<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
or
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission file number: 001-12189
IMAGE GUIDED TECHNOLOGIES, INC.
-------------------------------
(Exact name of small business issuer as
specified in its charter)
COLORADO 84-1139082
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5710-B FLATIRON PARKWAY, BOULDER, CO 80301
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(303) 447-0248
--------------
(Registrant's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes __X__ No _____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,106,024 shares of common
stock, no par value, were outstanding on July 30, 1997.
Transitional Small Business Disclosure Format (check one); Yes _____ No __X__
<PAGE>
Table of Contents
PART ITEM PAGE
- ---- ---- ----
I FINANCIAL INFORMATION
1. Financial Statements
Balance Sheet -- June 30, 1997 1
Statements of Operations -- Three Months and Six Months
Ended June 30, 1997 and 1996 2
Statements of Cash Flows -- Six Months Ended June 30, 1997
and 1996 3
Notes to Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation
Financial Condition and Results of Operations 4
Liquidity and Capital Resources 6
Forward-Looking Statements 6
Other Matters 9
II OTHER INFORMATION
1. Legal Proceedings 10
2. Changes in Securities 10
3. Defaults Upon Senior Securities 10
4. Submission of Matters to a Vote of Security Holders 10
5. Other Information 10
6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMAGE GUIDED TECHNOLOGIES, INC.
BALANCE SHEET
JUNE 30, 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,799,000
Accounts receivable, net of allowance for doubtful accounts of
$66,000 at June 30, 1997 948,000
Inventories, net 426,000
Other current assets 80,000
-----------
Total current assets 6,253,000
Property and equipment, net of accumulated depreciation of
$194,000 at June 30, 1997 350,000
Other assets 16,000
-----------
Total assets $ 6,619,000
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 269,000
Accrued liabilities 223,000
Current portion of capital lease obligation 36,000
-----------
Total current liabilities 528,000
Capital lease obligation 81,000
-----------
Total liabilities 609,000
-----------
Commitments and contingencies
Shareholders' equity
Common Stock, no par value; 10,000,000 shares authorized;
3,106,024 shares issued and outstanding at June 30, 1997 8,798,000
Accumulated deficit (2,788,000)
-----------
Total shareholders' equity 6,010,000
-----------
Total liabilities and shareholders' equity $ 6,619,000
-----------
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The accompanying notes are an integral part of these financial statements.
1
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IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $1,324,000 $1,011,000 $2,496,000 $1,747,000
Cost of goods sold 560,000 455,000 1,114,000 734,000
---------- ---------- ---------- ----------
Gross profit 764,000 556,000 1,382,000 1,013,000
---------- ---------- ---------- ----------
Operating expenses:
Research and development 222,000 160,000 414,000 300,000
Selling and marketing 157,000 109,000 318,000 225,000
General and administrative 270,000 192,000 525,000 324,000
---------- ---------- ---------- ----------
Total operating expenses 649,000 461,000 1,257,000 849,000
---------- ---------- ---------- ----------
Operating income 115,000 95,000 125,000 164,000
Other income (expense):
Interest and other expense (8,000) (20,000) (12,000) (44,000)
Interest and other income 56,000 4,000 125,000 6,000
---------- ---------- ---------- ----------
Net Income $ 163,000 $ 79,000 $ 238,000 $ 126,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share $ 0.05 $ 0.07
Weighted average common shares
outstanding 3,568,178 3,576,169
Pro forma earnings per share $ 0.04 $ 0.06
Pro forma weighted average
common shares outstanding 2,006,957 2,241,588
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
Six Months Ended June 30,
-------------------------
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 238,000 $ 126,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 68,000 41,000
Write-off of fixed assets 8,000 ---
Provision for doubtful accounts 9,000 17,000
Allowance for inventory obsolescence 30,000 (3,000)
Changes in operating assets and liabilities:
Accounts receivable (435,000) (72,000)
Inventories (40,000) (177,000)
Other current assets 26,000 (82,000)
Deposits --- (12,000)
Accounts payable (125,000) 18,000
Accrued liabilities (69,000) (10,000)
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Net cash used in operating activities (290,000) (154,000)
---------- ----------
INVESTING ACTIVITIES:
Additions to property and equipment (144,000) (77,000)
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Net cash used in investing activities (144,000) (77,000)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock --- 337,000
Principal payments on capital leases (7,000) ---
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Net cash provided by (used in) financing activities (7,000) 337,000
---------- ----------
Net increase (decrease) in cash and cash equivalents (441,000) 106,000
Cash and cash equivalents at beginning of period 5,240,000 32,000
---------- ----------
Cash and cash equivalents at end of period $4,799,000 $ 138,000
---------- ----------
---------- ----------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $6,000 $5,000
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment acquired under capital lease --- $126,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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IMAGE GUIDED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements of Image Guided Technologies, Inc.
(the "Company") are unaudited. However, in the opinion of management, such
statements reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation. Interim results of operations
are not necessarily indicative of results for the full year.
Certain reclassifications of the 1996 financial information have been made
in order to conform to current year presentation.
2. INVENTORIES
Inventories are comprised of the following at June 30, 1997:
Raw materials $272,000
Work-in-process 111,000
Finished goods 89,000
--------
472,000
Less allowance for obsolescence (46,000)
--------
$426,000
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3. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128, which is effective for periods ending after December 15, 1997, requires
changes in the computation, presentation, and disclosure of earnings per share.
All prior period earnings per share data must be restated to conform with the
provisions of SFAS No. 128. If the provisions of SFAS No. 128 had been adopted
on January 1, 1997, the basic earnings per share for the three and six months
ended June 30, 1997 would be $0.05 and $0.08, respectively, and the diluted
earnings per share for the three and six months ended June 30, 1997 would be
$0.05 and $0.07, respectively. The pro forma basic earnings per share for the
three and six months ended June 30, 1996 would be $0.06 and $0.09, respectively,
and the pro forma diluted earnings per share for the three and six months ended
June 30, 1996 would be $0.04 and $0.06, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the results of operations and financial
condition should be read in conjunction with the financial statements and notes
thereto.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue increased by $313,000, or approximately 31%, to $1,324,000 for the
three months ended June 30, 1997, as compared to $1,011,000 for the three months
ended June 30, 1996. This increase was primarily due to greater demand for the
Company's FlashPoint-Registered Trademark- 5000 and Pixsys-TM- 5000 products.
