUBLETTING.
14.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily, or by
operation of law, assign, transfer, mortgage, sublet or otherwise transfer or
encoumber all or any part of Lessee's interest in this Lease or in the
Premises without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Any attempted assignment, transfer, mortgage,
encumbrance or subletting without such consent shall be void and shall
constitute a breach of this Lease. Lessor may condition its consent to any
subletting upon entering into a lease directly with the proposed subtenant,
in which case the portion of the Premises so leased shall be released from
this Lease and Lessee shall have no further obliga-
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tions with respect to the released space.
14.2 NO RELEASE OF LESSEE. Except where Lessor requires a new Lease
directly with the proposed subtenant, as set forth above, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be seemed consent to any
subsequent assignment or subletting.
15. DEFAULTS; REMEDIES.
15.1 DEFAULTS. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in Paragraph (b) above, where such failure shall continue
for a period of thirty (30) days after written notice hereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than thirty (30) days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commenced such cure withing said
30-day period and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; (ii) the filing by or against Lessee
of a petition to have Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy unless, in
the case of a petition filed against Lessee, the same is dismissed within sixty
(60) days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease where such seizure is not discharged within thirty (30)
days.
15.2 REMEDIES. In the event of any such default or breach by Lessee,
Lessor may, at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event,
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee provides could be reasonably avoided
and that portion of the leasing commission paid by Lessor applicable to the
unexpired term of this Lease. In the event Lessee shall have abandoned the
Premises, Lessor shall have the option of (i) retaking possession of the
Premises and recovering from Lessee the amount specified in this Paragraph
15.2(a), or (ii) proceeding under Paragraph 15.2(b).
(b) Maintain Lessee's right to possession, in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event, Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state in which the property is
located.
15.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time but in no
event later than thirty (30) days after written notice by Lessee to Lessor;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance, then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion.
15.4 LATE CHARGES. Notwithstanding anything contained in this Lease to
the contrary, Lessee hereby acknowledges that late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, Lessee shall pay to Lessor a late charge
equal to ten percent (10%) of such overdue amount. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
16. CONDEMNATION. If the Premises, or any portion thereof, are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than 10% of the
floor area of the Premises is taken by condemnation, Lessee may, at Lessee's
option to be exercised in writing only withing ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of
such notice, within ten (10) days after the condemning authority shall have
taken possession), terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the rent
shall be reduced in the proportion that the floor area taken bears to the
total floor area of the Premises. Any award for the taking of all or any
part of the Premises under the power of eminent domain or any payment made
under the threat of the exercise of such power shall be the property of
Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of
damage to Lessee's trade fixtures and removable personal property. In the
event that this Lease is not terminated by reason of such condemnation,
Lessor shall, to the extent of severance damages received by Lessor in
connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess
of such severance damages required to complete such repair.
17. GENERAL PROVISIONS.
17.1 ESTOPPEL CERTIFICATE.
(a) Lessee shall, at any time upon not less than ten (10) days prior
written notice from Lessor, execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance or refinance the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender designated by Lessor
such financial statements of Lessee as may be reasonably required by such
Lender. Such statements shall include the past three years' financial
statements of Lessee. All such financial statements shall be received by Lessor
in confidence and shall be used only for purposes herein set forth.
17.2 LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title or a Lessee's
interest in a ground Lease of the Premises. In the event of any transfer of
such title or interest, Lessor herein named (and in case of any subsequent
transfers the then grantor) shall be relieved from and after the date of such
transfer of all liability for Lessor's obligations thereafter to be
performed, provided that any funds in the hands of Lessor or the then grantor
at the time of such transfer in which Lessee has an interest shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns only during their respective periods of ownership.
17.3 SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way effect the
validity of any other provision hereof.
17.4 TIME OF ESSENCE. Time is of the essence.
17.5 INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification.
17.6 NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and may be served personally or by regular mail, addressed to
Lessor and Lessee respectively, at the addresses set forth after their
signatures at the end of this Lease.
17.7 WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof other than the failure of Lessee to pay the particular rent so
accepted regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
17.8 RECORDING. Lessee shall not record this Lease without Lessor's prior
written consent and such recordation shall, at the option of Lessor, constitute
a noncurable default of Lessee hereunder. Either party shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
17.9 HOLDING OVER. If Lessee remains in possession of the Premises or any
part thereof after the expiration of the term hereof without the express written
consent of Lessor, such occupancy shall be a tenancy from month to month at a
rental in the amount of double the last monthly rental plus all other charges
payable hereunder and upon all the terms
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hereof applicable to a month-to-month tenancy.
17.10 CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
17.11 COVENANTS AND CONDITIONS. Each provision of this Lease to be
performed by Lessee shall be deemed both a covenant and a condition.
17.12 BINDING EFFECT. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17.2, this Lease shall bind the parties, their personal representatives,
successors and assigns.
17.13 SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
Lease, mortgage, deed of trust or any other hypothecation for security now or
hereafter placed upon the property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms.
If any mortgagee, trustee or ground lessor shall elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground Lease and shall
give written notice thereof to Lessee, this Lease shall be deemed prior to
such mortgage, deed of trust or ground Lease whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of trust or ground
Lease as of the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any mortgage, deed
of trust or ground Lease, as the case may be, and failing to do so within ten
(10) days after written demand does hereby make, constitute and irrevocably
appoint Lessor as Lessee's attorney in fact and in Lessee's name, place and
stead, to do so.
17.14 ATTORNEY'S FEES. If either party brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party, in any such
action, on trial or appeal, shall be entitled to reasonable attorney's fees to
be paid by the losing party as fixed by the court.
17.15 LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times between 8 a.m. and 5 p.m. weekdays for
the purpose of inspecting the same, showing the same to prospective purchasers
or lenders and making such alterations, repairs, improvements or additions to
the Premises or to the building of which they are a part as Lessor may deem
necessary or desirable. Lessor may at any time place on or about the Premises
any "For Sale" and "For Lease" signs.
17.16 SIGNS AND AUCTIONS. Lessee shall not place any sign upon the Premises
or conduct any auction thereon without Lessor's prior written consent, provided,
however, Lessee shall place and maintain a sign as per Lessor's specifications.
Specific sign criteria shall be set forth in Exhibit "C" attached hereto and
incorporated herein.
17.17 MERGER. The voluntary or other surrender of this Lease by Lessee,
or a mutual cancellation thereof, shall not work a merger and shall, at the
option of Lessor, terminate all or any existing subtenancies or may, at the
option of the Lessor, operate as an assignment to Lessor of any or all of
such subtenancies.
17.18 CORPORATE AUTHORITY. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he or she is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Lessee is a corporation, Lessee shall, withing thirty (30)
days after execution of this Lease, deliver to Lessor a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
17.19 RIGHT TO MOVE. Lessor shall have the right, at any time during the
term of this Lease upon giving Lessee sixty (60) days notice in writing, to
provide and furnish Lessee with space elsewhere in the industrial park of the
approximate same size and area as the herein Premises and to remove and place
Lessee in such new space, at Lessor's sole cost and expense, with all terms,
covenants and provisions contained herein remaining in full force and effect.
If Lessee declines to accept such substituted Premises, this Lease Agreement
shall terminate at the expiration of such sixty (60) day notice period or at
such earlier date as agreed upon by Lessor and Lessee.
17.20 PARKING AND COMMON AREAS. The Lessee, its agents, employees and
invitees shall be entitled to park in common with other tenants of Lessor
providing that it agrees not to overburden the parking facilities and agrees to
cooperate with the Lessor and other occupants of the property in the use of the
parking facilities. the Lessor specifically reserves the right in its absolute
discretion to determine whether parking facilities are becoming overburdened and
in such event to allocate the parking spaces among the Lessee and other
occupants, their agent, employees and business invitees using the parking
facilities. All loading operations for receipt or shipment of goods, wares and
merchandise by the Lessee shall be done in the rear of the Premises or in such
area therein which is specifically designated in writing by the Lessor.
17.21 SAFETY. Lessee will maintain on the Premises at all times during the
term hereof adequate number, size and type of fire extinguishers as is
appropriate to Lessee's business. Lessee will at all times adhere to good
safety practices or as may be required by safety inspectors.
The parties hereto have executed this Lease on the date set forth hereinabove.
Life Investors Insurance Company of
WITNESS: LESSOR: America, by AEGON USA Realty
Management, Inc. its authorized
agent
/s/Joan Sebers By:/s/ illegible signature
- --------------------------------- ---------------------------------------
Address: 4333 Edgewood Road NE
----------------------------------
Cedar Rapids, IA 52499
------------------------------------------
Image Guided Technologies, Inc.,
WITNESS: LESSEE: a Colorado Corporation
/s/ Robert E. Sillgman By:/s/ Jeffrey J. Hiller
- --------------------------------- ---------------------------------------
Address: 5710 Flatiron Parkway
----------------------------------
Boulder, CO 80301
------------------------------------------
4
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty this ____ day of
January, 1996.
Guarantor: S.M. Stoller Corporation, a Delaware corporation
5700 Flatiron Parkway
Boulder, CO 80301
By: /s/Dorothy Morse
----------------------
Its: Vice President
----------------------
Witness: /s/Gemmi C. Holland
--------------------------------
Witness:
--------------------------------
The S.M. Stoller Corporation shall not be charged late fees, under this
guarantee, for non-payment of rent by Image Guided Technologies, Inc. if: The
S.M. Stoller Corporation makes this payment within ten days of written
notification by Life Investors Company of America.
Any amounts due Life Investors Company of America by the S.M. Stoller
Corporation, under this guarantee, shall not exceed an amount that The S.M.
Stoller Corporation would have paid in rent under their Lease on the same space
through April 30, 1997.
/s/ illegible
<PAGE>
RIDER
THE PROVISIONS OF THIS RIDER SHALL BE PARAMOUNT AND SHALL SUPERSEDE THE PRINTED
PROVISIONS OF THIS LEASE AND ALL EXHIBITS, NOTWITHSTANDING ANYTHING THEREIN TO
THE CONTRARY. IN THE EVENT OF ANY CONFLICT, INTERPRETATION OR INCONSISTENCY,
THE PROVISIONS OF THIS RIDER SHALL CONTROL.
1. AS TO PARAGRAPH 4: Subject to adjustments as otherwise provided in said
Lease, the monthly rental shall be as follows:
Commencing February 1, 1996 and continuing through January 31, 1997, the
sum of $110,458.44 per annum, payable monthly, in advance, at the rate of
$9,204.87 per month.
Commencing February 1, 1997 and continuing through January 31, 1998, the
sum of $115,981.32 per annum, payable monthly, in advance, at the rate of
$9,665.11 per month.
Commencing February 1, 1998 and continuing through January 31, 1999, the
sum of $121,780.44 per annum, payable monthly, in advance, at the rate of
$10,148.37 per month.
2. AS TO PARAGRAPH 5: Notwithstanding any of the terms and provisions of
Paragraph 5 to the contrary, whereas this Lease will be guaranteed by S.M.
Stoller Corporation, a Delaware corporation, from February 1, 1996 through April
30, 1997, Lessee shall pay its security deposit to S.M. Stoller Corporation
prior to Lease commencement. On May 1 1997, Lessee's security deposit, or the
remainder thereof, shall be transferred to Lessor and held by Lessor, per the
terms and provisions of Paragraph 5.
2. AS TO PARAGRAPH 6.2: The following shall be inserted in line 3 of
Paragraph 6.2 immediately following the word "tenants.":
(a) Lessee shall comply with all applicable federal, state and local
environmental laws, ordinances, orders or regulations affecting the Premises,
the operation of Lessee's business at the Premises, the use of the Premises,
or the removal of any hazardous substance or non hazardous substances
therefrom, as now or hereafter defined. Notwithstanding anything in this
Lease to the contrary. Lessee shall not, without Lessor's prior written
consent and subject to reasonable condition imposed by Lessor, place or
permit on the Premises or otherwise use, store, manufacture, process or
dispose of any oil, grease or hazardous substance regulated by public
authority.
(b) Lessee shall not permit on-site disposal of any oil, grease or
hazardous substance. No hazardous or industrial wastes, contaminated
substances or those resulting from manufacturing or processing, shall be
deposited in containers provided for trash removal. All waste materials,
including Lessee's construction or remodeling wastes, other than ordinary
sanitary commercial trash, shall be removed from the Premises and properly
disposed of in compliance with all applicable laws at Lessee's sole cost and
expense.
(c) Lessee docs hereby agree to indemnify and hold Lessor harmless of,
from and against all claims, actions liens, demands, costs expenses, fines and
judgments (including legal costs and attorney's fees) resulting from or arising
by reason of any of the following: (i) any spills or contamination of air, oil
or water by oil, grease or hazardous substances at or around the Premises or
upon removal therefrom: (ii) the violation of any environmental laws or
regulations; or (iii) the violation of any of the provisions of this Paragraph
6. Notwithstanding the above, this indemnity shall not cover or apply to
conditions or matters: (i) existing as of the commencement date of this Lease,
or (ii) resulting from the actions or in action's or other tenants or
originating in premises of other tenants.
(d) Upon ten (10) days prior written notice request from Lessor, Lessee
shall execute, acknowledge and deliver to Lessor a written statement, in form
satisfactory to Lessor, certifying that no hazardous substances have been
brought on the Premises during the term of this Lease, that Lessee has not
disposed of any oil, grease or hazardous substance at the Premises and that any
such substances used, processed or generated at the Premises have been disposed
of properly.
(c) Lessor warrants that to the best of its knowledge no hazardous or
toxic substances have been released at the Premises and the Premises are in
compliance with all environmental laws and regulations.
<PAGE>
(f) Notwithstanding any of the above provisions to the contrary, Lessee
shall not be responsible for any pre existing conditions or substances existing
upon the Premises as of the commencement of this Lease, nor shall Lessee be
responsible for any conditions or matters resulting form the action or inactions
of Lessor, or Lessor's employees, agents, representatives or contractors.
3. AS TO PARAGRAPH 7.3: Notwithstanding any of the terms and provisions of
Paragraph 7.3 to the contrary, Lessor shall, at Lessor's sole cost and expense,
provide the following improvements to the Premises:
(i) Seal off the doorway between Suite 5710 and the other areas of
the building which are not part of the Premises.
(ii) Install VCT tile in the area lined out on the attached layout.
(iii) Clean the carpets of the Premises.
(iv) Touch-up paint the walls of the Premises as needed.
Any improvements in excess of $4,000 above shall be at Lessee's sole cost and
expense.
Notwithstanding any of the terms and provisions of Paragraph 7.3 to the
contrary, Lessee may, at Lessee's sole cost and expense, remove, then re-
install, exterior windows and/or interior walls of the Premises in order to move
a piece of Lessee's equipment into the Premises. Permission is given to Emerald
Construction to perform such work. Lessee hereby agrees that upon completion of
said work, all windows, doors and walls of the Premises will be restored to
their previous condition.
4. AS TO PARAGRAPH 8.1 The body of Paragraph 8.1 is deleted and in lieu and in
place thereof is inserted the following:
"Notwithstanding anything to the contrary set forth in this Lease. Lessee
covenants and agrees that so long as this Lease remains in effect and during
such other times as Lessee occupies the Premises or any part thereof, Lessee at
its sole cost and expense, shall obtain, maintain and keep in full force and
effect as to the Premises:
(a) Commercial General Liability Insurance including Blanket
Contractual, Personal Injury, Fire Legal Liability, Broad Form Liability,
Owned, Non-Owned and Hired Automobile coverages naming Lessee as insured, and
Lessor, any mortgagee of the Building, any Lessor under the Lease of the
property on which the Building is located, and AEGON USA Realty Management,
Inc. as Lessor's agent, as additional insureds, with minimum limits of
$1,000,000 combined single limit for property damage and bodily injury per
occurrence for any and all claims for injury or damage to persons or property
or for the loss of life or damage to persons or property of for the loss of
life or or of property occurring upon, in or about the Premises and the
public portions of the Building arising out of or in connection with any act
or omission of Lessee, its employees, agents, contractors, customers and
invitees.
(b) All Risk Insurance including without limitation sprinkler leakage and
flood and earthquake, if flood and earthquake exposure exists, and vandalism and
malicious mischief on a 100% replacement cost basis covering all contents,
merchandise, inventory, equipment, floor coverings, fixtures and improvements
owned or installed by Lessee. Lessee shall apply all insurance proceeds
attributable to any of the foregoing items to the repair and restoration
thereof. In addition, Lessee shall obtain and keep in full force and effect
during the term of this lease Business Interruption Insurance with All Risk
Perils and such other insurance in such amounts as Lessor shall reasonably
require.
(c) Worker's Compensation Insurance as required by law and Employers'
Liability Coverage for a minimum of $100,000 per occurrence.
(d) The limits of insurance coverage shall not limit the liability of
Lessee. If Lessee fails to procure or maintain insurance coverages as
provided above. Lessor may, but shall not be required to, procure and
maintain coverage at the expense of Lessee."
THIS RIDER CONSISTS OF TWO (2) TYPEWRITTEN PAGES.
<PAGE>
RULES AND REGULATIONS
GEMINI II BUILDING
(1.) The sidewalks, entrances, and passage courts shall not be obstructed
for any purpose other than ingress and egress.
(2.) No awnings or other projections shall be attached to the outside walls
of the building. No curtains, blinds, shades or screens shall be attached to or
hung in or used in connection with any window or door of the premises, without
prior written consent of the Lessor. All electrical ceiling fixtures hung in
offices of spaces along the perimeter of the building must be fluorescent and/or
of quality, type, design, and bulb color approved by Lessor.