Cost of goods sold increased by $105,000, or approximately 23%, to $560,000
for the three months ended June 30, 1997, compared to $455,000 for the three
months ended June 30, 1996. Cost of goods sold as a percentage of revenue
decreased to 42% for the three months ended June 30, 1997, as compared to 45%
for the three months ended June 30, 1996. 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 attributable to changes in the mix of
products sold.
4
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Research and development expenses increased by $62,000, or approximately
39%, to $222,000 for the three months ended June 30, 1997, compared to $160,000
for the three months ended June 30, 1996. This increase was principally due to
the addition of engineering personnel and related expenses, increased testing of
products to meet regulatory requirements and to increased product development.
Selling and marketing expenses increased by $48,000, or approximately 44%,
to $157,000 for the three months ended June 30, 1997, as compared to $109,000
for the three months ended June 30, 1996. This increase was primarily
attributable to the addition of personnel and related expenses, as well as
expanded marketing activities to facilitate increases in revenue.
General and administrative expenses increased by $78,000, or approximately
41%, to $270,000 for the three months ended June 30, 1997, as compared to
$192,000 for the three months ended June 30, 1996. This increase was primarily
attributable to the additional expenses necessary for a public company,
increased salaries, and to additional personnel and associated costs.
Operating income increased by $20,000 to $115,000 for the three months
ended June 30, 1997 compared to operating income of $95,000 for the three months
ended June 30, 1996. This increase was primarily attributable to the mix of
products sold.
Net other income (expense) increased by $64,000 to $48,000 for the three
months ended June 30, 1997 from $(16,000) for the three months ended June 30,
1996. This change was primarily due to interest income on net proceeds from the
initial public offering (the "IPO").
As a result of the foregoing, net income increased to $163,000 for the
three months ended June 30, 1997, compared to net income of $79,000 for the
three months ended June 30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue increased by $749,000, or approximately 43%, to $2,496,000 for the
six months ended June 30, 1997, as compared to $1,747,000 for the six months
ended June 30, 1996. This increase was primarily due to greater demand for the
Company's FlashPoint 5000 and Pixsys 5000 products.
Cost of goods sold increased by $380,000, or approximately 52%, to
$1,114,000 for the six months ended June 30, 1997, compared to $734,000 for the
six months ended June 30, 1996. Cost of goods sold as a percentage of revenue
increased to 45% for the six months ended June 30, 1997, as compared to 42% for
the six months ended June 30, 1996. This increase in cost of goods sold was
attributable to increased sales volume and the increase in cost of goods sold as
a percentage of revenue was attributable to increased costs associated with
improvements in the reliability and durability of certain components, as well as
changes in the mix of products sold.
Research and development expenses increased by $114,000, or approximately
38%, to $414,000 for the six months ended June 30, 1997, compared to $300,000
for the six months ended June 30, 1996. This increase was principally due to
the addition of engineering personnel and related expenses, to increased testing
of product to meet regulatory requirements and to increased product development.
Selling and marketing expenses increased by $93,000, or approximately 41%,
to $318,000 for the six months ended June 30, 1997, as compared to $225,000 for
the six months ended June 30, 1996. This increase was primarily attributable to
the addition of personnel and related expenses, as well as expanded marketing
activities to generate increases in revenue.
General and administrative expenses increased by $201,000, or approximately
62%, to $525,000 for the six months ended June 30, 1997, as compared to $324,000
for the six months ended June 30, 1996. This increase was primarily
attributable to the additional expenses necessary for a public company,
increased salaries, and to additional personnel and associated costs.
Operating income decreased by $39,000 to $125,000 for the six months ended
June 30, 1997 compared to operating income of $164,000 for the six months ended
June 30, 1996. This decrease was primarily attributable to increased costs
associated with improvements in the reliability and durability of certain
components and to changes in the mix of products sold.
5
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Net other income (expense) increased by $151,000 to $113,000 for the six
months ended June 30, 1997 from $(38,000) for the six months ended June 30,
1996. This change was primarily due to interest income on net proceeds from the
IPO and to interest expense incurred in 1996 in connection with funds borrowed
by the Company and paid off with a portion of the IPO proceeds.
As a result of the foregoing, net income increased to $238,000 for the six
months ended June 30, 1997, compared to net income of $126,000 for the six
months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had working capital of $5,725,000,
compared to working capital of $5,571,000 at December 31, 1996. The improvement
in working capital was primarily the result of increases in accounts receivable
and decreases in accounts payable and accrued liabilities.
During the six months ended June 30, 1997, $290,000 in cash was used in
operating activities, principally by increased accounts receivable and decreased
accounts payable and accrued liabilities, all partially offset by net income.
The Company used $144,000 in cash for investing activities during the six month
period ended June 30, 1997 to purchase property and equipment. Also during the
six month period ended June 30, 1997, $7,000 in cash was used in financing
activities for principal payments on a capital lease.
On October 24, 1996, Image Guided Technologies, Inc. closed on its IPO of
1,437,500 shares of common stock, including a 187,500 share over-allotment
purchase by the IPO underwriter at the IPO price of $5.00 per share. The
offering resulted in gross proceeds of $7,187,500. Aggregate offering cost was
approximately $1,500,000. The shares were offered pursuant to a Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission. A
portion of the proceeds was used to retire approximately $889,000 of 11% secured
notes and related interest.
FORWARD-LOOKING STATEMENTS
The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by reference
therein) and in written and oral presentations made by the Company, include
projections or other forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act
of 1934, as amended. Such projections and forward-looking statements are based
on assumptions which the Company believes are reasonable, but are by their
nature inherently uncertain. In all cases, there can be no assurance that such
assumptions will prove correct or that projected events will occur, and actual
results could differ materially from those projected. Some of the important
factors that could cause actual results to differ from any such projections or
other forward-looking statements follow.