(3.) No sign, advertisement or notice shall be exhibited, painted or
affixed by tenant so as to be seen from the outside of the premises or the
building without prior written consent of the Lessor. In the event of the
violation of the foregoing, Lessor may remove same without liability and may
charge Lessee the expenses incurred in such removal. Signs on directory tablet
shall be inscribed, painted or affixed by Lessor at the sole cost and expense of
the Lessee.
(4.) Lessee shall not mark, paint, drill into, or in any way deface any
part of the premises or the building. No boring, cutting or stringing of wires
or laying of floor coverings shall be permitted without the prior written
consent of the Lessor.
(5.) No animals of any kind shall be brought into or kept in or about the
premises. Lessee shall not cause or permit any unusual or objectionable odors
to be produced in or permeate the building, including excessive cigarette, cigar
or pipe smoke odor.
(6.) Lessee shall not occupy or permit any portion of the premises to be
occupied or used for the manufacture or sale of liquor, narcotics, or tobacco in
any form, or as a medical office, dental office, barber shop, beauty salon,
cosmetology or manicure shop. The premises shall not be used for lodging or
sleeping or for any illegal or immoral purpose.
(7.) Lessee shall not make or permit to be made any unseemly or disturbing
noise or disturb or interfere with occupants of premises or neighboring
buildings or those having business with them whether by the use of any musical
instrument, radio, phonograph, unusual noise or in any other way.
(8.) Lessee, it's agents, employees, representatives, or invitees shall not
at any time store upon the premises any inflammable, combustible or explosive
fluid, chemical or substance.
(9.) No additional locks, hooks or attachments of any kind shall be placed
upon any of the doors or windows, nor shall any changes be made in the existing
locks or mechanism thereof without prior consent of Lessor.
(10.) No air conditioning or heating unit, wood burning stove or similar
apparatus shall be installed on the roof or inside the premises without the
prior written consent of the Lessor.
(11.) Plastic chair mats are mandatory for all chairs equipped with
rolling casters. Carpet damage resulting from negligence in this regard will
be billed to Lessee or deducted from Lessee's security deposit for such
damage up to and including the cost of replacing the entire carpet.
(12.) Solicitors are not permitted on the premises and should be immediately
reported to Lessor.
(13.) Lessee shall, at Lessee's sole cost and expense, provide, install
and maintain one (1) fire extinguisher for every seventy (70) feet of travel
distance within the demised premises. Such fire extinguisher(s) shall be the
multipurpose ABC type with a minimum five (5) pound capacity.
(14.) Lessee, it's agents, employees, contractors, representatives, or
invitees shall not be permitted on the roof of any building without the prior
consent of the Lessor.
(15.) Lessee is required to breakdown all boxes and bag all paper trash
prior to disposing of same in dumpster.
(16.) Lessee will maintain the exterior of the warehouse service area in a
neat and clean fashion at all times. Storage of pallets or other materials
of any kind is not permitted outside the demised premises.
(17.) In addition to paragraph 17.20 of this lease, Lessee, it's agents,
employees, representatives, contractors, or invitees will not store any
vehicle(s) in the parking lot. In the event of violation of the foregoing,
Lessor may remove same without liability and at the sole cost and expense of
the vehicle owner.
<PAGE>
[MAP]
EXHIBIT A
<PAGE>
[MAP]
EXHIBIT B
<PAGE>
EXHIBIT "C"
In consideration of, and as an inducement for the granting,
execution and delivery of a certain Lease, dated contemporaneously with this
Guaranty (herein the "Lease"), by Life Investors Insurance Company of
America, the Landlord or Lessor therein named (herein the "Lessor") to Image
Guided Technologies, Inc., a Colorado Corporation, as the Tenant or Lessee
therein named (herein the "Lessee"), and in further consideration of the sum
of Ten ($10.00) Dollars and other good and valuable consideration paid by
Lessor to the undersigned, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, S.M. Stoller Corporation, a Delaware
corporation, (herein the "Guarantor"), hereby guarantees to the Lessor, its
successors and assigns, the full and prompt payment of Rent, as defined in
the Lease, and any and all other sums and charges payable by Lessee, its
successors and assigns, under the Lease, and hereby further guarantees the
full and timely performance and observance of all the covenants, terms,
conditions and agreements of the Lease to be performed and observed by
Lessee, its successors and assigns. Guarantor hereby covenants and agrees to
and with Lessor, its successors and assigns, that if default shall at any
time be made by Lessee, its successors and assigns, in the payment of Rent,
or if Lessee should default in the performance and observance of any of the
terms, covenants, provisions or conditions contained in the Lease, Guarantor
shall and will forthwith pay such Rent to Lessor, its successors and assigns,
and any arrears thereof, and shall forthwith faithfully perform and fulfill
all of such terms, covenants, conditions and provision, and will forthwith
pay to Lessor all damages including, without limitation, all reasonable
attorneys fees, and disbursements incurred by Lessor or caused by any such
default and by the enforcement of this Guaranty. If at any time the term
"Guarantor" shall include more than one (1) person or entity, the obligations
of all such persons and entities under the Guaranty shall be joint and
several.
Guarantor agrees it shall not have any rights based on suretyship
or otherwise to stand in the place of the Lessor so as to compete with Lessor
as a creditor of Lessee, unless and until all claims of the Lessor under said
Lease shall have been fully paid and satisfied. Guarantor waives any right to
require that any security deposit or any other credit in favor of Lessee be
applied to Lessee's account. Guarantor also waives the benefits and
protection of any statute of limitations affecting Guarantor's liabilities
under this Guaranty.
This Guaranty is an absolute and unconditional Guaranty of payment
and of performance. It shall be enforceable against Guarantor, its
successors and assigns, without the necessity for any suit or proceedings on
Lessor's part of any kind or nature whatsoever against Lessee. Guarantor
waives any and all notices and demands to which Guarantor might otherwise be
entitled, with Guarantor further agreeing that the validity of this Guaranty
and the obligations of the Guarantor hereunder shall in no way be terminated,
affected, diminished or impaired by reason of the assertion or the failure to
assert by Lessor against Lessee, or against Lessee successors and assigns, of
any of the rights or remedies reserved to Lessor pursuant to the provisions
of the Lease. The phrase "successors and assigns" shall be deemed to include
the heirs and legal representatives of Lessee and Guarantor, as the case may
be.
This Guaranty shall be a continuing Guaranty, and the liability of
Guarantor hereunder shall in no way be affected, modified or diminished by
reason of any assignment, renewal, modification or extension of the Lease or
by reason of any modification or waiver of or change in any of the terms,
covenants, conditions or provisions of the Lease by Lessor and Lessee, or by
reason of any extension of time that may be granted by Lessor to Lessee, its
successors or assigns by reason of any dealings or transactions or matter of
thing occurring between Lessor and Lessee, its successors or assigns or by
reason of any bankruptcy, insolvency, reorganization, arrangement, assignment
for the benefit of creditors, receivership or trusteeship affecting Lessee,
whether or not notice thereof or of any thereof is given to Guarantor.
Neither Guarantor's obligation to make payment in accordance with the terms
of this Guaranty nor any remedy for the enforcement thereof shall be
impaired, modified, released, or limited in any way by an impairment,
modification, release, or limitation of the liability of Lessee or its estate
in bankruptcy, resulting from the operation of any present or future
provision of the U.S. Bankruptcy Code or from the decision of any court
interpreting the same.
Guarantor warrants and represents to Lessor that it has the legal
right and capacity to execute this Guaranty. In the event that this Guaranty
shall be held ineffective or unenforceable by any court or competent
jurisdiction, the Guarantor shall be deemed to be a Lessee under this Lease
with the same force and effect as if Guarantor were expressly named as a
joint Lessee herein. Guarantor expressly agrees (without in any way limiting
its liability under any other provision of this Guaranty) that Guarantor
shall, at the request of Owner, in the event of the termination of the Lease
due to Lessee's default, enter into a new lease with Owner on the same terms
and conditions as contained in the Lease immediately prior to its
termination, for a term commencing on the termination date of the Lease and
ending on the expiration date of the Lease,
As a further inducement to Lessor to make said Lease and in
consideration therefor, Lessor and the undersigned hereby agree that in any
action, proceeding or counterclaim brought by either the Lessor or the
undersigned against the other on any matters whatsoever arising out of or
in any way connected with said Lease or this guaranty, that Lessor and the
undersigned shall and do hereby waive a trial by jury.
This Guaranty shall be governed by and construed in accordance with
the laws of the jurisdiction in which the premises demised pursuant to the
Lease is located. All of the Lessor's rights and remedies under the Lease or
under this Guaranty are intended to be distinct, separate and cumulative, and
no such right or remedy therein mentioned is intended to be in exclusion of
or a waiver of the other right or remedy available to Lessor. This Guaranty
or any of the provisions thereof cannot be modified, waived or terminated,
unless in writing, signed by Lessor.
THIS GUARANTY SHALL TERMINATE AND EXPIRE AS TO OBLIGATIONS OF THE
LESSEE UNDER THE LEASE ARISING AFTER APRIL 30, 1997. AS TO OBLIGATIONS ARISING
OUT OF EVENTS OCCURRING PRIOR TO THAT DATE OF TERMINATION, GUARANTOR SHALL BE
LIABLE AS TO ALL SUCH OBLIGATIONS WHETHER OR NOT KNOWN AS OF THE DATE OF
TERMINATION. GUARANTOR SHALL ALSO BE RESPONSIBLE FOR ALL COSTS AND EXPENSES,
INCLUDING INTEREST AND ATTORNEY FEES, ASSOCIATED WITH THOSE OBLIGATIONS FOR
WHICH GUARANTOR IS RESPONSIBLE, INCLUDING THOSE COSTS AND EXPENSES FOR THE
PERIOD FOLLOWING THE DATE OF TERMINATION.
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 1 OF 9
Pixsys, Inc.
Domestic Sales Representation Agreement
SANDAB
THIS AGREEMENT made this 21st day of December, 1993, by and between Pixsys,
Inc., a corporation incorporated under the laws of the State
of Colorado having its principal office at 5680 Central Avenue, Unit B, Boulder,
Colorado 80301 ("Manufacturer"), and SANDAB, a corporation
incorporated under the laws of the State of Michigan having its principal office
at 570 South Glenhurst, Birmingham, Michigan 48009
("Representative"), as follows:
1. APPOINTMENT AND ACCEPTANCE - Manufacturer appoints Representative as its
exclusive representative to promote the sale of and sell
its Products (indicated in Provision #4 hereof; in the territory (indicated in
Provision #2 hereof); and Representative accepts the appointment and
agrees to sell and promote the sale of the Manufacturer's Products.
2. TERRITORY - Representative's Territory shall consist of the following:
Authorized Accounts in Michigan, Indiana, Ohio, Pennsylvania and
West Virginia. Accounts in Ontario, Canada will be considered to be part of the
Territory until such time as Manufacturer opts to terminate
Ontario as part of Representative's Territory. Ontario can, at Manufacturer's
option, be terminated independently of the other territories under the
terms outlined in Provisions #10 and 11 hereof. "Authorized Accounts" are as
defined in Provision #3 hereof.
3. AUTHORIZED ACCOUNTS/UNAUTHORIZED ACCOUNTS - "Unauthorized Accounts" shall be
defined as those accounts which are
specifically excluded from Representative's Territory and for which all
promotion, sales and service will be provided directly by Manufacturer.
"Authorized Accounts" are defined as those accounts which have not been
designated as Unauthorized Accounts by the Manufacturer. The
Representative is expected to promote for sale or sell the Manufacturer's
Products to Authorized Accounts. The Representative is not to promote
for sale or sell the Manufacturer's Products to Unauthorized Accounts except
where authorized by Manufacturer in writing in advance.
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 2 OF 9
Where such authorization is given, such accounts will be considered to be
Authorized Accounts.
Accounts in which the immediate or ultimate use of the Manufacturer's product is
in a hospital, clinic, medical center or other medical
environment shall be considered Unauthorized Accounts. Accounts in which the
Manufacturer's Product is used in dental or orthodontic
applications but not in other medical applications shall be considered
Authorized Accounts.
In recognition of Representative's prior efforts to develop sales and potential
sales among the following accounts, commissions will be paid to the
Representative on all payments received from these accounts prior to September
l, 1995. Commissions related to these accounts shall be paid in a
manner similar to that described for payment of commissions after termination as
defined in Provision #11 of this Agreement. The effective
termination date for these accounts only shall be August 31, 1993.
Representative shall receive commissions based on sales to the following
accounts under the terms of this paragraph:
Nomos Corporation
Picker International
Reality Imaging
4. PRODUCTS - The Products of the Manufacturer to be promoted for sale and sold
by the Representative are those products and services listed
on Manufacturer's current domestic price list(s). Products or services added to
the price list(s) from time to time are also to be promoted for sale
and sold by the Representative.
5. FORM OF COMPENSATION - Representative's compensation for service performed
hereunder shall be calculated as a percentage of the "net
invoice price" of the Manufacturer's Products invoiced to Authorized Accounts in
Representative's territory. However, when an order is initiated
in one territory and shipped into one or more different territories, the
Manufacturer will split the full commission among the Representatives
whose territories are involved. The Manufacturer will make this determination
in consultation with the Representatives involved based upon split
commission requests submitted in writing by those Representatives and will
advise the interested Representatives. The sum of the split
commission shares shall add up to a full commission.
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 3 OF 9
6. COMPUTATION AND PAYMENT OF COMMISSION
a) Commissions wall be paid at a rate of 10% of net invoice price on the sale
of all catalog items sold in Representative's territory at the
Manufacturer's standard quantity discount schedule. No commissions will be paid
under the terms of this Agreement on the sale of non-catalog
products or products sold at non-standard discounts. Commissions paid in these
circumstances will be paid under the terms of a separate
agreement and at the sole discretion of the company.
b) Commissions are due and payable on or before the twentieth (20th) day of the
month immediately following the month in which Manufacturer
receives payment from the customer as invoiced. If the commissions are not paid
when due, the amount not paid will accrue interest at 8% per
annum from the date due until paid.
c) Commissions for the sale of Products sold under a lease agreement are due
and payable on or before the twentieth (20th) day of the month
immediately following the month in which Manufacturer receives payment from the
leasing company. If Manufacturer does not receive full
payment at the time the lease is signed, commission will be paid in installments
as a percentage of the payments received by Manufacturer.
d) Manufacturer will send Representative a monthly tabulation of all invoices
with purchase order numbers, quantity, price and commission due.
e) At the time of payment of commissions to Representative, Manufacturer will
send Representative a commission statement showing:
i) commissions due and owing Representative for that period and
any prior periods, and
ii) commissions being paid (listing the invoices on which
commissions are being paid).
f) "Net invoice price" shall mean the total price at which an order is invoiced
to the customer including any quantity or other discounts and/or any
increase or decrease in the total amount of the order (even though such increase
or decrease takes place after the effective date of termination), but
excluding shipping and insurance costs, sales, use and excise taxes, and any
tariffs, duties and export fees involved in international shipments.
g) There shall be deducted from any sums due Representative:
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 4 OF 9
i) An amount equal to commissions previously paid or credited on
sales of Manufacturer's Products which have since been returned
by the customer or on allowances credited to the customer for any
reason by the Manufacturer; and
ii) An amount equivalent to commissions previously paid or credited
on sales which Manufacturer shall not have been fully paid by the
customer whether by reason of the customer's bankruptcy,
insolvency, or any other reason which, in Manufacturer's judgment
renders the account uncollectible. If any sums are ever realized
upon such uncollectible accounts, Manufacturer will pay
Representative its percentage of commission applicable at the
time of the original sale upon the net proceeds of such
collection.
h) "Order" shall mean any commitment to purchase Manufacturer's Products which
is invoiced to an authorized customer in Representative's
territory.
7. ACCEPTANCE OF ORDERS - All orders are subject to acceptance or rejection by
an authorized officer of Manufacturer at its home office and
to the approval of Manufacturer's credit department. Manufacturer shall be
responsible for all credit risks and collections.
If Manufacturer notifies customer of its acceptance or rejection of an order, a
copy of any written notification shall be transmitted to the
Representative. At least once every month Manufacturer shall supply
Representative with copies of all orders received directly by Manufacturer,
copies of all shipping notices, and copies of all quotations made to Authorized
Accounts in the territory.
8. TERMS OF SALE - All sales shall be at prices and upon terms established by
Manufacturer, and it shall have the right, in its discretion, from
time to time, to establish, change, alter or amend prices and other terms and
conditions of sale. Representative shall not accept orders in the
Manufacturer's name or make price quotations or delivery promises without the
Manufacturer's prior approval.
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 5 OF 9
9. REPRESENTATIVE'S RELATIONSHIP AND CONDUCT OF BUSINESS
a) Representative shall maintain a sales office in the territory and devote
such time as may be reasonably necessary to sell and promote
Manufacturer's Products within the territory.
b) Representative will:
i) conduct all of its business in its own name and in such manner as
it may see fit,
ii) pay all expenses whatever of its office and activities, and
iii) be responsible for the acts and expenses of its employees.
c) Nothing in this Agreement shall be construed to constitute Representative as
the partner, employee or agent of the Manufacturer nor shall
either party have any authority to bind the other in any respect, it being
intended that each shall remain an independent contractor responsible only
for its own actions.
d) Representative shall not, without Manufacturer's prior written approval,
alter, enlarge, or limit orders, make representations or guarantees
concerning Manufacturer's Products or accept the return of, or make any
allowance for such products.
e) Representative shall furnish to Manufacturer's Credit Department any
information which it may have from time to time relative to the credit
standing of any of its customers.
f) Representative shall abide by Manufacturer's policies and communicate same
to Manufacturer's accounts.
g) Manufacturer shall furnish Representative, at no expense to Representative,
samples, catalogs, literature and any other material necessary for
the proper promotion and sale of its Products in the territory. Any literature
which is not used or samples or other equipment belonging to
Manufacturer shall be returned to the Manufacturer at its request.
h) Manufacturer will keep Representative fully informed about sales and
promotional policies and programs affecting the Representative's
territory.