LIMITED HISTORY OF PROFITABILITY AND POTENTIAL FLUCTUATIONS IN OPERATING
RESULTS. Prior to its fiscal year ending December 31, 1996, the Company had
experienced significant operating losses. Its accumulated deficit was
$2,788,000 at June 30, 1997 and $3,026,000 at December 31, 1996. While the
Company was profitable for the quarter ended June 30, 1997, there can be no
assurance that the Company will consistently 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. 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.
DEPENDENCE ON A FEW CUSTOMERS. The Company currently has six significant
customers: GE Medical Systems, Carl Zeiss, Elekta IGS, Radionics Software
Applications, Brewco and Spinex Medical Technologies. None of these customers
has entered into any long term minimum purchase agreements with the Company.
The loss of, or substantial diminution of purchases from the Company by, any of
these customers could have a material adverse effect on the Company.
6
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THE COMPANY'S DEPENDENCE ON A SINGLE TYPE OF PRODUCT. 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.
THE UNCERTAINTY OF MARKET ACCEPTANCE FOR THE COMPANY'S PRODUCT. The market
for optical localizers has only recently begun to develop. The market for
optical localizers may continue to develop or may develop more slowly than the
Company anticipates or cease altogether. 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.
TECHNOLOGICAL CHANGE IN THE MEDICAL INDUSTRY AND IN THE COMPANY'S PRODUCT.
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.
The Company believes that a substantial amount of capital will be required to be
allocated to such activities in the future.
THE RISK OF PATENT INFRINGEMENT CLAIMS BROUGHT AGAINST THE COMPANY'S
CUSTOMERS. There are a number of patents that utilize a localizer as part of
their claimed inventions, several of which relate to the medical industry. One
of the patents relating to the medical industry is the patent granted to St.
Louis University (the "SLU Patent"), and subsequently licensed to Surgical
Navigation Technologies, Inc. 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.
THE COMPANY'S ABILITY TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS. The
Company has one patent that covers a use of its FlashPoint optical localizer and
one patent on a method for instrument identification. In addition, the Company
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 does
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, or issued to, the Company will not be invalidated, circumvented
or challenged (including, without limitation, on the basis of the SLU Patent or
other patents), or that the rights granted thereunder will provide meaningful
competitive advantages to the Company.
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 those which may be the basis of the SLU Patent, utilizes a localizer). Such
litigation could result in substantial costs and diversion of resources,
regardless of the outcome of the litigation. If any claims are asserted against
the Company, the Company may be required to obtain a license under a third
party's intellectual property rights. However, such a license may not be
available on reasonable terms or at all.
COMPETITION BY EXISTING COMPETITORS AND POTENTIAL NEW ENTRANTS INTO THE
MARKETPLACE. The Company's primary competitor in the medical market currently
is Northern Digital Inc. 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
7
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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 develop
their own localizers to ensure control over their localizer technology, to be
able to differentiate their product 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.
REGULATION BY THE FDA. Noncompliance with applicable requirements of the
US Food and Drug Administration (the "FDA") 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 medical 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 medical device.
There can be no assurance that the Company's customers have complied or
will be able to comply with all applicable FDA market clearance requirements,
including those which may arise from the incorporation of the Company's
FlashPoint product into the customer's product. Moreover, 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.
In addition, international sales of medical devices are subject to foreign
regulatory requirements, which vary from country to country.
THE 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 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.
POSSIBLE CHANGES TO GOVERNMENT REGULATIONS GOVERNING HEALTH CARE. 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.
THE COMPANY'S DEPENDENCE ON KEY MANAGEMENT AND TECHNICAL PERSONNEL AND ITS
ABILITY TO ATTRACT NEW 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; Robert E. Silligman, President and Chief Operating Officer; Waldean
Schulz, Vice President, Technology and Secretary; and Jeffrey J. Hiller, Vice
President, Finance and Chief Financial Officer. The loss of services of any of
these individuals could have a material adverse effect on the Company. The
Company's growth and profitability also depend on its ability to attract and
retain other management and technical personnel.
8
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OTHER MATTERS
In June 1997, the Company entered into a three-year product sales agreement
with Nu-Tech, Inc. (d.b.a. Brewco 360DEG. Collision Repair Systems) of Central
City, Kentucky, one of its current significant customers. Under the terms of
this agreement, Brewco must purchase a minimum number of units per year to
maintain its preferred pricing of the Pixsys optical localizer. This agreement
does not guarantee any specific number of units to be purchased by Brewco.
The Company anticipates greater spending on research and development and
selling and marketing activities for the foreseeable future. This spending
could adversely effect operating income.
9
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Image Guided Technologies, Inc. was
held on April 24, 1997. The first matter voted on by the shareholders was the
election of the Board of Directors, with the following results: Paul L. Ray,
2,707,496 votes for and 4,200 votes withheld; Waldean A. Schulz, 2,710,696 votes
for and 1,000 votes withheld; Ray L. Hauser, 2,710,696 votes for and 1,000 votes
withheld; Clifford F. Frith, 2,710,696 votes for and 1,000 votes withheld; David
G. Sengpiel, 2,707,496 votes for and 4,200 votes withheld; Robert T. Hamilton,
2,707,496 votes for and 4,200 votes withheld; and William O'Connor, 2,706,496
votes for and 5,200 votes withheld.
The second matter considered was the adoption of the Image Guided
Technologies, Inc. 1997 Stock Option Plan. Results of the voting were 2,110,843
votes for, 23,120 votes against, 1,250 votes abstained and 576,483 broker non
votes.
The last matter considered was the ratification of the appointment of Price
Waterhouse LLP as auditors for the Company for the fiscal year ending
December 31, 1997. Results of the voting were 2,708,196 votes for, 2,000 votes
against and 1,500 votes abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
10.21 OEM Agreement Between Nu-Tech, Inc. and the Company dated
6/7/97.***
10.22 Escrow Agreement in Relation with the OEM Agreement Between
Nu-Tech, Inc. and the Company.***
27.1 Financial Data Schedule.
- -------------------------
***The Company has applied for confidential treatment with respect to portions
of this exhibit.
(b) Form 8-K Reports
The Company filed no reports on Form 8-K during the quarter ended June 30,
1997.
10
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Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IMAGE GUIDED TECHNOLOGIES, INC.
(Registrant)
By: /s/ PAUL L. RAY
-----------------------------------
August 14, 1997 Paul L. Ray
Chairman of the Board and Chief
Executive Officer
By: /s/ JEFFREY J. HILLER
-----------------------------------
August 14, 1997 Jeffrey J. Hiller
Vice President and Chief Financial Officer
(Principal Accounting Officer)
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EXHIBIT 10.21
The brackets ("[ ]") which appear in various places in the following exhibit
indicate areas where confidential information has been redacted by the Company.
Such redacted information is the subject of a request for confidential treatment
and is therefore being filed separately with the Commission.
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OEM AGREEMENT
BETWEEN
NU-TECH, INC. AND
IMAGE GUIDED TECHNOLOGIES, INC.
OEM AGREEMENT, entered into as of June 7, 1997 (the "Effective Date"),
between IMAGE GUIDED TECHNOLOGIES, INC. ("IGT"), a Colorado corporation with
offices at 5710-B Flatiron Parkway, Boulder, CO 80301, and Nu-Tech, Inc. (dba
Brewco 360DEG. Collision Repair Systems), a Kentucky corporation with offices
at 601 Front Street, Central City, KY 42330 (mailing address PO Box 67, Central
City, KY) the original equipment manufacturer ("OEM").
1. DEFINITIONS
As used herein, the following words and phrases shall have the following
meanings:
1.1 "CONFIDENTIAL INFORMATION" means that information which relates to
IGT's or OEM's businesses, customers, products and plans which have been
created by or for IGT or OEM and that is not generally known to the public.
1.2 "CONFIDENTIAL TECHNOLOGY" means those portions of the processes,
know-how, technologies, and trade secrets embodied or included in the IGT or
OEM Software and/or IGT or OEM Hardware that have been developed by or for or
acquired by IGT or OEM and that are not generally known to competitors of IGT
or OEM.
1.3 "DISTRIBUTION" means OEM's shipment of OEM's Products to OEM's
customers or OEM's use of OEM's Products within OEM's organization.
1.4 "EFFECTIVE DATE" means the date set forth on the first page hereof
which establishes the date on which the parties become legally bound by the
terms of this Agreement.
1.5 "END USER" means a third party that is a customer, lessee, or
distributee of OEM to whom OEM sells OEM's Products or grants a sublicense to
use IGT Software as a part or portion of OEM's Products.
1.6 "OEM" means the OEM named on the first page of this Agreement.
1.7 "OEM'S PRODUCTS" means all systems developed by OEM which incorporate
the IGT Product.
1.8 "OBJECT CODE" means the binary computer language program prepared by an
assembler or a compiler after acting on programmer-written source code.
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1.9 "IGT ACCESSORIES" means all of the accessories identified as IGT
Accessories in Schedule A of this Agreement as of the Effective Date of this
Agreement, as such may be expanded from time to time with mutual agreement of
both parties.
1.10 "IGT PRODUCT" means the IGT Hardware and IGT Accessories offered for
sale hereunder and the IGT Software offered for license hereunder.
1.11 "IGT SOFTWARE" means all of the computer software identified or
described as IGT Software in Schedule A of this Agreement and all
documentation used to describe, maintain or use such software.
1.12 "IGT HARDWARE" means all of the equipment identified or described as
IGT Hardware in Schedule A of this Agreement as of the Effective Date of this
Agreement.
1.13 "TERM" means the time period defined by paragraph 10.1 of this
Agreement, during which time period the parties are legally bound by the terms
and provisions of this Agreement.
1.14 "TERRITORY" means worldwide.
1.15 "ESCROW AGREEMENT" means the escrow agreement referred to in paragraph
10.7 of this agreement.
2. OWNERSHIP AND GRANT OF LICENSE
2.1 OWNERSHIP OF PROPRIETARY RIGHTS. OEM acknowledges that IGT owns all
proprietary rights in the IGT Software, Confidential Technology and
Confidential Information, including, but not limited to, copyrights, trade
secrets, and know-how. OEM also acknowledges, understands, and agrees that
(i) this Agreement does not transfer or provide to OEM any title or rights of
ownership or use in the IGT Software, Confidential Technology, Confidential
Information or in any of IGT's trade secrets, know-how, copyrights, or other
proprietary rights, except for the license to use the IGT Software as provided
in this Agreement, and (ii) OEM may not sell, sublicense, transfer or make
available to others the IGT Software, Confidential Technology, Confidential
Information or IGT's trade secrets, know-how, copyrights or other proprietary
rights, except for the right to grant sublicenses of the IGT Software as
provided in this Agreement.
IGT acknowledges that OEM owns all proprietary rights in the OEM Software,
Confidential Technology and Confidential Information, including, but not limited
to, copyrights, trade secrets, and know-how. IGT also acknowledges,
understands, and agrees that (i) this Agreement does not transfer or provide to
IGT any title or rights of ownership or use in the OEM Software, Confidential
Technology, Confidential Information or in any of OEM's trade secrets, know-how,
copyrights, or other proprietary rights, except for the license to use the OEM
Software as provided in this Agreement, and (ii) IGT may not sell, sublicense,
transfer or make available to
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others the OEM Software, Confidential Technology, Confidential Information or
OEM's trade secrets, know-how, copyrights or other proprietary rights.
2.2 LICENSE GRANT. Subject to the terms and conditions of this Agreement,
IGT hereby grants to OEM, and OEM hereby accepts, a worldwide, exclusive,
revocable (at termination of this agreement only), personal, and nontransferable
license to use the IGT Software, in Object Code only, for OEM's own use on that
IGT Hardware on which the IGT Software runs for use in automotive collision
repair and wheel alignment applications and a worldwide, nonexclusive,
revocable, personal, and nontransferable license to use the IGT Software, in
Object Code only, for OEM's own use on that IGT Hardware on which the IGT
Software runs for all other applications.
3. LICENSE AND OTHER LIMITATIONS
3.1 LIMITATIONS.
3.1.1 The IGT Software may only be used on the IGT Hardware on which the
IGT Software runs.
3.1.2 OEM may only sell, lease and distribute the IGT Hardware in
conjunction with and as part of OEM's Products.