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 6 OF 9
10. TERMS OF AGREEMENT AND TERMINATION
This Agreement shall be effective on the date it is signed by both Manufacturer
and Representative as noted below and shall continue in force
until such time as it is terminated by either party under the terms of this
Provision #10. This Agreement may be terminated:
a) By Manufacturer:
i) immediately upon written notice to Representative by registered
or certified mail if there is a change of fifty (50%) percent or
more of the present ownership or control of the Representative's
business without Manufacturer's written consent, or
ii) if Representative, without Manufacturer's written consent,
offers, promotes or sells any product which is competitive with
any Product Representative is to offer, promote or sell for
Manufacturer in accordance with the terms of the Agreement, and
written notice of this breach of the Agreement is mailed to or
served upon Representative, the breach is not cured (10) days
after receipt of such notice by Representative, and written
notice of termination is mailed to or served upon Representative.
b) By Representative:
i) if Manufacturer, without Representative's written consent offers,
promotes or sells any product which is competitive with any
Product Representative is offering or selling for any other
manufacturer, and written notice of this breach of the Agreement
is mailed to or served upon Manufacturer, the breach is not cured
within ten (10) days after receipt of such notice by the
Manufacturer, and written notice of termination is mailed to or
served upon Manufacturer, or
ii) immediately upon written notice to Manufacturer by Registered or
Certified mail in the event Manufacturer sells substantially all
of the assets of its business or there is a change of fifty (50%)
percent or more of its present ownership, or it is merged with
another firm, corporation or business and Manufacturer is not the
surviving company.
c) By either party
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 7 OF 9
i) in the event of the other party's unreasonable and repeated
failure to perform the terms and conditions of this Agreement,
written notice of the failure is mailed to or served upon that
party, the failure is not cured within thirty (30) days after
receipt of such notice, and written notice of termination is
mailed to or served on that party, or
ii) upon immediate written notice to the other party in the event
that party has filed or has filed against it a petition in
bankruptcy (which is not dismissed within thirty (30) days after
it is filed) or that party makes an assignment for the benefit of
creditors, or
iii) with or without cause, when written notice of the termination is
mailed to or served upon the other party, termination being
effective 90 days after the other party receives written
notification of termination; or
d) By mutual written agreement.
11. RIGHTS UPON TERMINATION
a) Upon termination of this Agreement for any reason, Representative shall be
entitled to commissions or split commissions on all orders invoiced to
authorized customers in Representatives territory which are dated or
communicated to Manufacturer prior to the effective date of termination,
regardless of when such orders are shipped, or releases and shipments on such
orders take place, according to the following schedule:
Full commission:
on all invoices paid by Authorized Accounts within the 12 months
immediately following the termination date
50% of full commission:
on invoices paid by Authorized Accounts within months 13 through
24 following the termination date
0% (no commission):
no commission will be paid after month 24 following the
termination date
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 8 OF 9
b) Commissions referred to in this Provision #11 shall be paid on or before the
twentieth (20th) day of the month following the month in which the Manufacturer
receives payment for the orders.
12. GENERAL - This Agreement contains the entire understanding of the parties,
shall supersede any other oral or written agreements, and shall be binding upon
and inure to the benefit of the parties' successors and assigns. It may not be
modified in any way without the written consent of both parties. Representative
shall not have the right to assign this Agreement in whole or in part without
Manufacturer's written consent.
13. CONSTRUCTION OF AGREEMENT - This Agreement shall be construed according to
the laws of the State of Colorado.
14. 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 rules of the American
Arbitration Association then in force, and that the arbitration hearings shall
be held in or about Boulder, Colorado, USA. If the parties cannot agree upon an
arbitrator within ten (10) days after demand by either of them, either or both
parties may request the American Arbitration Association to name a panel of five
(5) arbitrators. The Manufacturer shall strike the names of two (2) on this
list, the Representative shall then strike two (2) names, and the remaining
name shall be the arbitrator. 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
that the expenses shall be otherwise assessed.
15. NOTICES - All notices, demands or other communications by either party to
the other shall be in writing and shall be effective upon personal
delivery or if sent by mail seventy-two (72) hours after deposited in the United
States mail, first class postage, prepaid, Registered or Certified,
and all such notices given by mail shall be sent and addressed as follows until
such time as another address is given by notice pursuant to this
Provision #15:
<PAGE>
SVENANDE.DOC
DECEMBER 21, 1993
PAGE 9 OF 9
To Manufacturer:
Pixsys, Inc.
568O-B Central Avenue
Boulder, CO 80301
(303) 447-0248
(303) 447-3905 (facsimile)
To Representative:
SANDAB, Inc.
570 South Glenhurst
Birmingham, MI 48009
(313) 644-0011
(313) 644-6965 (facsimile)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written in multiple counterparts, each of which shall be
considered an original.
MANUFACTURER: Pixsys, Inc.
By: /S/ TIMOTHY L. FEAVER
Name: Timothy L. Feaver
Title: Vice President, Sales & Marketing
REPRESENTATIVE: SANDAB, Inc.
By: /S/ SVEN ANDEN
Name: Sven Anden
Title: President
<PAGE>
ADDENDUM
--------
This document will serve as Addendum #1, dated 21 June, 1994 to contract between
SANDAB INC. (Consultant)and Pixsys Inc. (Company)
dated December 1993 (the "Agreement").
1. The Consultant will send to the Company monthly, by the 10th of the
month, a report summarizing previous month's activities. Each
quarter the Consultant will prepare a quarterly forecast for the
Territory.
2. Concerning the Pixsys/Imageware bundled package, the Company will pay
its regular commission of 10% on all Pixsys hardware sold by
Consultant, per Agreement. The Company will pay the Consultant 10%
commission rate on the 30% discount it receives from Imageware, for
selling Imageware/Pixsys bundled software.
3. Regarding the Imageware/Pixsys bundled software commission indicated
in #2 above, will only apply to sales within the Consultant's
Territory, as stated in the original agreement.
4. Future commissions due as a result of sales to the Company's
authorized VAR's and OEM's, located within the Consultant's Territory,
will result in 5% commission being paid to Consultant when the sale
originates outside the Consultant's Territory but that was purchased
within the Territory. Pixsys hardware and software sold in the
Consultant's Territory by a source located outside the Consultant's
Territory will result in 5% commission paid to the Consultant.
5. Activity regarding CDI, headquartered in Grand Rapids, Michigan, is
specifically excluded from the conditions stated in #4 above.
6. The State of Indiana is a non-exclusive part of the Consultant's
Territory. A list of potential Indiana accounts will be assembled by
both parties, and the Consultant has the first right to any Automotive
related accounts located in Indiana and any other accounts that are
not listed within the State of Indiana.
Agreed:
Pixsys, Inc. SANDAB INC.
By: /S/ JEFFREY J. HILLER By: /S/ SVEN ANDEN
----------------------------- -----------------------------
Title: V.P. Title: PRESIDENT
-------------------------- --------------------------
<PAGE>
EMPLOYMENT AGREEMENT
This Employment agreement ("Agreement") is entered into as of January
1, 1996, between Pixsys, Inc., d/b/a Image Guided Technologies, Inc., a Colorado
corporation (the "Company"), and Paul L. Ray ("Ray").
In consideration of the mutual covenants and conditions set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Ray in the capacity of
Chairman of the Board and Chief Executive Officer. Ray accepts such employment
and agrees to perform such services as are customary to such office and as shall
from time to time be assigned to him by the Board of Directors.
2. TERM. Subject to earlier termination as provided in Section 5,
the employment hereunder shall be for an initial period of one year, commencing
on January 1, 1996 (the "Commencement Date") and ending on December 31, 1996,
and shall be automatically renewed on the same terms and conditions for an
additional one-year period unless either party notifies the other prior to the
expiration of the initial term of its desire not to renew the Agreement. Ray's
employment will be on a full-time basis requiring the devotion of such amount of
his productive time as is necessary for the efficient operation of the business
of the Company.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. For the performance of Ray's duties hereunder, the
Company shall pay Ray an annual salary of $105,000, payable (less required
withholdings) no less frequently than twice monthly.
3.2 BENEFITS. Ray shall be entitled to such medical, disability
and life insurance coverage and such vacation, sick leave and holiday benefits,
if any, as are made available to the Company's top executive personnel, all in
accordance with the Company's benefits program in effect from time to time.
3.3 REIMBURSEMENT OF EXPENSES. Ray shall be entitled to be
reimbursed for all reasonable expenses, including but not limited to expenses
for travel, meals and entertainment, incurred by Ray in connection with and
reasonably related to the furtherance of the Company's business.
<PAGE>
3.4 ANNUAL REVIEW. On each anniversary of the Commencement
Date, the Board of Directors will review Ray's performance and compensation
hereunder (including salary, bonus and stock options and/or other equity
incentives) and will consider whether to increase such compensation, but will
not have authority, as the result of such review, to decrease any portion of
such compensation without the written consent of Ray.
3.5 OPTIONS. Notwithstanding anything to the contrary set forth
in the stock option agreements for options heretofore granted to Ray by the
Company, such options shall expire seven years from the date of grant and shall
remain exercisable during such seven year period despite his earlier termination
of employment. Options not vested on his termination of employment, shall on
termination of employment, unless the Board of Directors otherwise determines,
be deemed to have been forfeited.
4. CHANGE OF CONTROL. In the event of a Change of Control of the
Company (as defined below), all options then granted to Ray which are unvested
at the date of the Change of Control will be immediately vested. In addition,
in the event of a termination of Ray's employment hereunder for any reason
(other than as set forth in Section 5.1(f)) following a Change of Control, the
Company will promptly pay Ray, in addition to the amounts required under Section
5.2(a), a lump sum severance amount payable immediately upon such termination of
employment, equal to one-half of his then annual salary. This payout shall be
in lieu of any amount which may otherwise be due under Section 5.2(b).
As used herein, a "Change of Control" of the Company shall be deemed
to have occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as well as immediately
exercisable voting power) representing effective control of the Company to a
person or group of related persons who, on the date of this Agreement, is not
affiliated (within the meaning of the Securities Act of 1933) with the Company,
whether such sale or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the
Company is a constituent corporation and in which the Company's shareholders
immediately prior thereto will beneficially own, immediately thereafter,
securities of the Company or any surviving or new corporation resulting
therefrom having less than a majority of the voting power of the Company or any
such surviving or new corporation; or
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<PAGE>
(c) Upon the consummation of a sale, lease, exchange or other
transfer or disposition by the Company of all or substantially all its assets to
any person or group of related persons.
5. TERMINATION.
5.1 TERMINATION EVENTS. The employment hereunder will terminate
upon the occurrence of any of the following events:
(a) Ray dies;
(b) The Company, by written notice to Ray or his personal
representative, discharges Ray due to the inability to perform the duties
assigned to him hereunder for a continuous period exceeding 90 days by reason of
injury, physical or mental illness or other disability, which condition has been
certified by a physician; provided, however, that prior to discharging Ray due
to such disability, the Company shall give a written statement of findings to
Ray or his personal representative setting forth specifically the nature of the
disability and the resulting performance failures, and Ray shall have a period
of ten (10) days thereafter to respond in writing to the Board of Directors'
findings;
(c) Ray is discharged by the Board of Directors of the Company
for cause. As used in this Agreement, the term "cause" shall mean:
(i) Ray's conviction of (or pleading guilty or NOLO
CONTENDERE to) a felony or any misdemeanor involving dishonesty or moral
turpitude; or
(ii) (a) The willful and continued failure of Ray to
substantially perform his duties with the Company (other than any such failure
resulting from illness or disability) after a demand for substantial performance
is requested by the Company's Board of Directors, which specifically identifies
the manner in which it is claimed Ray has not substantially performed his
duties, or (b) Ray is willfully engaged in misconduct which has a direct and
material adverse monetary affect on the Company. For purposes of this subpart
(ii) no act or failure to act on Ray's part shall be considered "willful" unless
done, or omitted to be done, by Ray not in good faith and without reasonable
belief that Ray's action or omission was in the best interest of the Company.
No termination shall be effected for cause pursuant to this subpart (ii) unless
Ray has been provided with specific information as to the acts or omissions
which form the basis of the allegation of cause, and Ray has had an opportunity
to be heard, with counsel if he so
-3-
<PAGE>
desired, before the Board of Directors and such Board determines in good faith
that Ray was guilty of conduct constituting "cause" as herein defined,
specifying the particulars thereof in detail;
(d) Ray is discharged by the Board of Directors of the Company
without cause, which the Company may do at any time upon notice to Ray, or if
the Agreement is not renewed by the Company at the end of the initial one-year
period as provided in Section 2;
(e) Ray voluntarily terminates his employment due to either (i)
a default by the Company in the performance of any of its obligations hereunder,
or (ii) an Adverse Change in Duties (as defined below), which default or Adverse
Change in Duties remains unremedied by the Company for a period of ten days
following its receipt of written notice thereof from Ray; or
(f) Ray voluntarily terminates his employment for any reason
other than the Company's default or an Adverse Change in Duties, which Ray may
do at any time with at least 30 days advance notice, or if the Agreement is not
renewed by Ray at the end of the initial one-year period as provided in Section
2.
As used herein, "Adverse Change in Duties" means an action or series
of actions taken by the Company, without Ray's prior written consent, which
results in:
(1) A change in Ray's reporting responsibilities, titles, job
responsibilities or offices which, in Ray's reasonable judgment, results in a
diminution of his status, control or authority; or
(2) The assignment to Ray of any positions, duties or
responsibilities which, in Ray's reasonable judgment, are inconsistent with
Ray's positions, duties and responsibilities or status with the Company or which
require Ray to travel more than previously required; or
(3) A requirement by the Company that Ray be based or perform
his duties anywhere other than (i) at the Company's corporate office location on
the date of this Agreement, or (ii) if the Company's corporate office location
is moved after the date of this Agreement, at a new location that is no more
than 60 miles from such prior location; or
(4) A failure by the Company (i) to continue in effect any
material benefit, whether or not qualified, or other compensation, bonus or
incentive plan in effect on the date of this Agreement or subsequently adopted,
or (ii) to continue Ray's participation in such benefits or plans at the same
level or to the same extent as on the Commencement Date or, with respect to
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<PAGE>
subsequently adopted benefits or plans, on the date of initial implementation
thereof, or (iii) to provide for Ray's participation in any newly adopted
benefits or plans at a level or to an extent commensurate, in Ray's reasonable
judgment, with that of other top executives of the Company.
5.2 EFFECTS OF TERMINATION.
(a) Upon termination of Ray's employment hereunder for any
reason, the Company will promptly pay Ray all compensation owed to Ray and
unpaid through the date of termination (including, without limitation, salary
and employee expense reimbursements).
(b) In addition (except in a situation where severance is due
pursuant to Section 4), if Ray's employment is terminated under Sections 5.1(a),
(b), (d) or (e), the Company shall also pay Ray, immediately upon such
termination of employment, a lump sum severance amount equal to one-half of his
then annual salary.
(c) Upon termination of Ray's employment hereunder for any
reason, Ray agrees that for the six (6) month period following the Termination
Event:
(i) Ray will not directly or indirectly, whether for his
own account or as an individual, employee, director, consultant or advisor, or
in any other capacity whatsoever, provide services to any person, firm,
corporation or other business enterprise which is involved in the design,
development or marketing of optical digitizers or image guided products unless
he obtains the prior written consent of the Board of Directors.
(ii) Ray will not directly or indirectly encourage or
solicit, or attempt to encourage or solicit, any individual to leave the
Company's employ for any reason or interfere in any other manner with the
employment relationships at the time existing between the Company and its
current or prospective employees.
(iii) Ray will not induce or attempt to induce any
customer, supplier, distributor, licensee or other business relation of the
Company to cease doing business with the Company or in any way interfere with
the existing business relationship between any such customer, supplier,
distributor, licensee or other business relation and the Company.
Ray acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive
-5-
<PAGE>
covenants. Accordingly, in the event of any such breach, the Company shall, in
addition to any remedies available to the Company at law, be entitled to obtain
equitable relief in the form of an injunction precluding Ray from continuing to
engage in such breach.
If any restriction set forth in this paragraph is held to be
unreasonable, then Ray and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
6. GENERAL PROVISIONS.
6.1 ASSIGNMENT. Neither party may assign or delegate any of his
rights or obligations under this Agreement without the prior written consent of
the other party.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior agreements between the parties relating to such
subject matter. Ray's employment agreement with the Company, dated as of
January 1, 1994, is hereby terminated and is of no further force and effect.
6.3 MODIFICATIONS. This Agreement may be changed or modified
only by an agreement in writing signed by both parties hereto.
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Ray and Ray's legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado.
6.6 SEVERABILITY. If any provision of the Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES. The parties will execute such further
instruments and take such further actions as may be reasonably necessary to
carry out the intent of this Agreement.
-6-
<PAGE>
6.8 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United States mail, certified or registered, postage prepaid
and addressed, in the case of the Company, to 5680 Central Avenue, Suite B,
Boulder, CO 80301, and in the case of Ray, to the address shown for Ray on the
signature page hereof, or to such other address as either party may later
specify by at least ten (10) days advance written notice delivered to the other
party in accordance herewith.
6.9 NO WAIVER. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver of that
provision, nor prevent that party thereafter from enforcing that provision or
any other provision of this Agreement.
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes
under this Agreement, each party shall be responsible for their own legal fees
and expenses which it may incur in resolving such dispute.
6.11 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Ray have executed this Agreement
effective as of the date first above written.
COMPANY RAY
Pixsys, Inc., d/b/a
Image Guided Technologies, Inc.
By:/S/ DAVID SENGPIEL /S/ PAUL L. RAY
---------------------------------- -------------------------------------
David Sengpiel Paul L. Ray
Director Address: 2621 N. Jupiter Avenue
Boulder, Colorado 80304
-7-
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment ("Amendment") to the Employment Agreement ("Agreement"),
dated as of January 1, 1996, between Image Guided Technologies, Inc., a Colorado
corporation and f/k/a Pixsys, Inc. ("the Company"), and Paul L. Ray ("Ray") is
entered into as of June 1, 1996.
(a) Section 2 of the Agreement is hereby amended by changing the first
sentence thereof to read in full as follows:
Subject to earlier termination as provided in Section 5, the
employment hereunder shall be for a period of two years, commencing on
January 1, 1996 (the "Commencement Date") and ending on December 31,
1997.
(b) Paragraph (d) of Section 5 is hereby amended to read in full as
follows:
(d) Ray is discharged by the Board of Directors of the Company
without cause, which the Company may do at any time upon notice to
Ray;
(c) Paragraph (f) of Section 5 is hereby amended to read in full as
follows:
(f) Ray voluntarily terminates his employment for any reason other
than the Company's default or an Adverse Change in Duties, which Ray
may do at any time with at least 30 days advance notice.
(d) All other terms and conditions of the Agreement shall remain in full
force and effect.
IMAGE GUIDED TECHNOLOGIES, INC.
By: /S/ ROBERT SILLIGMAN
---------------------------------
Robert Silligman
/S/ PAUL L. RAY
---------------------------------
Paul L. Ray
<PAGE>
EMPLOYMENT AGREEMENT
This Employment agreement ("Agreement") is entered into as of November
28, 1995, between Pixsys, Inc., d/b/a Image Guided Technologies, Inc., a
Colorado corporation (the "Company"), and Robert E. Silligman ("Silligman").
In consideration of the mutual covenants and conditions set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Silligman in the capacity
of President and Chief Operating Officer. Silligman accepts such employment and
agrees to perform such services as are customary to such office and as shall
from time to time be assigned to him by the Chairman of the Board or the Board
of Directors.
2. TERM. Subject to earlier termination as provided in Section 5,
the employment hereunder shall be for a period of two years, commencing on
November 28, 1995 (the "Commencement Date") and ending on November 30, 1997. At
the end of the two-year period (provided the Agreement has not been previously
terminated), the parties hereto shall consider, without any obligation to do so,
extending the Agreement for an additional one-year period. Silligman's
employment will be on a full-time basis requiring the devotion of such amount of
his productive time as is necessary for the efficient operation of the business
of the Company.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. For the performance of Silligman's duties
hereunder, the Company shall pay Silligman an annual salary of $90,000, payable
(less required withholdings) no less frequently than twice monthly.
3.2 BENEFITS. Silligman shall be entitled to such medical,
disability and life insurance coverage and such vacation, sick leave and holiday
benefits, if any, as are made available to the Company's top executive
personnel, all in accordance with the Company's benefits program in effect from
time to time.
3.3 REIMBURSEMENT OF EXPENSES. Silligman shall be entitled to
be reimbursed for all reasonable expenses, including but not limited to expenses
for travel, meals and entertainment, incurred by Silligman in connection with
and reasonably related to the furtherance of the Company's business.
<PAGE>
3.4 ANNUAL REVIEW. On each anniversary of the Commencement
Date, the Board of Directors will review Silligman's performance and
compensation hereunder (including salary, bonus and stock options and/or other
equity incentives) and will consider whether to increase such compensation, but
will not have authority, as the result of such review, to decrease any portion
of such compensation without the written consent of Silligman.
4. CHANGE OF CONTROL. In the event of a Change of Control of the
Company (as defined below), all options then granted to Silligman which are
unvested at the date of the Change of Control will be immediately vested. In
addition, in the event of a termination of Silligman's employment hereunder for
any reason (other than as set forth in Section 5.1(f)) following a Change of
Control, the Company will promptly pay Silligman, in addition to the amounts
required under Section 5.2(a), a lump sum severance amount payable immediately
upon such termination of employment, equal to one-half of his then annual
salary. This payout shall be in lieu of any amount which may otherwise be due
under Section 5.2(b).
As used herein, a "Change of Control" of the Company shall be deemed
to have occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as well as immediately
exercisable voting power) representing effective control of the Company to a
person or group of related persons who, on the date of this Agreement, is not
affiliated (within the meaning of the Securities Act of 1933) with the Company,
whether such sale or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the
Company is a constituent corporation and in which the Company's shareholders
immediately prior thereto will beneficially own, immediately thereafter,
securities of the Company or any surviving or new corporation resulting
therefrom having less than a majority of the voting power of the Company or any
such surviving or new corporation; or
(c) Upon the consummation of a sale, lease, exchange or other
transfer or disposition by the Company of all or substantially all its assets to
any person or group of related persons.
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<PAGE>
5. TERMINATION.
5.1 TERMINATION EVENTS. The employment hereunder will terminate
upon the occurrence of any of the following events:
(a) Silligman dies;
(b) The Company, by written notice to Silligman or his personal
representative, discharges Silligman due to the inability to perform the duties
assigned to him hereunder for a continuous period exceeding 90 days by reason of
injury, physical or mental illness or other disability, which condition has been
certified by a physician; provided, however, that prior to discharging Silligman
due to such disability, the Company shall give a written statement of findings
to Silligman or his personal representative setting forth specifically the
nature of the disability and the resulting performance failures, and Silligman
shall have a period of ten (10) days thereafter to respond in writing to the
Board of Directors' findings;
(c) Silligman is discharged by the Board of Directors of the
Company for cause. As used in this Agreement, the term "cause" shall mean:
(i) Silligman's conviction of (or pleading guilty or NOLO
CONTENDERE to) a felony or any misdemeanor involving dishonesty or moral
turpitude; or
(ii) (a) The willful and continued failure of Silligman to
substantially perform his duties with the Company (other than any such failure
resulting from illness or disability) after a demand for substantial performance
is requested by the Company's Board of Directors, which specifically identifies
the manner in which it is claimed Silligman has not substantially performed his
duties, or (b) Silligman is willfully engaged in misconduct which has a direct
and material adverse monetary affect on the Company. For purposes of this
subpart (ii) no act or failure to act on Silligman's part shall be considered
"willful" unless done, or omitted to be done, by Silligman not in good faith and
without reasonable belief that Silligman's action or omission was in the best
interest of the Company. No termination shall be effected for cause pursuant to
this subpart (ii) unless Silligman has been provided with specific information
as to the acts or omissions which form the basis of the allegation of cause, and
Silligman has had an opportunity to be heard, with counsel if he so desired,
before the Board of Directors and such Board determines in good faith that
Silligman was guilty of conduct constituting "cause" as herein defined,
specifying the particulars thereof in detail;
-3-
<PAGE>
(d) Silligman is discharged by the Board of Directors of the
Company without cause, which the Company may do at any time upon notice to
Silligman;
(e) Silligman voluntarily terminates his employment due to
either (i) a default by the Company in the performance of any of its obligations
hereunder, or (ii) an Adverse Change in Duties (as defined below), which default
or Adverse Change in Duties remains unremedied by the Company for a period of
ten days following its receipt of written notice thereof from Silligman; or
(f) Silligman voluntarily terminates his employment for any
reason other than the Company's default or an Adverse Change in Duties, which
Silligman may do at any time with at least 30 days advance notice.
As used herein, "Adverse Change in Duties" means an action or series
of actions taken by the Company, without Silligman's prior written consent,
which results in:
(1) A change in Silligman's reporting responsibilities, titles,
job responsibilities or offices which, in Silligman's reasonable judgment,
results in a diminution of his status, control or authority; or
(2) The assignment to Silligman of any positions, duties or
responsibilities which, in Silligman's reasonable judgment, are inconsistent
with Silligman's positions, duties and responsibilities or status with the
Company;
(3) A requirement by the Company that Silligman be based or
perform his duties anywhere other than (i) at the Company's corporate office
location on the date of this Agreement, or (ii) if the Company's corporate
office location is moved after the date of this Agreement, at a new location
that is no more than 60 miles from such prior location; or
(4) A failure by the Company (i) to continue in effect any
material benefit, whether or not qualified, or other compensation, bonus or
incentive plan in effect on the date of this Agreement or subsequently adopted,
or (ii) to continue Silligman's participation in such benefits or plans at the
same level or to the same extent as on the Commencement Date or, with respect to
subsequently adopted benefits or plans, on the date of initial implementation
thereof, or (iii) to provide for Silligman's participation in any newly adopted
benefits or plans at a level or to an extent commensurate, in Silligman's
reasonable judgment, with that of other top executives of the Company.
-4-
<PAGE>
5.2 EFFECTS OF TERMINATION.
(a) Upon termination of Silligman's employment hereunder for any
reason, the Company will promptly pay Silligman all compensation owed to
Silligman and unpaid through the date of termination (including, without
limitation, salary and employee expense reimbursements).
(b) In addition (except in a situation where severance is due
pursuant to Section 4), if Silligman's employment is terminated under Sections
5.1(a), (b), (d) or (e), the Company shall also pay Silligman, immediately upon
such termination of employment, a lump sum severance amount equal to one-half of
his then annual salary.
(c) Upon termination of Silligman's employment hereunder for any
reason, Silligman agrees that for the six (6) month period following the
Termination Event:
(i) Silligman will not directly or indirectly, whether for
his own account or as an individual, employee, director, consultant or advisor,
or in any other capacity whatsoever, provide services to any person, firm,
corporation or other business enterprise which is involved in the design,
development or marketing of optical digitizers or image guided products unless
he obtains the prior written consent of the Board of Directors.
(ii) Silligman will not directly or indirectly encourage or
solicit, or attempt to encourage or solicit, any individual to leave the
Company's employ for any reason or interfere in any other manner with the
employment relationships at the time existing between the Company and its
current or prospective employees.
(iii) Silligman will not induce or attempt to induce any
customer, supplier, distributor, licensee or other business relation of the
Company to cease doing business with the Company or in any way interfere with
the existing business relationship between any such customer, supplier,
distributor, licensee or other business relation and the Company.
Silligman acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive covenants. Accordingly, in the event of any
such breach, the Company shall, in addition to any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Silligman from continuing to engage in such breach.
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<PAGE>
If any restriction set forth in this paragraph is held to be
unreasonable, then Silligman and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
6. GENERAL PROVISIONS.
6.1 ASSIGNMENT. Neither party may assign or delegate any of his
rights or obligations under this Agreement without the prior written consent of
the other party, except that the Company may assign its rights and obligations
hereunder to a successor by merger or an assignee of all or substantially all of
the Company's assets.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior agreements between the parties relating to such
subject matter.
6.3 MODIFICATIONS. This Agreement may be changed or modified
only by an agreement in writing signed by both parties hereto.
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Silligman and Silligman's legal representatives,
heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person shall have become a party to this Agreement and
have agreed in writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado.
6.6 SEVERABILITY. If any provision of the Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES; COMMITTEES OF BOARD. The parties will
execute such further instruments and take such further actions as may be
reasonably necessary to carry out the intent of this Agreement. The term "Board
of Directors" shall include any committee of the Board.
6.8 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United
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<PAGE>
States mail, certified or registered, postage prepaid and addressed, in the case
of the Company, to 5680 Central Avenue, Suite B, Boulder, CO 80301, and in the
case of Silligman, to the address shown for Silligman on the signature page
hereof, or to such other address as either party may later specify by at least
ten (10) days advance written notice delivered to the other party in accordance
herewith.
6.9 NO WAIVER. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver of that
provision, nor prevent that party thereafter from enforcing that provision or
any other provision of this Agreement.
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes
under this Agreement, each party shall be responsible for their own legal fees
and expenses which it may incur in resolving such dispute.
6.11 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Silligman have executed this
Agreement effective as of the date first above written.
COMPANY SILLIGMAN
Pixsys, Inc., d/b/a
Image Guided Technologies, Inc.
By:/S/ PAUL L. RAY /S/ ROBERT E. SILLIGMAN
--------------------------- ------------------------------
Paul L. Ray Robert E. Silligman
President Address: 2354 E. Terrace Drive
Highlands Ranch, CO 80126
-7-
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of January 1,
1996, between Pixsys, Inc., d/b/a Image Guided Technologies, Inc., a Colorado
corporation (the "Company"), and Waldean Schulz ("Schulz").
In consideration of the mutual covenants and conditions set forth herein,
the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Schulz in the capacity of Vice
President - Technology. Schulz accepts such employment and agrees to perform
such services as are customary to such office and as shall from time to time be
assigned to him by the Board of Directors.
2. TERM. Subject to earlier termination as provided in Section 5, the
employment hereunder shall be for a period of two years, commencing on January
1, 1996 (the "Commencement Date") and ending on December 31, 1997. Schulz'
employment will be on a full-time basis requiring the devotion of such amount of
his productive time as is necessary for the efficient operation of the business
of the Company.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. For the performance of Schulz' duties hereunder, the
Company shall pay Schulz an annual salary of $80,000, payable (less required
withholdings) no less frequently than twice monthly.
3.2 BENEFITS. Schulz shall be entitled to such medical, disability
and life insurance coverage and such vacation, sick leave and holiday benefits,
if any, as are made available to the Company's top executive personnel, all in
accordance with the Company's benefits program in effect from time to time.
3.3 REIMBURSEMENT OF EXPENSES. Schulz shall be entitled to be
reimbursed for all reasonable expenses, including but not limited to expenses
for travel, meals and entertainment, incurred by Schulz in connection with and
reasonably related to the furtherance of the Company's business.
3.4 ANNUAL REVIEW. On each anniversary of the Commencement Date, the
Board of Directors will review Schulz' performance and compensation hereunder
(including salary, bonus and stock options and/or other equity incentives) and
will consider whether to increase such compensation, but will not have
<PAGE>
authority, as the result of such review, to decrease any portion of such
compensation without the written consent of Schulz.
4. CHANGE OF CONTROL. In the event of a Change of Control of the Company
(as defined below), all options then granted to Schulz which are unvested at the
date of the Change of Control will be immediately vested. In addition, in the
event of a termination of Schulz' employment hereunder for any reason set forth
in Section 5.1 following a Change of Control, the Company will promptly pay
Schulz, in addition to the amounts required under Section 5.2(a), a lump sum
severance amount payable immediately upon such termination of employment, equal
to one-half of his then annual salary. This payout shall be in lieu of any
amount which may otherwise be due under Section 5.2(b).
As used herein, a "Change of Control" of the Company shall be deemed to
have occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as well as immediately
exercisable voting power) representing effective control of the Company to a
person or group of related persons who, on the date of this Agreement, is not
affiliated (within the meaning of the Securities Act of 1933) with the Company,
whether such sale or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the Company
is a constituent corporation and in which the Company's shareholders immediately
prior thereto will beneficially own, immediately thereafter, securities of the
Company or any surviving or new corporation resulting therefrom having less than
a majority of the voting power of the Company or any such surviving or new
corporation; or
(c) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by the Company of all or substantially all its assets to any person
or group of related persons.
5. TERMINATION.
5.1 TERMINATION EVENTS. The employment hereunder will terminate upon
the occurrence of any of the following events:
(a) Schulz dies;
(b) The Company, by written notice to Schulz or his personal
representative, discharges Schulz due to the
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<PAGE>
inability to perform the duties assigned to him hereunder for a continuous
period exceeding 90 days by reason of injury, physical or mental illness or
other disability, which condition has been certified by a physician; provided,
however, that prior to discharging Schulz due to such disability, the Company
shall give a written statement of findings to Schulz or his personal
representative setting forth specifically the nature of the disability and the
resulting performance failures, and Schulz shall have a period of ten (10) days
thereafter to respond in writing to the Board of Directors' findings;
(c) Schulz is discharged by the Board of Directors of the Company for
cause. As used in this Agreement, the term "cause" shall mean:
(i) Schulz' conviction of (or pleading guilty or NOLO CONTENDERE
to) a felony or any misdemeanor involving dishonesty or moral turpitude; or
(ii) (a) The willful and continued failure of Schulz to
substantially perform his duties with the Company (other than any such failure
resulting from illness or disability) after a demand for substantial performance
is requested by the Company's Board of Directors, which specifically identifies
the manner in which it is claimed Schulz has not substantially performed his
duties, or (b) Schulz is willfully engaged in misconduct which has a direct and
material adverse monetary affect on the Company. For purposes of this subpart
(ii) no act or failure to act on Schulz' part shall be considered "willful"
unless done, or omitted to be done, by Schulz not in good faith and without
reasonable belief that Schulz' action or omission was in the best interest of
the Company. No termination shall be effected for cause pursuant to this
subpart (ii) unless Schulz has been provided with specific information as to the
acts or omissions which form the basis of the allegation of cause, and Schulz
has had an opportunity to be heard, with counsel if he so desired, before the
Board of Directors and such Board determines in good faith that Schulz was
guilty of conduct constituting "cause" as herein defined, specifying the
particulars thereof in detail;
(d) Schulz is discharged by the Board of Directors of the Company
without cause, which the Company may do at any time upon notice to Schulz; or
(e) Schulz voluntarily terminates his employment due to either (i) a
default by the Company in the performance of any of its obligations hereunder,
or (ii) an Adverse Change in Duties (as defined below), which default or Adverse
Change in Duties remains unremedied by the Company for a period of ten days
following its receipt of written notice thereof from Schulz.