3.2 SUBLICENSE. OEM may grant sublicenses of the IGT Software to End Users
for use on that IGT Hardware on which it runs, provided such sublicenses comply
with paragraph 5.2 of this Agreement. No other sublicense by OEM and no further
sublicense by an End User shall be permitted.
3.3 FORM OF SOFTWARE DELIVERY. The IGT Software will be delivered and made
available to OEM in Object Code form only as incorporated in the IGT Product
only, along with any documentation necessary to enable OEM to use the IGT
Software for the purposes of this Agreement. OEM is not entitled to receive or
have access to any of the Source Code of the IGT Software.
3.4 USE OF IGT SOFTWARE. OEM shall use the IGT Software received from IGT
solely for the purpose of incorporating the IGT Software and IGT Product into
OEM's Products. Once the IGT Software becomes a part or portion of OEM's
Products, it may be installed and operated as a part of OEM's Products according
to the terms and conditions of this Agreement.
3.5 CONTROL OF COPIES. OEM may make copies of the Object Code only of the
IGT Software and only for archival purposes and for the purposes of this license
as provided elsewhere in this Agreement. OEM shall not make any copies of the
documentation to the IGT Software other than for purposes of this license and
all copies of the IGT Software and the documentation are the sole property of
IGT. OEM shall inform End User of the restrictions against copying the IGT
Software, as per paragraph 5.2.
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3.6 NO REVERSE ENGINEERING. OEM understands and acknowledges that the IGT
Software and the Confidential Technology, trade secrets, know-how, and other
proprietary information embodied therein and in the IGT Product are proprietary
to IGT. Therefore, OEM shall not reverse engineer, reverse compile or reverse
assemble or do any other operation or analysis with or of (i) the IGT Software
that would reveal any of the Confidential Technology, Source Code, trade
secrets, or other proprietary rights in the IGT Software, or (ii) the IGT
Product that would reveal any of the Confidential Technology, trade secrets or
other proprietary rights in the IGT Product. In addition, OEM shall not remove
or modify any confidentiality, trade secret or copyright notices or trademarks
encoded in the IGT Software or IGT Product or displayed on any documentation.
OEM shall also not allow any of its employees to do any of the things that are
prohibited under this paragraph.
3.7 OEM COMPLIANCE. OEM warrants that it will obey all laws and
regulations of the country in which it distributes the OEM Products. OEM
shall indemnify IGT for any losses, costs, and damages incurred by IGT as a
result of a failure by OEM to comply with the necessary government formalities
in any country.
3.8 OEM EXPORTS. OEM understands that IGT is subject to regulation by
agencies of the United States Government, including the United States Department
of Commerce, and OEM warrants that it shall not sell IGT Product contained
within the OEM's Products or OEM's Products to any country not approved under
applicable United States laws and regulations. OEM shall hold harmless and
indemnify IGT from and against any damages from breach hereof.
4. IGT PRODUCT
4.1 Prices - Discount - Taxes - Payment.
4.1.1 PRICES. Prices to be paid by OEM for the IGT Product will be as
specified on Schedule A to this Agreement. Prices shown on Schedule A will
remain in effect for 12 months from the effective date of this agreement.
Prices may be adjusted thereafter except that no price can be increased more
than [ ] in any single 12 month period without agreement by OEM. Any new
pricing schedule will remain in effect for a minimum of 12 months after it is
issued. IGT shall give OEM sixty (60) days notice of any price increase.
4.1.2 TAXES. OEM shall pay any and all sales, use, value-added and other
taxes of any nature assessed upon or with respect to payments hereunder by any
federal, state or local governmental entity and any nation or any political
subdivisions of any nation, exclusive, however, of taxes based on IGT's net
income. In the event IGT is required to pay any such taxes, OEM shall
promptly reimburse IGT for the same.
4.1.2 PAYMENT. Shipment of IGT Product shall be F.O.B. IGT's plant in
Boulder (Colorado, USA) and title and risk of loss or damage to IGT Product
shall pass to OEM at such F.O.B. point. Terms of payment shall be net 30
days. Interest shall be assessed on past due
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amounts and shall accrue at the lesser of the rate of 1.5% per month or the
maximum rate permitted by applicable law. In addition to the interest
assessed, IGT may, at its option, suspend all services and shipments to OEM
(including stoppage in transit) until all delinquent amounts are paid to IGT.
In the event IGT is required to commence any legal action to collect any
amount due from OEM hereunder, IGT shall be entitled to recover its cost of
suit, including reasonable attorneys' fees, in addition to any damages.
4.2 QUARTERLY FORECASTS. Beginning with the Effective Date, OEM shall
issue a rolling quarterly forecast of its anticipated approximate order volume
for IGT Product for the subsequent six (6) months. Such quarterly forecast
shall not be binding upon OEM, but shall be prepared with diligence and care.
4.3 AVAILABILITY OF IGT PRODUCT. Subject to the terms and conditions of
this Agreement, IGT agrees to make the IGT Product on Schedule A of this
Agreement available for sale during the term of this Agreement, or, with OEM's
prior consent, to make available a replacement product or products with similar
functional specifications and similar regulatory approvals.
4.4 SPARE PARTS AND SERVICE. IGT agrees to provide, at its published
parts and service list price (less OEM discount), spare parts and service for
the IGT Product for a minimum of twenty four (24) months after the
discontinuance of the sale of the IGT Product.
4.5 FORCE MAJEURE. IGT shall be relieved of its obligation under any
purchase order accepted by it pursuant to this Agreement, to the extent
necessary, for failure to provide the ordered IGT Product due to causes beyond
IGT's reasonable control, including without limitation, acts of God, war,
hostilities, civil unrest, sabotage, fires, floods, strikes or other labor
troubles, supply shortages, or embargoes.
4.6 ORDERS; ACKNOWLEDGMENTS. IGT shall acknowledge receipt of purchase
orders for IGT Products by written fax notification within one (1) week after
IGT's receipt of the purchase order and, with such acknowledgment, shall
identify any limitations, corrections or conditions related to acceptance of the
order. OEM shall have one (1) week to withdraw any such purchase orders if it
does not accept such limitations, corrections or conditions. Preprinted terms
and conditions on OEM's purchase orders are superseded by this agreement and are
of no force or effect.