-3-
<PAGE>
As used herein, "Adverse Change in Duties" means an action or series of
actions taken by the Company, without Schulz' prior written consent, which
results in:
(1) A change in Schulz' reporting responsibilities, titles, job
responsibilities or offices which, in Schulz' reasonable judgment, results in a
diminution of his status, control or authority; or
(2) The assignment to Schulz of any positions, duties or
responsibilities which, in Schulz' reasonable judgment, are inconsistent with
Schulz' positions, duties and responsibilities or status with the Company or
which require Schulz to travel more than previously required; or
(3) A requirement by the Company that Schulz be based or perform his
duties anywhere other than (i) at the Company's corporate office location on the
date of this Agreement, or (ii) if the Company's corporate office location is
moved after the date of this Agreement, at a new location that is no more than
60 miles from such prior location; or
(4) A failure by the Company (i) to continue in effect any material
benefit, whether or not qualified, or other compensation, bonus or incentive
plan in effect on the date of this Agreement or subsequently adopted, or (ii) to
continue Schulz' participation in such benefits or plans at the same level or to
the same extent as on the Commencement Date or, with respect to subsequently
adopted benefits or plans, on the date of initial implementation thereof, or
(iii) to provide for Schulz' participation in any newly adopted benefits or
plans at a level or to an extent commensurate, in Schulz' reasonable judgment,
with that of other top executives of the Company.
5.2 EFFECTS OF TERMINATION.
(a) Upon termination of Schulz' employment hereunder for any reason,
the Company will promptly pay Schulz all compensation owed to Schulz and unpaid
through the date of termination (including, without limitation, salary and
employee expense reimbursements).
(b) In addition (except in a situation where severance is due pursuant
to Section 4), if Schulz' employment is terminated under Sections 5.1(a), (b),
(d) or (e), the Company shall also pay Schulz, immediately upon such termination
of employment, a lump sum severance amount equal to one-half of his then annual
salary.
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<PAGE>
(c) Upon termination of Schulz' employment hereunder for any reason,
Schulz agrees that for the twelve (12) month period following the Termination
Event:
(i) Schulz will not directly or indirectly, whether for his own
account or as an individual, employee, director, consultant or advisor, or in
any other capacity whatsoever, provide services to any person, firm, corporation
or other business enterprise which is involved in the design, development or
marketing of optical digitizers or image guided products unless he obtains the
prior written consent of the Board of Directors.
(ii) Schulz will not directly or indirectly encourage or solicit,
or attempt to encourage or solicit, any individual to leave the Company's employ
for any reason or interfere in any other manner with the employment
relationships at the time existing between the Company and its current or
prospective employees.
(iii) Schulz will not induce or attempt to induce any customer,
supplier, distributor, licensee or other business relation of the Company to
cease doing business with the Company or in any way interfere with the existing
business relationship between any such customer, supplier, distributor, licensee
or other business relation and the Company.
Schulz acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive covenants. Accordingly, in the event of any
such breach, the Company shall, in addition to any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Schulz from continuing to engage in such breach.
If any restriction set forth in this paragraph is held to be unreasonable,
then Schulz and the Company agree, and hereby submit, to the reduction and
limitation of such prohibition to such area or period as shall be deemed
reasonable.
6. GENERAL PROVISIONS.
6.1 ASSIGNMENT. Neither party may assign or delegate any of his
rights or obligations under this Agreement without the prior written consent of
the other party, except that the Company may assign its rights and obligations
hereunder to a successor by merger or an assignee of all or substantially all of
the Company's assets.
-5-
<PAGE>
6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior agreements between the parties relating to such subject matter.
6.3 MODIFICATIONS. This Agreement may be changed or modified only by
an agreement in writing signed by both parties hereto.
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors and
assigns and Schulz and Schulz' legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado.
6.6 SEVERABILITY. If any provision of the Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES; COMMITTEES OF THE BOARD. The parties will
execute such further instruments and take such further actions as may be
reasonably necessary to carry out the intent of this Agreement. The term "Board
of Directors" shall include any committee of the Board.
6.8 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United States mail, certified or registered, postage prepaid
and addressed, in the case of the Company, to 5680 Central Avenue, Suite B,
Boulder, CO 80301, and in the case of Schulz, to the address shown for Schulz on
the signature page hereof, or to such other address as either party may later
specify by at least ten (10) days advance written notice delivered to the other
party in accordance herewith.
6.9 NO WAIVER. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver of that provision, nor
prevent that party thereafter from enforcing that provision or any other
provision of this Agreement.
-6-
<PAGE>
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes under this
Agreement, each party shall be responsible for their own legal fees and expenses
which it may incur in resolving such dispute.
6.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Schulz have executed this Agreement
effective as of the date first above written.
COMPANY SCHULZ
Pixsys, Inc., d/b/a
Image Guided Technologies, Inc.
By:/S/ PAUL L. RAY /S/ WALDEAN SCHULZ
---------------------------- ------------------
Paul L. Ray Waldean Schulz
President Address: 440 Japonica Way
Boulder CO 80304
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<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of July 1, 1996,
between Image Guided Technologies, Inc., a Colorado corporation (the "Company"),
and Jeffrey J. Hiller ("Hiller").
In consideration of the mutual covenants and conditions set forth herein,
the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Hiller in the capacity of Vice
President of Finance and Chief Financial Officer. Hiller accepts such
employment and agrees to perform such services as are customary to such office
and as shall from time to time be assigned to him by the Chairman of the Board,
the President or the Board of Directors.
2. TERM. Subject to earlier termination as provided in Section 5, the
employment hereunder shall be for a period of eighteen months, commencing on
July 1, 1996 (the "Commencement Date") and ending on December 31, 1997.
Hiller's employment will be on a full-time basis requiring the devotion of such
amount of his productive time as is necessary for the efficient operation of the
business of the Company.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. For the performance of Hiller's duties hereunder, the
Company shall pay Hiller an annual salary of $85,000, payable (less required
withholdings) no less frequently than twice monthly.
3.2 BENEFITS. Hiller shall be entitled to such medical, disability
and life insurance coverage and such vacation, sick leave and holiday benefits,
if any, as are made available to the Company's top executive personnel, all in
accordance with the Company's benefits program in effect from time to time.
3.3 REIMBURSEMENT OF EXPENSES. Hiller shall be entitled to be
reimbursed for all reasonable expenses, including but not limited to expenses
for travel, meals and entertainment, incurred by Hiller in connection with and
reasonably related to the furtherance of the Company's business.
3.4 ANNUAL REVIEW. On the anniversary of the Commencement Date, the
Board of Directors will review Hiller's performance and compensation hereunder
(including salary, bonus and stock options and/or other equity incentives) and
will consider whether to increase such compensation, but will not have
<PAGE>
authority, as the result of such review, to decrease any portion of such
compensation without the written consent of Hiller.
4. CHANGE OF CONTROL. In the event of a Change of Control of the Company
(as defined below), all options then granted to Hiller which are unvested at the
date of the Change of Control will be immediately vested. In addition, in the
event of a termination of Hiller's employment hereunder for any reason (other
than as set forth in Section 5.1(f)) following a Change of Control, the Company
will promptly pay Hiller, in addition to the amounts required under Section
5.2(a), a lump sum severance amount payable immediately upon such termination of
employment, equal to one-half of his then annual salary. This payout shall be
in lieu of any amount which may otherwise be due under Section 5.2(b).
As used herein, a "Change of Control" of the Company shall be deemed to
have occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as well as immediately
exercisable voting power) representing effective control of the Company to a
person or group of related persons who, on the date of this Agreement, is not
affiliated (within the meaning of the Securities Act of 1933) with the Company,
whether such sale or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the
Company is a constituent corporation and in which the Company's shareholders
immediately prior thereto will beneficially own, immediately thereafter,
securities of the Company or any surviving or new corporation resulting
therefrom having less than a majority of the voting power of the Company or any
such surviving or new corporation; or
(c) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by the Company of all or substantially all its assets to any person
or group of related persons.
5. TERMINATION.
5.1 TERMINATION EVENTS. The employment hereunder will terminate upon
the occurrence of any of the following events:
(a) Hiller dies;
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<PAGE>
(b) The Company, by written notice to Hiller or his personal
representative, discharges Hiller due to the inability to perform the duties
assigned to him hereunder for a continuous period exceeding 90 days by reason of
injury, physical or mental illness or other disability, which condition has been
certified by a physician; provided, however, that prior to discharging Hiller
due to such disability, the Company shall give a written statement of findings
to Hiller or his personal representative setting forth specifically the nature
of the disability and the resulting performance failures, and Hiller shall have
a period of ten (10) days thereafter to respond in writing to the Board of
Directors' findings;
(c) Hiller is discharged by the Board of Directors of the Company for
cause. As used in this Agreement, the term "cause" shall mean:
(i) Hiller's conviction of (or pleading guilty or NOLO
CONTENDERE to) a felony or any misdemeanor involving dishonesty or moral
turpitude; or
(ii) (a) The willful and continued failure of Hiller to
substantially perform his duties with the Company (other than any such failure
resulting from illness or disability) after a demand for substantial performance
is requested by the Company's Board of Directors, which specifically identifies
the manner in which it is claimed Hiller has not substantially performed his
duties, or (b) Hiller is willfully engaged in misconduct which has a direct and
material adverse monetary affect on the Company. For purposes of this subpart
(ii) no act or failure to act on Hiller's part shall be considered "willful"
unless done, or omitted to be done, by Hiller not in good faith and without
reasonable belief that Hiller's action or omission was in the best interest of
the Company. No termination shall be effected for cause pursuant to this
subpart (ii) unless Hiller has been provided with specific information as to the
acts or omissions which form the basis of the allegation of cause, and Hiller
has had an opportunity to be heard, with counsel if he so desired, before the
Board of Directors and such Board determines in good faith that Hiller was
guilty of conduct constituting "cause" as herein defined, specifying the
particulars thereof in detail;
(d) Hiller is discharged by the Board of Directors of the Company
without cause, which the Company may do at any time upon notice to Hiller;
(e) Hiller voluntarily terminates his employment due to either (i) a
default by the Company in the performance of any of its obligations hereunder,
or (ii) an Adverse Change in Duties (as defined below), which default or Adverse
Change in
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<PAGE>
Duties remains unremedied by the Company for a period of ten days following its
receipt of written notice thereof from Hiller; or
(f) Hiller voluntarily terminates his employment for any reason other
than the Company's default or an Adverse Change in Duties, which Hiller may do
at any time with at least 30 days advance notice.
As used herein, "Adverse Change in Duties" means an action or series of
actions taken by the Company, without Hiller's prior written consent, which
results in:
(1) A change in Hiller's reporting responsibilities, titles, job
responsibilities or offices which, in Hiller's reasonable judgment, results in a
diminution of his status, control or authority; or
(2) The assignment to Hiller of any positions, duties or
responsibilities which, in Hiller's reasonable judgment, are inconsistent with
Hiller's positions, duties and responsibilities or status with the Company; or
(3) A requirement by the Company that Hiller be based or perform his
duties anywhere other than (i) at the Company's corporate office location on the
date of this Agreement, or (ii) if the Company's corporate office location is
moved after the date of this Agreement, at a new location that is no more than
60 miles from such prior location.
5.2 EFFECTS OF TERMINATION.
(a) Upon termination of Hiller's employment hereunder for any reason,
the Company will promptly pay Hiller all compensation owed to Hiller and unpaid
through the date of termination (including, without limitation, salary and
employee expense reimbursements).
(b) In addition (except in a situation where severance is due
pursuant to Section 4), if Hiller's employment is terminated under Sections
5.1(a), (b), (d) or (e), the Company shall also pay Hiller, immediately upon
such termination of employment, a lump sum severance amount equal to one-half of
his then annual salary.
(c) Upon termination of Hiller's employment hereunder for any reason,
Hiller agrees that for the six (6) month period following the Termination Event:
(i) Hiller will not directly or indirectly, whether for his own
account or as an individual, employee, director, consultant or advisor, or in
any other capacity
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<PAGE>
whatsoever, provide services to any person, firm, corporation or other business
enterprise which is involved in the design, development or marketing of optical
localizers or image guided surgery products unless he obtains the prior written
consent of the Board of Directors.
(ii) Hiller will not directly or indirectly encourage or solicit,
or attempt to encourage or solicit, any individual to leave the Company's employ
for any reason or interfere in any other manner with the employment
relationships at the time existing between the Company and its current or
prospective employees.
(iii) Hiller will not induce or attempt to induce any customer,
supplier, distributor, licensee or other business relation of the Company to
cease doing business with the Company or in any way interfere with the existing
business relationship between any such customer, supplier, distributor, licensee
or other business relation and the Company.
Hiller acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive covenants. Accordingly, in the event of any
such breach, the Company shall, in addition to any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Hiller from continuing to engage in such breach.
If any restriction set forth in this paragraph is held to be unreasonable,
then Hiller and the Company agree, and hereby submit, to the reduction and
limitation of such prohibition to such area or period as shall be deemed
reasonable.
6. GENERAL PROVISIONS.
6.1 ASSIGNMENT. Neither party may assign or delegate any of his
rights or obligations under this Agreement without the prior written consent of
the other party, except that the Company may assign its rights and obligations
hereunder to a successor by merger or an assignee of all or substantially all of
the Company's assets.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior agreements between the parties relating to such subject matter.
6.3 MODIFICATIONS. This Agreement may be changed or modified only by
an agreement in writing signed by both parties hereto.
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<PAGE>
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors and
assigns and Hiller and Hiller's legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado.
6.6 SEVERABILITY. If any provision of the Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES; COMMITTEES OF BOARD. The parties will
execute such further instruments and take such further actions as may be
reasonably necessary to carry out the intent of this Agreement. The term "Board
of Directors" shall include any committee of the Board.
6.8 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United States mail, certified or registered, postage prepaid
and addressed, in the case of the Company, to 5710-B Flatiron Parkway, Boulder,
CO 80301, and in the case of Hiller, to the address shown for Hiller on the
signature page hereof, or to such other address as either party may later
specify by at least ten (10) days advance written notice delivered to the other
party in accordance herewith.
6.9 NO WAIVER. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver of that provision, nor
prevent that party thereafter from enforcing that provision or any other
provision of this Agreement.
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes under this
Agreement, each party shall be responsible for their own legal fees and expenses
which it may incur in resolving such dispute.
6.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company and Hiller have executed this Agreement
effective as of the date first above written.
COMPANY HILLER
Image Guided Technologies, Inc.
By:/S/ PAUL L. RAY /S/ JEFFREY J. HILLER
---------------------------- -------------------------
Paul L. Ray Jeffrey J. Hiller
President Address: 111 Mine Lane
Boulder, CO 80302
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<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into this 8th day of 1992 by and between
Raycon Properties (a partnership of Consuelo M. Hauser and Ray L. Hauser),
hereinafter referred to as "Landlord" and Pixsys, Inc., a Colorado
corporation, hereinafter referred to as "Tenant."
WITNESSETH:
In consideration of the covenants, terms, conditions, agreements, and payments
as hereinafter set forth, the parties hereto covenant and agree as follows:
1. PROPERTY - LEASE PREMISES
Portion B* of Lot 1, Block 1, Flatirons Industrial Park east of the east row of
columns in the Technical Building located on said Lot 1, this portion commonly
known as 5680 Central Avenue, in the City of Boulder, County of Boulder, State
of Colorado, which shall hereinafter be referred to as the "leased premises,"
the leasing of which shall be covered by the terms of this Agreement and shall
be used and occupied by Tenant for any lawful purpose.
Exhibit I presents the room and area designations for concurrent tenants A, B
and C of this facility, and it presents area D available for common use by the
three tenants. The rooftop is accessible for all three tenants.
2. TERM
The term of this Lease shall be for a period of twelve* (12) months commencing
at 7:00 a.m. on December* 1, 1992, and unless terminated as herein provided for,
shall end at 7:00 p.m. on November 30,* 1993.
3. RENT
Tenant shall pay to Landlord, at the address of Landlord as herein set forth,
the following as rental for the leased premises:
a. The base rental for the twelve* months shall be $20,352* payable in
monthly installments (basis monthly rental of $1696* in advance on the first day
of each month.
b. The base rental to be paid by Tenant to Landlord will be adjusted on
each annual anniversary of the commencement date of the term of this lease for
the successive year, such adjustment to be in accord with the annual change of
the Denver Area Cost Of Living Index. As a matter of record, the DACOLI dated
Jan-June 1991 is noted to be 129,0 as reported by the Denver Chamber of
Commerce.
c. Tenant shall pay to Landlord at the inception of lease $1696* as
damage deposit to be held in escrow earning 6% simple interest. The interest
amount may be taken by the Tenant as a deduction of rent at each anniversary
payment.
4. TAXES - REAL PROPERTY - RESPONSIBILITY - ADJUSTMENT
Landlord will pay in the first instance all real property taxes which may be
levied or assessed by any lawful authority against the land and improvements in
the development.
5. TAXES - PROPERTY - RESPONSIBILITY
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<PAGE>
Tenant shall be responsible and pay for any and all taxes and/or assessments
levied and/or assessed against any furniture, fixtures, equipment and items of a
similar nature installed and/or located in or about the leased premises by
Tenant.
6. UTILITIES
Tenant shall pay its share of utility services used or consumed on the leased
premises including, but not limited to heat, electricity, gas, and any and all
other utilities used by Tenant in connection with the leased premises; provided
however, that expenses for water and sewer shall be paid by the Landlord.
7. HOLDING OVER
If, after expiration of the term of this Lease, Tenant shall remain in
possession of the leased premises and continue to pay rent without a written
agreement as to such possession, then Tenant shall be deemed a month-to-month
Tenant and the rental rate during such holdover tenancy shall be equivalent to
the monthly rental rate due as if the Lease were still in effect.
8. MODIFICATIONS OR EXTENSIONS
No holding over by Tenant shall operate to renew or extend this Lease without
the written consent of Landlord given in conformity with requirements of any
provision of the laws of the State of Colorado which may relate to such renewal
or extension. No modification of this Lease shall be binding unless
endorsed heron or attached hereto and signed by the respective parties.
9. ALTERATIONS - CHANGES AND ADDITIONS - RESPONSIBILITY
Tenant may, during the term of this Lease, at Tenant's expense, erect inside
partitions, add to existing electric power service, add telephone outlets, add
light fixtures, install additional heating and/or air conditioning or make such
other changes or alternations as Tenant may desire. At the end of this Lease,
all such fixtures, equipment, additions and/or alterations (except trade
fixtures, installed by Tenant) shall be and remain the property of Landlord,
provided, however, Landlord shall have the option to require Tenant to remove
any or all such fixtures, equipment, additions, and/or alterations and restore
the leased premises to the condition existing immediately prior to such
change and/or installation, normal wear and tear excepted, all at Tenant's cost
and expense. All work done by Tenant shall conform to appropriate city, county
and state building codes and health standards and Tenant shall be responsible
for obtaining and paying for building permits.
10. APPROVAL OF CHANGES - SIGNS
Landlord must approve in writing any sign to be placed in or on the leased
premises, regardless of size or value, and any improvements, additions,
alterations and/or changes to the leased premises in excess of Two Thousand
Dollars ($2,000.00). As a condition to the granting of such approval, Landlord
shall have the right to require Tenant to furnish a bond or other
security acceptable to Landlord sufficient to insure completion of and payment
for any such work to be so performed. Landlord shall also have the right to
require Tenant's contractor(s) to furnish adequate lien waivers on work
completed to both Tenant and Landlord. Landlord reserves right to post notice in
leased premises that Landlord is not responsible for payment of work performed.
11. CARE OF PREMISES - RESPONSIBILITY
During the term of this Lease, Tenant agrees to keep and maintain the interior
of the leased premises, including the plumbing, glass and electrical systems, in
good condition and repair at Tenant's cost and expense. Tenant further agrees at
the end of the term, to return the leased premises to Landlord in substantially
as good condition as when received, except for usual and ordinary wear and tear.
Landlord
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<PAGE>
agrees to keep and maintain the exterior of the building in good repair
throughout the term of this Lease. Landlord agrees to make and pay for (a) all
repairs, structural or otherwise, to the exterior of the building located on the
premises of which the leased premises are a part, including, but not limited to,
the foundation, exterior walls, roof, other structural components for the
building, and (b) all rebuilding alteration or repair of the structural
improvements on the premises of which the leased premises are a part, which are
ordered or required by any law, ordinance, or regulation of any
governmental agency, unless due to use of the premises by Tenant.
12. USE OF PREMISES AND CARE OF GROUNDS
Landlord will maintain the grounds, and will be responsible for snow removal and
further, shall conform to all present and future laws and ordinances of any
governmental authority having jurisdiction over the leased premises. No outside
storage shall be allowed unless first approved by Landlord in writing and
then only in such areas as are designated as storage areas by Landlord. Tenant
shall not commit or suffer any waste or environmental pollution on the leased
premises. Tenant shall not permit any nuisance to be maintained on the leased
premises nor permit any disorderly conduct, noise or other activity having a
tendency to annoy or to disturb occupants of any part of the property of
which the leased premises are a part and/or any adjoining property. Tenant shall
be responsible for removal of trash and other debris and pay all costs incurred
for disposal of such trash and debris. Landlord shall be responsible for the
maintenance of all trees, shrubs, and other landscaping on the subject premises
and shall keep the exterior premises clean of trash and debris;
provided, however, that Tenant shall be responsible for and pay the costs
of services for removal and disposal of its trash and debris.
13. ENVIRONMENTAL RESPONSIBILITY
The parties acknowledge that certain federal, state and local laws, regulations
and guidelines are now in effect, and that additional laws, regulations and
guidelines may hereinafter be enacted, relating to or affecting the rented
premises, the entire building and the larger parcel of land of which the rented
premises are a part, concerning the impact on the environment of construction,
land use, the maintenance and operation of structures and the conduct of
business. Tenant will not cause, or permit to be caused, any act or practice, by
negligence, omission or otherwise, that would do anything or permit anything to
be done that would violate any of said laws, regulations or guidelines. Any
violation of this covenant shall be an event of default under this lease. If
tenant does cause or permit any such environmental violation, tenant shall be
responsible for remediation of any such damage. Tenant shall have no claim
against Landlord by reason of any changes Landlord or others may make in the
building or the premises in which the leased premises are located when such
changes are made under such laws, regulations and guidelines.
14. LIABILITY FOR OVERLOAD
Tenant shall be liable for the Cost of any damage to the leased premises or the
building or the sidewalks and pavements adjoining the same which results from
the movement of heavy articles. Tenant shall not overload the floors or any part
of the leased premises. All floors on the second level are recognized as being
designed and constructed to support loadings of 50 pounds/sq. ft.
15. GLASS AND DOOR RESPONSIBILITY
All glass and doors on the leased premises shall be the responsibility of the
Tenant except for glass and door breakage that is not caused by or preventable
by the Tenant. Any replacement or repair which is the responsibility of Tenant
shall be promptly completed at the expense of the Tenant.
16. USE OF PREMISES - INSURANCE
Tenant may use the leased premises for any lawful purposes, provided, however,
Tenant shall make no use of the leased premises which will void or make voidable
any insurance upon the leased premises.
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<PAGE>
17. INSURANCE
Landlord agrees that it will keep the leased premises insured against loss of
damage by fire with standard extended coverage endorsements to the full value of
the improvements on the subject premises. Such insurance shall be issued by
financially responsible insurors duly authorized to do business in the state
of Colorado.
Tenant shall not carry any stock of goods or do anything in or about the leased
premises which will in any way tend to increase the insurance rates on said
premises. Tenant agrees to pay additional rent equal to any increase in fire
insurance premiums that may be charged during the term of this Lease on the
amount of insurance carried by landlord on said total premises where
such increases may result from the business carried on by Tenant on the leased
premises whether or not Landlord has consented to the same. Tenant shall not
install any electrical equipment that overloads the wiring panels, etc. in the
leased premises. Tenant shall make at his own expense whatever changes are
necessary to relieve any overload condition and to comply with the requirements
of the insurance underwriters or the governmental authorities
having jurisdiction. Tenant agrees to carry general liability insurance in the
minimum total amount or amounts of Two Hundred Fifty Thousand Dollars ($250,000)
for each occurrence of bodily injury and Fifty Thousand Dollars ($50,000)
property damage. Tenant shall supply to Landlord certificates of insurance
showing the liability insurance coverage and throughout the term hereof,
certificates of renewals of such policies. Said certificate shall provide that
the insuror shall have given Landlord ten (10) days written notice prior to
cancellation of said policy. In the event Tenant fails to secure such insurance
or to give evidence to Landlord of such insurance by depositing with Landlord
certificates as above provided, Landlord may purchase such insurance in Tenant's
name and charge Tenant the premiums therefor. Bills for the premiums therefor
shall be deemed and paid as additional rent. Landlord's local agent is Beeson
Taggart and Associates, Inc. representing CNA Insurance Companies.
18. FIRE REGULATIONS - TENANT RESPONSIBILITY
The Landlord assures that the Leased premises meet all fire regulations
effective as of the initial date of the lease. It shall be Tenant's sole and
exclusive responsibility to meet all fire regulations of any governmental unit
having jurisdiction over the leased premises as such regulations affect Tenant's
operations, at Tenant's sole expense.
19. REPLACEMENT OF BUILDING
Landlord shall keep the building of which the leased premises are a part insured
against loss or damage by fire. If the leased premises are damaged or destroyed
by fire at any time after the date of this Lease, or if, after such date, said
premises are damaged or destroyed through any cause not directly attributable to
the negligence of Tenant, Landlord shall proceed with due diligence to repair or
restore the same to the same condition as existed before such damage or
destruction, and as soon as possible thereafter will give possession to the
Tenant of the premises herein leased without diminution or change of location.
In the event the premises are rendered temporarily untenantable because of fire
or other casualty, base monthly rent shall be waived until the premises are
restored to tenantable condition. Except as to damages covered by Landlord's
insurance, it is further agreed that the replacement or repair of any portion of
the leased premises damaged in connection with any burglary or other forcible
entry into the premises or damage directly attributable to the negligence of
Tenant, other than damage caused by fire, shall be at the sole expense of
Tenant. Area D of Exhibit A is subject to this paragraph with Tenant
responsibility shared by the three Tenants of the Leased premises in proportion
to the monthly lease payments.
20. WAIVER OF SUBROGATION
The parties release each other, and their respective authorized representatives,
from any claims for damages to any person or to the premises are located, and
the fixtures, personal property, Tenant's improvements,
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and alterations of either Landlord or Tenant in or on the premises and the
building or other improvements in which the premises are located that are caused
by or result from risks insured against under any insurance policies carried by
the parties and in force at the time of such damage. Each party shall cause each
insurance policy obtained by it to provide that the insurance company waives all
rights of recovery by way of subrogation against either party in connection with
any damage covered by any policy. If such insurance cannot be obtained or the
party in whose favor a waiver of subrogation is desired refuses to pay any
additional premium charge, the other party is relieved of the obligation to
obtain a waiver of subrogation rights with respect to the particular insurance
involved.
21. INSPECTION BY LANDLORD
Landlord, or its authorized representative, and/or any lender or prospective
lender, shall have the right to enter the leased premises during the Lease term
at all reasonable times during usual business hours for purposes of inspection,
and/or the performance of any work therein.
22. DEFAULT - REMEDIES OF LANDLORD
If after 30 days' written notice of default, Tenant shall remain in default in
the payment of rent or in the keeping of any of the terms, covenants, or
conditions of this Lease to be kept and/or performed by Tenant, Landlord may
immediately, or at any time thereafter declare this Lease terminated and reenter
the leased premises, remove all persons and property therefrom, without being
liable to indictment, prosecution for damage therefor, or for forcible entry and
detainer, and repossess and enjoy the leased premises, together with all
additions thereto or alterations and improvements thereof. Landlord may, at its
option, elect to treat this lease as still in effect and relet the leased
premises or any part thereof for the account of Tenant. The Landlord shall
receive and collect the rents therefor and apply the same first to the payment
of such expenses as Landlord may have incurred in recovering possession and for
putting the same in good order and condition for rerental, and expense and
commissions and charges paid by Landlord in reletting the leased premises. Any
such reletting may be for the remainder of the term of this Lease or for a
longer or shorter period. Whether or not the leased premises or any part thereof
be relet, Tenant shall pay the Landlord the rent and all other charges required
to be paid by Tenant up to the time of the expiration of this Lease or of such
recovered possession, as the case may be, and thereafter, Tenant, if required
by Landlord, shall pay to Landlord until the end of the term of this Lease, the
equivalent of the amount of all rent reserved herein and all other charges
required to be paid by Tenant, less the net amount received by Landlord for such
reletting, if any. If the leased premises shall be reoccupied by Landlord, then,
from and after the date of repossession, Tenant shall be discharged of
any obligations to Landlord under the provisions hereof for the payment of rent.
In event of any default by Tenant, and regardless of whether the premises shall
be relet or possessed by Landlord, any fixtures, additions, furniture, and the
like then on the premises may be retained by Landlord.
23. DEFAULT AND ABANDONMENT - REMEDIES OF LANDLORD
In the event an assignment of Tenant's business or property shall be made for
the benefit of creditors, or, if the Tenant's leasehold interest under the terms
of this Agreement shall be levied upon by execution or seized by virtue of any
writ of any
24. FINANCIAL FAILURE OF TENANT - REMEDIES BY LANDLORD
In the event an assignment of Tenant's business or property shall be made for
the benefit of creditors, or, if the Tenant's leasehold interest under the terms
of this Agreement shall be levied upon by execution or seized by virtue of any
writ of any receiver for the business or property of Tenant, or, if a
petition in bankruptcy shall be filed by or against Tenant, then and in any such
event, at Landlord's option, with or without notice, Landlord may terminate this
Lease and immediately retake possession of the leased premises without the same
working any forfeiture of the obligation of Tenant hereunder.
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25. LEGAL PROCEEDINGS - RESPONSIBILITY
In the event of any proceeding at law or in equity wherein Landlord, without
being in default as to its covenants under the terms hereof, shall be made a
party to any litigation by reason of Tenant's interest in the leased premises,
or, in the event Landlord shall be required to commence any legal proceedings
relating to the leased premises and/or Tenant's occupancy thereof and/or
Tenant's relation thereto, Landlord shall be allowed and Tenant shall be liable
for and shall pay all costs and expenses incurred by Landlord, including a
reasonable attorney's fee.
26. HOLD HARMLESS OF TENANT
Tenant will indemnify and hold Landlord harmless from and against any and all
claims, losses, expenses, costs, judgments, and/or demands arising from the
conduct of Tenant in the leased premises and/or on account of any operation or
action by Tenant and/or from and against all claims arising from any breach
or default on the part of Tenant or any act of negligence of Tenant, its agents,
contractors, servants, employees, licensees, or invitees, or any accident,
injury or death of any person or damage to any property in or about the leased
premises.
27. ASSIGNMENT OR SUBLETTING
Tenant may not assign the Lease, or sublet the leased premises without the
written consent of Landlord, which consent may be granted or withheld in the
Landlord's absolute discretion; provided, however, no such assignment or
subletting shall relieve Tenant of any of its obligations hereunder.
28. WARRANTY OF TITLE
Landlord covenants it has good right to lease the leased premises in the manner
described herein and that Tenant shall peaceably and quietly have, hold, occupy,
and enjoy the premises during the term of the lease.
29. ACCESS
Landlord shall provide Tenant non-exclusive access through and across land owned
by Landlord to the leased premises. Landlord shall have the rights to designate,
during the term of this Lease, non-exclusive roadways, sidewalks and other
common facilities of which the leased premises are a part. Tenants have shared
access to fourteen designated parking spaces on the south side of the leased
premises.
30. DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORDS
Landlord does reserve, during the term of this Lease, the right to go upon and
deal with the leased premises or part thereof for the purpose of implementing a
common development plan for the project of which the leased premises are a part,
and to install non-exclusive roadways and other street improvements for use
by vehicles, pedestrians, and for parking; to undertake such drainage programs
to handle underground and surface drainage water and make any other changes
and/or improvements as Landlord shall deem advisable in the exercise of its sole
discretion; provided, however, any such action by Landlord shall not
unreasonably interfere with the rights of Tenant hereunder.
31. GOVERNMENTAL ACQUISITION OF PROPERTY
The parties agree that Landlord shall have complete freedom of negotiation and
settlement of all matters pertaining to the acquisition of all or part of leased
premises. It being understood and agreed that any financial settlement
respecting land and/or building to be taken whether resulting from negotiation
and agreement or condemnation proceedings, shall be the exclusive property of
Landlord, there being no sharing whatsoever between Landlord and Tenant of any
sum received in settlement. The taking of land as noted herein, shall not be
considered as a breach of this Lease by Landlord, nor give rise to any claims in
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Tenant for damages or compensation from Landlord.
32. SUBORDINATION
The Tenant agrees that its Lease rights will be subordinate to those of any
lending institution making any loan upon the real property of which the leased
premises are a part. Tenant further agrees to sign reasonable documents
reflecting this subordination when and if requested by the Landlord.
33. INTEREST 0N PAST DUE OBLIGATIONS
Any amount due to Landlord not paid within five (5) days of due date shall bear
interest at one and one-half (1.5) percent per month from due date until paid.
Payment of such interest shall not excuse or cure any default by Tenant under
this lease.
34. LATE CHARGE
The Landlord may make a one-time collection service charge in the minimum amount
of $25.00 or 3% monthly, whichever is greater, of any rent installment,
percentage rental or other payment provided herein which is delinquent 10 days
or more.
35. NO WAIVER OF BREACH
No assent, expressed or implied, to any breach of any one or more of the
covenants or agreements herein shall be deemed or taken to be a waiver of any
succeeding or additional breach.
36. NOTICE PROCEDURE
All notices, demands, and requests which may or are required to be given by
either party to the other shall be in writing and such that are to be given to
Tenant shall be deemed to have been property given if served on Tenant or an
employee of Tenant or sent to Tenant by United States certified mail return
receipt requested, properly sealed, stamped and addressed to Tenant at 5680
Central Avenue, Boulder, Colorado, 80301, or at such other place as Tenant may
from time to time designate in a written notice to Landlord; and, such as are to
be given to Landlord shall be deemed to have been properly given if personally
served on Landlord or if sent to Landlord, United States certified mail, return
receipt requested, properly sealed, stamped and addressed to Landlord at 5758
Rustic Knolls Drive, Boulder, Colorado, 80301, or at such other place
as Landlord may from time to time designate in a written notice to Tenant. Any
notice given by mail shall be effective as of the date of mailing as shown by
the receipt given therefor.
37. CONTROLLING LAW
The Lease, and all terms hereunder shall be construed consistent with the laws
of the State of Colorado. Any dispute resulting in litigation hereunder shall be
resolved in arbitration (if chosen by mutual consent of Tenant and Landlord) or
court proceedings instituted in Colorado and in no other jurisdiction.
38. BINDING UPON SUCCESSORS
The covenants and agreements herein contained shall bind and inure to the
benefit of successors. This Lease shall be signed by the parties in duplicate,
each of which shall be a complete and effective original Lease.
39. MISCELLANEOUS
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All marginal notations and paragraph headings are for the purposes of reference
and shall not affect the true meaning and intent of the terms hereof. Throughout
this Lease, wherever the words, "Landlord" and "Tenant" are used they shall
include and imply to the singular, plural, persons both male and
female, companies, partnerships and corporations, and in reading said Lease the
necessary grammatical changes required to make the provisions hereof mean and
apply as aforesaid shall be made in the same manner as though originally
included in said Lease.