4.7 OEM will make every reasonable effort to meet any purchase orders
placed; however, OEM shall incur no liability for failure to meet such purchase
orders placed.
4.8 DELIVERY DATES. Shipments are subject to IGT's availability
schedule. IGT will make every reasonable effort to meet any delivery dates
acknowledged; however, IGT shall incur no liability for failure to meet such
delivery dates. In any case, delivery dates shall not be later than 30 (thirty)
days after any delivery date provided on the acknowledgment of the order by IGT.
With a 30 day notice from OEM to IGT, OEM may increase the planned (forecasted)
quantity to be delivered in any monthly period by an amount up to 25% of the
planned monthly quantity and IGT agrees to deliver such increased quantity
within the affected monthly period.
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5. OEM'S DUTIES
5.1 GENERAL DUTIES. OEM shall use its best efforts to create, develop,
and market OEM's Products and to keep IGT informed of the progress of its
development and marketing efforts. All marketing, advertising, promotional,
distribution, training and support activities of OEM shall be at the sole
judgment and expense of OEM unless otherwise agreed in writing by IGT.
5.2 SUBLICENSING.
5.2.1 Before Distribution of any OEM Products with the IGT Software,
OEM shall take adequate steps to ensure that the End User only receives a
customary sublicense, satisfactory to IGT, for the IGT Software. A provision
substantially in the form of Schedule C attached hereto included in OEM's
Software license shall satisfy this requirement. OEM shall provide a copy of
its software license agreement to IGT upon request.
5.2.2 OEM shall promptly report any unlicensed use of the IGT
Software or other activities which infringe or may infringe the Confidential
Technology or the copyrights, trade secrets, know-how, trademarks, patents, or
other proprietary rights of IGT of which it has knowledge.
5.2.3 If OEM becomes aware of a breach by the End User of the above
sublicense, OEM shall promptly demand that the End User take prompt corrective
action to remedy the breach and shall, in addition, notify IGT of the breach and
the corrective action taken. OEM shall assign to IGT, at IGT's sole option, any
rights OEM has against its sublicensees for breach of this sublicense. OEM
agrees to cooperate with IGT, as IGT may reasonably request, in any proceeding
against any third party alleging breach of this sublicense. OEM shall not be
liable to IGT for any breach of the terms of this sublicense by a third party
unless OEM has willfully contributed to or cooperated in the breach.
5.3 NOTICES AND LEGENDS. The IGT Software, the IGT Product and any IGT
documentation delivered to OEM will contain IGT's copyright notice, trademarks
and other proprietary legends. Any copies or modifications permitted to be made
under this Agreement shall contain such copyright notice, trademarks, and other
proprietary legends. OEM shall not remove or obscure any such notices or marks
attached or affixed to IGT Product. OEM may place their product identification
labels on the product as they see fit.
5.4 OEM'S PRECAUTIONS WITH EMPLOYEES. OEM agrees to take precautions
and implement whatever procedures it deems necessary to ensure that the License
and other limitations set forth in Article 3 of this Agreement are not exceeded
by OEM or by any of its employees.
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5.5 CUSTOMER SERVICE AND SUPPORT. OEM shall be solely responsible for
all installation, use, support, and support questions of the End Users of OEM's
Products. During the warranty period, IGT shall cooperate with OEM as needed to
respond to End User questions and complaints regarding the IGT part of OEM's
Products.
5.6 CUSTOMER INFORMATION. OEM shall promptly bring to IGT's attention
any complaints, causes of dissatisfaction, or requests for corrections,
revisions, or enhancements relating to the IGT Software or IGT Product.
5.7 PROTECTION OF TRADE SECRETS, CONFIDENTIAL TECHNOLOGY AND
CONFIDENTIAL INFORMATION. OEM acknowledges that the IGT Software and IGT
Product contain Confidential Information and Confidential Technology, being
trade secrets, know-how and other proprietary information and that those and
other trade secrets, know-how and proprietary information belonging to IGT may
be communicated or otherwise made available to OEM in connection with this
Agreement. OEM agrees to keep all such Confidential Technology and Confidential
Information confidential, not to publish or disclose such Confidential
Technology and Confidential information to others, and to handle, maintain and
protect all such Confidential Technology and Confidential Information with at
least the same degree of care used by OEM to safeguard and protect and maintain
OEM's own trade secrets and confidential or proprietary information. Such
safeguards shall include at least the precautions of restricting access to only
those persons in OEM's employ who have a need to know, instructing those
employees of their obligations to maintain the confidentiality and secret nature
of the information and having executed agreements in place with such employees
pursuant to which they agree to those obligations, providing reasonable security
precautions for areas and computers where the IGT Software and other trade
secrets or proprietary information is used and stored, and completely erasing or
deleting all IGT Software from any disk, tape or other media being discarded,
disposed or converted to different uses.
6. IGT's DUTIES.
6.1 AUDITS OF FACILITIES AND QUALITY SYSTEM. IGT agrees to allow OEM to
inspect IGT's facilities and quality system for the sole purpose of verifying
IGT's compliance with quality and regulatory standards as is necessary for OEM
to sell IGT's Products. When possible, OEM agrees to give IGT at least thirty
(30) days advance notice of such inspections. All such inspections are at the
sole expense of OEM unless otherwise agreed in writing.
6.2 PROTECTION OF OEM'S TRADE SECRETS AND CONFIDENTIAL INFORMATION. IGT
acknowledges that confidential information, being trade secrets, know-how and
proprietary information belonging to OEM, may be communicated or otherwise made
available to IGT in connection with this Agreement. IGT agrees to keep all such
confidential information confidential, not to publish or disclose such
confidential information to others, and to handle, maintain and protect all such
confidential information with at least the same degree of care used by IGT to
safeguard and protect and maintain IGT's own trade secrets and confidential or
proprietary information. Such safeguards shall include at least the precautions
of restricting
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access to only those persons in IGT's employ who have a need to know,
instructing those employees of their obligations to maintain the
confidentiality and secret nature of the information and having executed
agreements in place with such employees pursuant to which they agree to those
obligations, providing reasonable security precautions for areas and computers
where the OEM trade secrets and proprietary information is used and stored.
7. STATUS OF PARTIES
7.1 INDEPENDENT CONTRACTOR. OEM and IGT shall each perform their duties
under this Agreement as an independent contractor and not as an agent one for
the other. The relationship between the parties shall remain that of
independent contractors and nothing herein shall imply any joint venture.
7.2 NO CONTRARY REPRESENTATIONS. OEM shall not in any way by oral or
written statements or other conduct represent itself as being other than an
independent contractor without any power to bind IGT.
8. RIGHTS RESERVED BY IGT
Anything in this Agreement to the contrary notwithstanding, IGT
reserves all rights not expressly granted to OEM herein.
8.1 Hardware Changes and Software Updates.
8.1.1 HARDWARE CHANGES. Notwithstanding any other term of this
Agreement, IGT shall not make any change to the mechanical, electronic or other
interfaces (or any design element including external colors) of the IGT Hardware
being sold hereunder without the prior written consent of OEM, except in such
case where changes are required to meet regulatory requirements.
8.1.2 SOFTWARE UPGRADES. IGT shall provide upgrades and enhancements
to the Software to OEM at no cost during the warranty period; upgrades and
enhancements to the Software after the warranty period shall be provided to OEM
at IGT's standard discounted license fee. Nevertheless, it is understood that
IGT shall provide updates correcting Software errors to OEM at no cost during
the lifetime of the Agreement. The term "Software" as used in this license
includes all upgrades, updates and enhancements provided hereunder.
9. REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATIONS
9.1 POWER TO ENTER AGREEMENT. Each party represents and warrants to the
other that it has the power, right, and authority to enter into this Agreement,
and to grant the rights and
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undertake the obligations set forth in this Agreement. IGT represents and
warrants to OEM that it is the owner of the rights licensed to OEM hereunder.
9.2 WARRANTY. IGT warrants the IGT Hardware and IGT Software as set
forth on Schedule B, the IGT Product Warranty.
9.3 Indemnification.
9.3.1 IGT INDEMNIFICATION. IGT shall defend any suit or proceeding
brought against OEM to the extent it is based on a claim that the making,
selling or using of the IGT Product sold to OEM under this agreement directly
infringes a patent or copyright issued by the United States; provided IGT is
notified promptly in writing and given authority, information and assistance (at
IGT's expense) for the defense of the suit or proceeding. IGT shall pay all
damages and costs awarded against OEM in such suit or proceeding or settlement,
if IGT has been given full control of the defense and the negotiations for
settlement, if any, of the suit or proceeding (any settlement shall require the
consent of OEM which shall not be unreasonably withheld). If any IGT Product is
held in such suit or proceeding directly to infringe a patent or copyright of
the United States or is, in IGT's opinion, likely to be held directly to
infringe such a patent or copyright, IGT may, at its option and expense, either
(a) procure for OEM the right to continue using the IGT Product, (b) replace the
IGT Product with non-infringing product, (c) modify the IGT Product so that it
becomes a non-infringing product, or (d) require return of the IGT Product and
refund the purchase price for the IGT Product, such purchase price to be reduced
by [ ] for each month since the product was first installed by the OEM. IGT
shall have no liability to OEM if the infringement or claim thereof is based
upon (a) the use of the IGT Product in combination with other products, devices
or software which are not furnished to OEM by IGT, (b) modification of the IGT
Product by other than IGT, or (c) use of the IGT Product as part of any
infringing process, apparatus or product. THIS SECTION STATES THE ENTIRE
LIABILITY OF IGT FOR PATENT OR COPYRIGHT INFRINGEMENT.
9.3.2 OEM'S INFRINGEMENT. Except as set forth in paragraph 9.3.1
above, OEM shall defend any suit or proceeding brought against IGT to the extent
it is based on a claim that the making, selling or using of OEM's product
infringes a patent or copyright; provided that OEM is notified promptly in
writing and given authority, information and assistance (at OEM's expense) for
the defense of the suit or proceeding. OEM shall pay all damages and costs
awarded against IGT in such suit or proceeding or settlement, if OEM has been
given full control of the defense and of the negotiations for the settlement, if
any, of the suit or proceeding (any settlement shall require the consent of IGT
which shall not be unreasonably withheld).
10. DURATION AND TERMINATION OF AGREEMENT
10.1 TERM. This Agreement and the License shall have a term of three
(3) years from the Effective Date, except this Agreement may be extended for
additional one (1) year terms by mutual agreement between IGT and OEM prior to
the end of the initial term and each subsequent term.
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10.2 TERMINATION. Either party may terminate this Agreement (a) on
thirty (30) days notice in the event of a material default by the other party of
any of its obligations hereunder, provided (i) the defaulting party receives
notice of termination containing a reasonably complete description of the
default and (ii) the defaulting party fails to cure such default within thirty
(30) days of receiving such notice or (b) immediately and without notice in the
event the other party becomes bankrupt or insolvent, suffers a receiver to be
appointed or makes an assignment for the benefit of its creditors. Any
"dispute" arising from any such termination action would be resolved under the
terms of Section 11.4.
10.3 AFTER TERMINATION. Upon expiration or termination of this Agreement
pursuant to Section 10.2, OEM shall forthwith cease marketing of all OEM's
Products with the IGT Software or IGT Product and shall forthwith cease all
display, advertising and use of all such names, trademarks, logos and
designations of IGT and shall not thereafter use, advertise or display any name,
trademark, designation or logos which is, or any part of which is, similar or
confusingly similar to any such designation associated with IGT or with any
product of IGT. Notwithstanding anything provided in this Section 10.3, OEM
will be permitted to sell OEM's Products with IGT Product, and to do so, be
permitted to undertake marketing efforts, until the exhaustion of IGT Product in
OEM's inventory for which OEM has already paid IGT at the time of the expiration
or earlier termination.
10.4 RETURN OF MATERIALS BY OEM. Upon the expiration or termination of
this Agreement pursuant to Section 10.2, all materials (including Confidential
Information) in the possession or under the control of OEM which were received
at no charge from IGT shall be returned to IGT upon IGT's request, forwarding
charges prepaid, and OEM shall not retain any copies of such materials except
for the support of its existing customers. OEM shall not be required to return
IGT Product in OEM's inventory for which OEM has already paid IGT. All
sublicenses to End Users, properly granted by OEM pursuant to this Agreement,
shall survive expiration or any other termination of this Agreement except to
the extent any sublicensee has infringed or is infringing IGT's proprietary
rights or has made any unauthorized disclosure or use of any of IGT's trade
secrets or is otherwise in breach of its obligations under such sublicense.