IN WITNESS WHEREOF, the Parties have executed this Lease as
of the date hereof.
LANDLORD:
RAYCON PROPERTIES, a partnership
By: /s/ CONSUELO M. HAUSER
------------------------
TENANT:
PIXSYS, INC.
By: /s/ MARTIN D. CHADER
----------------------
Its President
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DRAFT 072196A
THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
HOWEVER, NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
THIS WARRANT IS NOT EXERCISABLE PRIOR TO ___________, 1997.
VOID AFTER 5:00 P.M. NEW YORK CITY LOCAL TIME, ___________, 2001.
IMAGE GUIDED TECHNOLOGIES, INC.
WARRANTS FOR THE PURCHASE
OF
120,000 SHARES OF COMMON STOCK, NO PAR VALUE
NO. IPO-1
THIS CERTIFIES that, for receipt in hand of $120.00 and other value
received, HAMPSHIRE SECURITIES CORPORATION (the "Holder") is entitled to
subscribe for, and purchase from, IMAGE GUIDED TECHNOLOGIES, INC., a Colorado
corporation (the "Company"), upon the terms and conditions set forth herein,
at any time or from time to time after 12:00 A.M., New York City local time
___________, 1997 until 5:00 P.M. New York City local time on ___________,
2001 (the "Exercise Period"), up to an aggregate of 120,000 shares of common
stock, no par value (the "Common Stock"). This Warrant is initially
exercisable at $________ per share; provided, however, that upon the
occurrence of any of the events specified in Section 5 hereof, the rights
granted by this Warrant, including the exercise price and the number of
shares of Common Stock to be received upon such exercise, shall be adjusted
as therein specified. The term "Exercise Price" shall mean, depending on the
context, the initial exercise price (as set forth above) or the adjusted
exercise price per share.
This Warrant is the Representative's Warrant or one of the
Representative's Warrants (collectively, including any Representative's
Warrant issued upon the exercise or transfer of any such Representative's
Warrants in whole or in part, the "Warrants") issued pursuant to the
Underwriting Agreement, dated __________, 1996 (the "Underwriting
Agreement"), between the Company and Hampshire Securities Corporation, as
the representative (the "Representative") of the several underwriters (the
"Underwriters"). As used herein, the term "this Warrant" shall mean
<PAGE>
and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part.
This Warrant may not be sold, transferred, assigned, or hypothecated until
______________, 1997, except that it may be transferred, in whole or in part,
to (i) one or more officers or partners of the Holder (or the officers or
partners of any such partner); (ii) any other underwriting firm or member of
the selling group which participated in the public offering of shares of
Common Stock which commenced on __________, 1996 (or the officers or partners
of any such firm); (iii) a successor to the Holder, or the officers or
partners of such successor; (iv) a purchaser of substantially all of the
assets of the Holder; or (v) by operation of law. The term the "Holder" as
used herein shall include any transferee to whom this Warrant has been
transferred in accordance with the above.
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
1. This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the
end hereof duly executed) to the Company at its office at 5710-B Flatiron
Parkway, Boulder, Colorado 80301, or at such other place as is designated in
writing by the Company, together with a certified or bank cashier's check
payable to the order of the Company in an amount equal to the product of the
Exercise Price and the number of Warrant Shares for which this Warrant is
being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant
Shares, the Holder shall be deemed to be the holder of record of the Warrant
Shares, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing the Warrant Shares with respect to which
this Warrant was exercised shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates
representing the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a Warrant evidencing the right of the
Holder to purchase the balance of the aggregate number of Warrant Shares
purchasable hereunder as to which this Warrant has not been exercised or
assigned.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register as the
owner in fact thereof for all purposes, and shall not be bound to recognize
any equitable or other claim to, or interest in, such Warrant on the part of
any other person, and shall not be liable for any registration of transfer of
Warrants which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be
transferable on the books of the Company only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative,
or accompanied by proper evidence of
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<PAGE>
succession, assignment, or authority to transfer. In all cases of transfer
by an attorney, executor, administrator, guardian, or other legal
representative, duly authenticated evidence of his, her, or its authority
shall be produced. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if,
in the opinion of counsel to the Company, such transfer does not comply with
the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such
Warrant Shares, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof and will
not be issued in violation of any preemptive or similar rights of
stockholders.
5. (a) The Exercise Price for the Warrants in effect from time to time,
and the number of shares of Common Stock issuable upon exercise of the
Warrants, shall be subject to adjustment, as follows:
(i) In the event that the Company shall at any time after the date
hereof (A) declare a dividend on the outstanding Common Stock payable in
shares of its capital stock, (B) subdivide the outstanding Common Stock, (C)
combine the outstanding Common Stock into a smaller number of shares, or (D)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each
case, the Exercise Price per Warrant Share in effect at the time of the
record date for the determination of stockholders entitled to receive such
dividend or distribution or of the effective date of such subdivision,
combination, or reclassification shall be adjusted so that it shall equal the
price determined by multiplying such Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action, and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur and shall become effective at the close of business on such
record date or at the close of business on the date immediately preceding
such effective date, as applicable.
(ii) In the event that the Company shall fix a record date for the
determination of stockholders entitled to receive issuance of rights or
warrants to be issued to all holders of Common Stock entitling such
stockholders to subscribe for or purchase shares of Common Stock (or
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<PAGE>
securities convertible into Common Stock) at a price (the "Subscription
Price") (or having a conversion price per share) less than the then Current
Market Price (as hereinafter defined) per share of Common Stock on such
record date, the Exercise Price in effect at the time of such record date
shall be adjusted so that the same shall equal the price determined by
multiplying such Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on such record date and the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such Current Market Price per share of the Common Stock, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
on such record date and the number of additional shares of Common Stock
offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants.
(iii) In the event the Company shall fix a record date for the
determination of stockholders entitled to receive (including any such
distribution made to the stockholders of the Company in connection with a
consolidation or merger in which the Company is the continuing corporation in
a distribution to all holders of Common Stock) evidences of its indebtedness,
cash, or assets (other than distributions and dividends payable in shares of
Common Stock), or rights, options, or warrants to subscribe for or purchase
shares of Common Stock, or securities convertible into, or exchangeable for,
shares of Common Stock (excluding those referred to in paragraph (ii) above)
in a distribution to all holders of Common Stock, then, in each case, the
Exercise Price in effect at the time of such record date shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Price
per share of Common Stock on such record date, less the fair market value (as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of
the evidences of indebtedness or assets so to be distributed, or of such
rights, options, or warrants, or convertible or exchangeable securities, or
the amount of such cash, applicable to one share of Common Stock, and the
denominator of which shall be such Current Market Price per share of Common
Stock on such record date. Such adjustment shall be made successively
whenever any event listed above shall occur and become effective at the close
of business on such record date.
(iv) In case the Company shall issue shares of Common Stock for a
consideration per share (the "Offering Price") less than the Current Market
Price per share of Common Stock on the date the Company fixes the offering
price of such additional shares, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying such Exercise Price by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined as
provided in Subsection (i) below) for the issuance of such additional shares
would purchase at such Current Market Price per share of Common Stock, and
the denominator of which shall be the
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<PAGE>
number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively
whenever such an issuance is made. Notwithstanding anything herein to the
contrary, no adjustment pursuant to this paragraph (a)(iv) of Section 5 shall
take place as a result of this issuance of shares of Common Stock pursuant to
an employee, officer, or director securities ownership or compensation plan
duly adopted by the Board of Directors of the Company, including, but not
limited to, any employee stock option plan duly adopted by the Board of
Directors of the Company.
(v) In case the Company shall issue any securities convertible into, or
exchangeable for, Common Stock (excluding securities issued in transactions
described in Subsections (ii) and (iii) above) for a consideration per share
of Common Stock (the "Conversion Price") initially deliverable upon
conversion or exchange of such securities (determined as provided in
Subsection (i) below) less than the Current Market Price per share of Common
Stock in effect immediately prior to the issuance of such securities, the
Exercise Price in effect immediately prior to the date of such issuance shall
be adjusted immediately thereafter so that it shall equal the price
determined by multiplying such Exercise Price by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the number of shares
of Common Stock which the aggregate consideration received (determined as
provided in Subsection (i) below) for such securities would purchase at such
Current Market Price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance and the maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange for, such securities at
the initial conversion or exchange price or rate. Such adjustment shall be
made successively whenever such an issuance is made. Notwithstanding
anything herein to the contrary, no adjustment pursuant to this paragraph
(a)(v) of Section 5 shall take place as a result of the issuance of
securities convertible into, or exchangeable for, shares of Common Stock
pursuant to an employee, officer, or director securities ownership or
compensation plan duly adopted by the Board of Directors of the Company,
including, but not limited to, any employee stock option plan duly adopted by
the Board of Directors of the Company.
(b) The Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days immediately preceding the date in question. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities
exchange (including, for purposes hereof, the Nasdaq National Market) on
which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the highest reported bid price for the Common Stock as furnished by
the National Association of Securities Dealers, Inc. through the Nasdaq
SmallCap Market or a similar organization if the Nasdaq SmallCap Market is no
longer reporting such information. If, on any such date, the Common Stock is
not listed or admitted to trading on any national securities exchange and is
not quoted on the Nasdaq SmallCap Market or any similar organization, the
Current Market Price shall be deemed to be the fair value of a share of
Common Stock on such date, as determined in good faith by the Board of
Directors of the Company, absent manifest error.
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<PAGE>
(c) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(d) In any case in which this Section 5 shall require that an
adjustment in the number of Warrant Shares be made effective as of a record
date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the Warrant Shares, if any, issuable upon
such exercise over and above the number of Warrant Shares issuable upon such
exercise on the basis of the number of shares of Common Stock outstanding or
in effect prior to such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing
the Holder's right to receive such additional shares of Common Stock upon the
occurrence of the event requiring such adjustment.
(e) Whenever there shall be an adjustment as provided in this Section
5, the Company shall within 15 days thereafter cause written notice thereof
to be sent by registered or certified mail, postage prepaid, to the Holder,
at its address as it shall appear in the Warrant Register, which notice shall
be accompanied by an officer's certificate setting forth the number of
Warrant Shares issuable and the Exercise Price thereof after such adjustment
and setting forth a brief statement of the facts requiring such adjustment
and the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(f) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of capital stock would be issuable on
the exercise of this Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the same fraction
of the Current Market Price of such share of Common Stock on the date of
exercise of this Warrant.
(g) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this Section 5 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
(h) Whenever the Exercise Price payable upon exercise of this Warrant
is adjusted pursuant to Subsections (a)(i), (a)(ii), (a)(iii), (a)(iv), or
(a)(v) above, the number of Warrant Shares issuable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number of Warrant
Shares theretofore issuable upon exercise of this Warrant by the Exercise
Price in effect on _________, 1996 and dividing the product so obtained by
the Exercise Price, as adjusted.
(i) For purposes of any computation respecting consideration received
pursuant to Subsections (a)(iv) and (a)(v) above, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no
case shall any deduction be
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<PAGE>
made for any commissions, discounts, or other expenses incurred by
the Company for any underwriting of the issue or otherwise in
connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), the determination
of which shall be a conclusive absent manifest error; and
(iii) in the case of the issuance of securities convertible into, or
exchangeable for, shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (i) and (ii) of
this Subsection (i)).
(j) Notwithstanding anything herein to the contrary, if any adjustment
under this Section 5 of the Exercise Price or the number of shares of Common
Stock or other securities issuable upon exercise of this Warrant shall be
determined by the National Association of Securities Dealers, Inc. (the
"NASD") to violate either or both of Section 44(c)(6)(B)(vi)(7) or Section
44(c)(6)(B)(vi)(8) of Article III of the Rules of Fair Practice of the NASD,
and such determination shall not be subject to further appeal or review, the
violative provisions or provisions shall be deemed to be amended to the
minimum extent necessary to cause each such provision to comply with the
applicable violated paragraph of Section 44 of the NASD Rules of Fair
Practice.
6. (a) In case of any capital reorganization, other than in the cases
referred to in Section 5(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into
shares of other stock or other securities or property), or in the case of any
sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety
(such actions being hereinafter collectively referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of
this Warrant (in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities or property to
which a holder of the respective number of Warrant Shares which would
otherwise have been deliverable upon the exercise of this Warrant would have
been entitled upon such Reorganization if this Warrant had been exercised in
full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
Board of Directors of the Company, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of the
Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other
property thereafter deliverable upon exercise of this Warrant. Any such
adjustment shall be made by, and set forth in, a supplemental agreement
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<PAGE>
between the Company, or any successor thereto, and the Holder, with respect
to this Warrant, and shall for all purposes hereof conclusively be deemed to
be an appropriate adjustment. The Company shall not effect any such
Reorganization unless, upon or prior to the consummation thereof, the
successor corporation, or, if the Company shall be the surviving corporation
in any such Reorganization and is not the issuer of the shares of stock or
other securities or property to be delivered to holders of shares of the
Common Stock outstanding at the effective time thereof, then such issuer,
shall assume by written instrument the obligation to deliver to the Holder
such shares of stock, securities, cash, or other property as such holder
shall be entitled to purchase in accordance with the foregoing provisions.
In the event of sale, lease, or conveyance or other transfer of all or
substantially all of the assets of the Company as part of a plan for
liquidation of the Company, all rights to exercise this Warrant shall
terminate 30 days after the Company gives written notice to the Holder and
each registered holder of a Warrant that such sale or conveyance or other
transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par
value or from a specified par value to no par value, or as a result of a
subdivision or combination, but including any change in the shares into two
or more classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes
or series of shares), the Holder or holders of this Warrant shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of Warrant Shares for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent
as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
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<PAGE>
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered or certified mail, postage prepaid, to the
Holder at the Holder's address as it shall appear in the Warrant Register,
mailed at least 20 days prior to (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants, or other securities are to be determined,
(ii) the date on which any such reclassification, change of outstanding
shares of Common Stock, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution, or winding-up is expected to become
effective and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance
of property, liquidation, dissolution, or winding-up, or (iii) the date of
such action which would require an adjustment to the Exercise Price per
Warrant Share.
8. The issuance of any shares or other securities upon the exercise of
this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder, and the Company shall
not be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
9. (a) If, at any time during the seven-year period commencing on
___________, 1997, the Company shall file a registration statement (other
than on Form S-4, Form S-8 or any successor form) with the Securities and
Exchange Commission (the "Commission") while any Registrable Securities (as
hereinafter defined) are outstanding, the Company shall give all the then
holders of any Registrable Securities (the "Eligible Holders") at least 45
days prior written notice of the filing of such registration statement. If
requested by any Eligible Holder in writing within 30 days after receipt of
any such notice, the Company shall, at the Company's sole expense (other than
the fees and disbursements of counsel for the Eligible Holders and the
underwriting discounts, if any, payable in respect of the Registrable
Securities sold by any Eligible Holder), register or qualify all or, at each
Eligible Holder's option, any portion of the Registrable Securities of any
Eligible Holders who shall have made such request, concurrently with the
registration of such other securities, all to the extent requisite to permit
the public offering and sale of the Registrable Securities, and will use its
best efforts through its officers, directors, auditors, and counsel to cause
such registration statement to become effective as promptly as practicable.
Notwithstanding the
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<PAGE>
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion
of the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the
Company for its own account, then any Eligible Holder who shall have
requested registration of his, her, or its Registrable Securities shall delay
the offering and sale of such Registrable Securities (or the portions thereof
so designated by such managing underwriter) for such period, not to exceed 90
days (the "Delay Period"), as the managing underwriter shall request,
provided that no such delay shall be required as to any Registrable
Securities if any securities of the Company are included in such registration
statement and eligible for sale during the Delay Period for the account of
any person other than the Company and any Eligible Holder unless the
securities included in such registration statement and eligible for sale
during the Delay Period for such other person shall have been reduced pro
rata to the reduction of the Registrable Securities which were requested to
be included and eligible for sale during the Delay Period in such
registration. As used herein, "Registrable Securities" shall mean the
Warrants and the Warrant Shares which, in each case, have not been previously
sold pursuant to a registration statement or Rule 144 promulgated under the
Securities Act.
(b) If, on any two occasions during the four-year period commencing on
________, 1996, the Company shall receive a written request from Eligible
Holders who in the aggregate own (or upon exercise of all Warrants or
Warrants then outstanding would own) a majority of the total number of shares
of Common Stock then included (or upon such exercises would be included) in
the Registrable Securities (the "Majority Holders"), to register the sale of
all or part of such Registrable Securities, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Registrable
Securities and will use its best efforts through its officers, directors,
auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, that the Company shall only
be obligated to file one such registration statement pursuant to this Section
9(b) for which all expenses incurred in connection with such registration
(other than the fees and disbursements of counsel for the Eligible Holders
and underwriting discounts, if any, payable in respect of the Registrable
Securities sold by the Eligible Holders) shall be borne by the Company.
Within five business days after receiving any request contemplated by this
Section 9(b), the Company shall give written notice to all the other Eligible
Holders, advising each of them that the Company is proceeding with such
registration and offering to include therein all or any portion of any such
other Eligible Holder's Registrable Securities, provided that the Company
receives a written request to do so from such Eligible Holder within 30 days
after receipt by him, her, or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such
holders may reasonably request; provided, however, that the Company shall not
be required by reason of this Section 9(c) to register or qualify the
Registrable Securities in any jurisdiction where, as a result thereof, the
Company would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction to which the Company
is not then subject.
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<PAGE>
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 9 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Securities Act and the rules and regulations
thereunder, and such other documents as any Eligible Holder may reasonably
request to facilitate the disposition of the Registrable Securities included in
such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 9, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Securities Act and no order suspending the
effectiveness of the registration statement, or preventing or suspending the use
of the registration statement, any preliminary prospectus, any final prospectus
or any amendment or supplement thereto, has been issued, nor, to the knowledge
of such counsel, has the Commission or any securities or blue sky authority of
any jurisdiction instituted or threatened to institute any proceedings with
respect to such an order, (ii) the registration statement and each prospectus
forming a part thereof (including each preliminary prospectus), and any
amendment or supplement thereto, complies as to form with theSecurities Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 9(c).
(g) In the event of a registration pursuant to the provision of this
Section 9, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
-11-
<PAGE>
(h) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Securities
Act, it shall keep current in filing all reports, statements, and other
materials required to be filed with the Commission to permit holders of the
Registrable Securities to sell such securities under Rule 144 under the
Securities Act.
10. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of theSecurities Act or Section
20(a) of the Securities ExchangeSecurities Act of 1934, as amended (the
"Exchange Act"), from and against any and all loss, liability, charge, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 10, without limitation, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with, (i) any untrue statement or
alleged untrue statement of a material fact contained in (A) any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the offer and sale of any of the Registrable Securities, or (B) any application
or other document or communication (in this Section 10, referred to collectively
as an "application") executed by, or on behalf of, the Company or based upon
written information furnished by, or on behalf of, the Company filed in any
jurisdiction in order to register or qualify any of the Registrable Securities
under the securities or "blue sky" laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company with respect to
such Eligible Holder by, or on behalf of, such person expressly for inclusion in
any registration statement, preliminary prospectus or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall
be in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a)) and the
Company shall promptly assume the defense of such action, including, without
limitation, the employment of counsel reasonably satisfactory to such
indemnified party or parties) and payment of expenses. Such indemnified party
or parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel
-12-
<PAGE>
reasonably satisfactory to such indemnified party or parties to have charge
of the defense of such action or the named parties to such action include
both the indemnified and the indemnifying parties and such indemnified party
or parties shall have reasonably concluded that there may be one or more
legal defenses available to it or them or to other indemnified parties which
are different from, or in addition to, those available to the Company, which,
for reasons of conflict of interest or otherwise, counsel to the Company is
not in a position to assert, in any of which events such reasonable fees and
expenses shall be borne by the Company and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party
or parties. Anything in this Section 10 to the contrary notwithstanding, the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the prior written consent of each
indemnified party that is not released as described in this sentence, settle
or compromise any action, or permit a default or consent to the entry of
judgment in, or otherwise seek to terminate, any pending or threatened
action, in respect of which indemnity may be sought hereunder (whether or not
any indemnified party is a party thereto), unless such settlement,
compromise, consent, or termination includes an unconditional release of each
indemnified party from all liability in respect of such action. The Company
agrees promptly to notify the Eligible Holders of the commencement of any
litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of any Registrable Securities or any
preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any
Registrable Securities.
(b) Each Eligible Holder severally agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Registrable Securities held by
such Eligible Holder, each other person, if any, who controls the Company within
the meaning of Section 15 of theSecurities Act or Section 20(a) of the Exchange
Act, and its or their respective counsel, to the same extent as the foregoing
indemnity from the Company to the Eligible Holders in Section 10(a), but only
with respect to statements or omissions, if any, made in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written information
furnished to the Company with respect to any Eligible Holder by, or on behalf
of, such Eligible Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based
on any such registration statement, preliminary prospectus, or final prospectus,
or any amendment or supplement thereto, or any application, and in respect of
which indemnity may be sought against any Eligible Holder pursuant to this
Section 10(b), such Eligible Holder shall have the rights and duties given to
the Company, and the Company and each other person so indemnified shall have
the rights and duties given to the indemnified parties, by the provisions of
Section 10(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 10(a) or 10(b)
hereof (subject to the limitations thereof), but it is found in a final judicial
determination, not subject to further appeal, that such
-13-
<PAGE>
indemnification may not be enforced in such case, even though this Warrant
expressly provides for indemnification in such case, or (ii) any indemnified
or indemnifying party seeks contribution under the Securities Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by, or on behalf of, any director of the Company, any
officer of the Company who signed any such registration statement, any
controlling person of the Company, and its or their respective counsel), as
one entity, and the Eligible Holders of the Registrable Securities included
in such registration in the aggregate (including for this purpose any
contribution by, or on behalf of, an indemnified party), as a second entity,
shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, on the basis of relevant
equitable considerations such as the relative fault of the Company and such
Eligible Holders in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information
supplied by the Company or by such Eligible Holders, and the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent such statement, alleged statement, omission, or alleged omission.
The Company and the Eligible Holders agree that it would be unjust and
inequitable if the respective obligations of the Company and the Eligible
Holders for contribution were determined by pro rata or per capita allocation
of the aggregate losses, liabilities, claims, damages, and expenses (even if
the Eligible Holders and the other indemnified parties were treated as one
entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 10(c). In
no case shall any Eligible Holder be responsible for a portion of the
contribution obligation imposed on all Eligible Holders in excess of its pro
rata share based on the number of shares of Common Stock owned (or which
would be owned upon exercise of all Registrable Securities) by it and
included in such registration as compared to the number of shares of Common
Stock owned (or which would be owned upon exercise of all Registrable
Securities) by all Eligible Holders and included in such registration. No
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For
purposes of this Section 10(c), each person, if any, who controls any
Eligible Holder within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent, and counsel of each such Eligible Holders or control person
shall have the same rights to contribution as such Eligible Holder or control
person and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act,
each officer of the Company who shall have signed any such registration
statement, each director of the Company, and its or their respective counsel
shall have the same rights to contribution as the Company, subject in each
case to the provisions of this Section 10(c). Anything in this Section 10(c)
to the contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without its
written consent. This Section 10(c) is intended to supersede any right to
contribution under the Securities Act, the Exchange Act, or otherwise.
-14-
<PAGE>
11. Unless registered pursuant to the provisions of Section 9 hereof, the
Warrant Shares issued upon exercise of the Warrants shall be subject to a stop
transfer order and the certificate or certificates representing the Warrant
Shares shall bear the following legend:
THE SECURITIES REPRESENTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
HEREOF, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon receipt by the Company of reasonably
satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15. The Holder and the Company irrevocably consent to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of, or relating
to, this Warrant, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Warrant, or a breach of this
Warrant or any such document or instrument. In any such action or proceeding,
the Holder or the Company, as applicable, waives personal service of any
summons, complaint, or other process and agrees that service thereof may be made
in accordance with Section 12 of the Underwriting Agreement. Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the Company shall
appear
-15-
<PAGE>
to answer such summons, complaint, or other process. Should the Company so
served fail to appear or answer within such 30-day period or such extended
period, as the case may be, the Company shall be deemed in default and judgment
may be entered against the Company for the amount as demanded in any summons,
complaint, or other process so served.
Dated: _________, 1996
IMAGE GUIDED TECHNOLOGIES, INC.
BY:
-------------------------------
PAUL L. RAY
PRESIDENT
[Seal]
- ----------------------
Secretary
-16-
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, no par value, of Image Guided Technologies, Inc., a Colorado
corporation (the "Company"), and does hereby irrevocably constitute and appoint
___________ attorney to transfer such Warrant on the books of the Company, with
full power of substitution.
Dated:
-----------------
Signature
-----------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
-17-
<PAGE>
ELECTION TO EXERCISE
To: Image Guided Technologies, Inc.
5710-B Flatiron Building
Boulder, Colorado 80301
The undersigned hereby exercises his, her, or its rights to purchase shares
of Common Stock, no par value ("the Common Stock"), of Image Guided
Technologies, Inc., a Colorado corporation (the "Company"), covered by the
within Warrant and tenders payment herewith in the amount of $____________ in
accordance with the terms thereof, and requests that certificates for the
securities constituting such shares of Common Stock be issued in the name of,
and delivered to:
(Print Name, Address, and Social Security
or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for the
balance of the shares of Common Stock covered by the within Warrant shall be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: Name
------------------ ------------------------
(Print)
Address:
-------------------------------
(Signature)
-18-
<PAGE>
Page 1 of 3
PIXSYS
Capturing a new dimension
1727 Conestoga Street
Boulder, CO 80301
303-447-0248 FAX 303-441-2487
June 24, 1992
Giken Shoji Company, Ltd.
6F Soar Building
2-3 1-Chome, Izumi, Higashi-Ku
Nagoya, 461 Japan
Subject: Letter of Agreement
Gentlemen:
This letter confirms that Pixsys, Inc., hereafter referred to as Pixsys,
entrusts Giken Shoji Company, Ltd., hereafter referred to as Giken Shoji, with
the exclusive right to resell Pixsys digitizing products to non-medical
customers in the whole of Japan and such other countries as are mutually agreed
to in writing from time to time. Giken Shoji also has the non-exclusive right
to sell Pixsys digitizing products to medical customers in the whole of Japan.
1. The products which Giken Shoji may resell and their selling price
shall be those listed on Pixsys' current international price list and are
subject to change as published from time to time by Pixsys and furnished to
Giken Shoji. Discounts will be as shown on the current Pixsys Discount Schedule
for Giken Shoji.
2. Giken Shoji agrees to utilize its resources to apply its best efforts
to sell Pixsys products in its territory. Giken Shoji will maintain adequate
inventory to support such sales efforts. Giken Shoji will keep Pixsys informed
at all times, and in particular when requested by Pixsys, with competitive
product and price information. In addition, Giken Shoji will provide Pixsys
with customer and prospect names, addresses, and other relevant information as
requested by Pixsys.
3. Pixsys agrees to provide Giken Shoji with up-to-date technical and
sales literature and technical sales training. Such literature will include
applicable product information, plus as available: information supporting
applications development, advertising, and sales promotion. Technical training,
sales training, and financial support for Giken Shoji's advertising and
promotional efforts will be provided to whatever extent is mutually agreed upon
in writing by Giken Shoji and Pixsys.
4. It is mutually agreed that in circumstances where it appears to Pixsys
that Giken Shoji cannot obtain business from certain customers in the territory
for Pixsys products, Pixsys reserves the right to deal directly with such
potential customers under any terms it elects to offer. In cases where a
Japanese customer purchases Pixsys products for integration into any
<PAGE>
Page 2 of 3
medical system, Pixsys also reserves the right to deal directly with such
customers under any terms it elects to offer. In either case, Pixsys will make
all reasonable efforts to work with Giken Shoji to support such potential
customers. Payments to Giken Shoji in such cases will be at Pixsys' sole
discretion and will be determined on a case-by-case basis.
5. Terms of payment will be an open account with a line of credit of
30,000 U.S. Dollars. Payment terms will be Net 30 days from date of invoice to
Giken Shoji. Line of credit and the terms of payment may be changed from time
to time at Pixsys' sole discretion. If Giken Shoji becomes delinquent in its
payments to Pixsys, it is agreed that Pixsys may stop shipment of its products
and/or charge a 1-1/2 percent per month service charge on the delinquent balance
of the account until paid. All payments are to be in U.S. dollars.
6. Giken Shoji is not the representative or agent of Pixsys for any
purpose and has no right or authority to assume or create any obligation of any
kind for or on behalf of Pixsys, or to bind Pixsys in any respect.
7. This agreement will be in effect from the date it is signed by Pixsys
as noted below. Either party may terminate this agreement immediately by
written notice to the other party upon breach by the other party of any
provision of this agreement. Either party may terminate this agreement for any
reason by written notice to the other party at least 60 days prior to the
termination date. Such written notices must be sent via certified mail. In the
event of termination of this agreement, Giken Shoji agrees immediately to return
in good condition any consigned inventory provided Giken Shoji by Pixsys. In
addition, at its sole discretion, Pixsys may elect to repurchase any other
inventory of Pixsys products previously purchased by Giken Shoji at a mutually
agreed upon price. Termination of this agreement does not constitute a release
or settlement of amounts owed or pending, whether disputed or not, by one or
both parties to the other.
9. Giken Shoji may not assign or delegate its rights or responsibilities
hereunder without the prior written consent of Pixsys.
10. This agreement shall be governed by the laws of the State of Colorado,
U.S.A.
GIKEN SHOJI COMPANY, LTD.
By: /S/ SIGNATURE
-------------------------
Title: President
-------------------------
Date: June 25, 1992
-------------------------
PIXSYS, INC.
By: /S/ TIMOTHY L. FEAVER
-------------------------
Title: President
-------------------------
Date: June 24, 1992
-------------------------
<PAGE>
Page 3 of 3
DISCOUNT SCHEDULE FOR SALES TO GIKEN SHOJI FOR RESALE IN JAPAN
Discounts are offered subject to the following conditions:
1. Each gross order value for discounting purposes will be calculated on the
products listed in Pixsys' current International Price List using the current
International list price. Catalog series numbers not included in Pixsys'
current International Price List will be negotiated separately.
2. The discount rate to be applied is 30%.
3. Pixsys reserves the right to split shipments.
4. The following Pixsys items are not eligible for any discount:
*Warranty repairs
*Non-warranty repairs
*Miscellaneous non-catalog parts
<PAGE>
July 3, 1996
Giken Shoji Co., Ltd. IMAGE GUIDED
Tomomi Kojima TECHNOLOGIES, INC.
President 5710-B Flatiron Parkway
3rd Floor, Spline Building Boulder, CO 80301
19-2, Dogenzaka 1-chome, USA
Shibuya-ku, 150 Tel:(303) 447-0248
Tokyo Fax:(303) 447-3905
Dear Kojima san:
Over the course of this past several months, Image Guided Technologies, Inc.
(IGT), has reviewed our various marketing relationships worldwide in order to
assess our current partnerships.
As a result of this analysis, the decision has been reached to terminate the
contract with Giken Shoji at the close of 1996. Until that time, IGT will honor
any orders for product placed through December 31, 1996.
It is my understanding that Giken Shoji is in possession of an FP 5000
demonstration unit. If this unit is still in your hands, then IGT will accept
full return of the unit by December 31, 1996 and extend to Giken Shoji a full
credit for the device.
I am appreciative of the relationship which we have had with Giken Shoji and
wish you the very best in the future.
Best regards,
/s/ PAUL L. RAY
Paul L. Ray
Chairman and CEO
cc: Robert Silligman
Jeffrey J. Hiller
Martin Chader
<PAGE>
Image Guided Technologies, Inc. Exhibit 11.1
Statement Re: Computation of Pro Forma Net Income (Loss)
Per Common Share (Unaudited)
Six Months
Year Ended Ended
December 31, June 30,
1995 1996
Weighted average number of common shares
outstanding 1,360,506 1,704,336
Weighted average number of shares of preferred stock
assumed converted to common stock at the time of
issuance 333,328 333,328
Number of shares of preferred stock assumed
issued under antidilution provisions 47,035 47,035
Common and common equivalent shares issued
during the twelve month period prior to the
filing of the Company's proposed initial public
offering calculated using the treasury stock
method and the assumed initial public
offering price of $5 per share 377,680 377,680
Weighted average number of dilutive common
stock equivalent shares calculated using the
treasury stock method 363,234
Pro forma weighted average number of common
shares outstanding 2,118,549 2,825,613
------------- -----------
------------- -----------
Net income (loss) ($1,051,949) $125,834
------------- -----------
------------- -----------
Pro forma net income (loss) per common share
(unaudited) ($0.50) $0.04
Page 1
<PAGE>
EXHIBIT 16.1
[LETTERHEAD]
July 29, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 23 of Form SB-2 dated July 29, 1996, of Image Guided
Technologies, Inc. (formerly Pixsys, Inc.) and are in agreement with the
statements contained in the fourth and fifth sentences of the paragraph included
therein. We have no basis to agree or disagree with other statements of the
registrant contained therein.
/s/ ERNST & YOUNG LLP
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated July 12, 1996 relating
to the financial statements of Image Guided Technologies, Inc., which appears in
such Prospectus. We also consent to the references to us under the headings
"Summary Financial Information", "Selected Financial Information" and "Experts"
in such Prospectus. However, it should be noted that Price Waterhouse LLP has
not prepared or certified such "Summary Financial Information" or "Selected
Financial Information."
Price Waterhouse LLP
Boulder, Colorado
July 26, 1996
<PAGE>
[LETTERHEAD]
July 25, 1996
VIA FACSIMILE
Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We hereby consent to the use of our name under the heading "Experts"
with regard to patent matters in the Prospectus that forms a part of the
Registration Statement on Form SB-2 to be filed in connection with the
initial public offering of the Common Stock, no par value, of Image Guided
Technologies, Inc.
Yours very truy,
NIKAIDO, MARMELSTEIN, MURRAY & ORAM LLP
By: /s/ CHARLES M. MARMELSTEIN
-------------------------------------
Charles M. Marmelstein
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 32 138
<SECURITIES> 0 0
<RECEIVABLES> 546 618
<ALLOWANCES> 24 41
<INVENTORY> 175 355
<CURRENT-ASSETS> 767 1190
<PP&E> 146 347
<DEPRECIATION> 55 93
<TOTAL-ASSETS> 859 1456
<CURRENT-LIABILITIES> 1462 1487
<BONDS> 0 109
0 0
1000 1000
<COMMON> 1777 2115
<OTHER-SE> (3381) (3255)
<TOTAL-LIABILITY-AND-EQUITY> 859 1456
<SALES> 1884 1747
<TOTAL-REVENUES> 1908 1753
<CGS> 794 734
<TOTAL-COSTS> 768 225
<OTHER-EXPENSES> 1196 607
<LOSS-PROVISION> 27 17
<INTEREST-EXPENSE> 176 44
<INCOME-PRETAX> (1052) 126
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1052) 126
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1052) 126
<EPS-PRIMARY> (.50) .04
<EPS-DILUTED> 0 0
</TABLE>