10.5 SURVIVAL OF CERTAIN OBLIGATIONS. OEM's obligations under this
Agreement, except for its obligations under paragraphs 4.2, 5.1 and 5.6, shall
survive any expiration or termination of this Agreement. IGT's obligations
under paragraphs 4.4, 6.2, and Article 9, and Schedule B shall survive any
expiration or termination of this Agreement.
WAIVER OF DAMAGES UPON TERMINATION. OEM understands and agrees that IGT has
not represented to OEM that OEM can or should expect to obtain any anticipated
amount of revenues or profits by virtue of this Agreement. Upon expiration or
termination of this Agreement, IGT shall not be liable to OEM for damages of any
kind including incidental, direct, indirect or consequential damages on account
of the expiration or termination of this Agreement whether such expiration or
termination was for any reason or for no reason except as otherwise specifically
provided in this Agreement.
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10.6 ESCROW. An escrow arrangement for IGT Products' source code, source
code documentation, design drawings of the entire hardware and calibration
procedures is being entered into simultaneously with this agreement. The escrow
agent has been chosen in agreement by the parties.
11. GENERAL PROVISIONS.
11.1 NOTICES. All notices and reports in connection with this Agreement
shall be sent to the addresses given below or to such other addresses as the
parties may hereafter specify in person, by first-class mail or by telecopier.
Such notices shall be deemed to be given (i) when delivered to a party, (ii) one
day after deposit with a nationally recognized courier service, or (iii) upon
receipt of facsimile transmission.
If to Image Guided Technologies, Inc.:
President
Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
If to Nu-Tech, Inc.:
President and Chief Executive Officer
Nu-Tech, Inc. (d.b.a. BREWCO 360DEG. Collision Repair Systems)
PO Box 67
Central City, KY 42330
11.2 ASSIGNMENT. Either IGT or OEM may assign their rights and
obligations hereunder as long as the assignee agrees, in writing, with the other
party to this agreement prior to such assignment that they will fulfill all the
obligations and responsibilities hereunder which would have been fulfilled by
the assignor.
11.3 TRADEMARKS AND TRADE NAMES. OEM concedes and recognizes the right of
IGT to, and shall have no right or license in, the trademarks and trade names
used with or affixed on any IGT Product. OEM shall conduct its business solely
in OEM's name.
11.4 DISPUTES. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. The arbitration shall take
place in St. Louis, MO. The obligations of the parties provided in this
paragraph shall survive the termination of this Agreement. However, nothing in
this paragraph shall prohibit either party from seeking temporary and/or
permanent equitable remedies in court as appropriate to enjoin patent,
copyright, trademark, or trade secret infringement or to enjoin unauthorized use
or
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dissemination of its trade secrets, including, but not limited to, such
equitable relief pending the outcome of arbitration proceedings, but no such
application shall stay or otherwise impede the progress of the arbitration
proceeding. OEM and IGT agree and consent to personal jurisdiction and venue
in the federal and state courts in Colorado for purposes of the preceding
sentence.
11.5 SEVERABILITY. The provisions of this Agreement are severable and in
the event that one or more of such provisions shall be illegal, invalid or
unenforceable, the remaining provisions shall remain in full force and effect.
11.6 GOVERNING LAW AND JURISDICTION. This Agreement shall be governed
and construed in accordance with the laws of the State of Colorado.
11.7 ENTIRE AGREEMENT; AMENDMENTS. Each party acknowledges that it has
read this Agreement, understands it, and agrees to be bound by its terms, and
further agrees that this is the complete and exclusive statement of the
agreement between the parties, which supersedes and merges all prior proposals,
understandings and all other agreements, oral and written, between the parties
relating to this Agreement. This Agreement may not be modified or altered
except by a written instrument duly executed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
IMAGE GUIDED TECHNOLOGIES, INC.
Date: 6/7/97 By: /s/ Robert E. Silligman
---------- ----------------------------------
Title President/COO
NU-TECH, INC
Date: 6/15/97 By: /s/ Clarence Brewer Jr.
---------- ----------------------------------
Title President
12
<PAGE>
Schedule A
PRODUCT PRICE LIST AND OEM DISCOUNT SCHEDULE
6/7/97
<TABLE>
- ------------------------------------------------------------------------------------------
PART NUMBER PRODUCT DESCRIPTION - IGT HARDWARE PRICE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CUSTOM FLASHPOINT-TM- SYSTEM FOR BREWCO "WOLF" ELECTRONIC [](*)
MEASUREMENT SYSTEM, INCLUDING:
Sensor Assembly 800mm, Black, with control unit interconnect cable
Control Unit:
- Industrial rack mount computer cabinet, black, with AT style
power supply, 2 cooling fans, PC support bracket and lockable
front access door
- ATX Motherboard PCBA
- Pentium CPU, 150Mhz
- 16 Mbytes Ram Memory
- 1.2 Gbyte Hard Drive
- 3 1/2" 1.44 Mbyte Floppy Drive
- Video Card
- Industrial Toolboard PCBA (Brewco) with internal Tool Cable
- DSP Master PCBA with internal DSP Cable
- DSP Slave PCBA (2)
- MS DOS 6.22 software
- Windows "95" software
IGT Flashpoint System Operating Software
- ------------------------------------------------------------------------------------------
</TABLE>
(*) NOTE: ABOVE PRICING FOR CUSTOM FLASHPOINT-TM- SYSTEMS IS BASED ON OEM
ORDING A QUANTITY OF [ ] TO [ ] UNITS ON ONE PURCHASE ORDER WITH DELIVERIES
SCHEDULED OVER THE 12 MONTH PERIOD FOLLOWING THE DATE OF THE PURCHASE ORDER.
IF QUANTITIES EXCEED [ ] UNITS IN THE 12 MONTH PERIOD, AN ADDITIONAL [ ]
DISCOUNT WILL BE APPLIED TO EACH UNIT OVER [ ] DELIVERED IN THE 12 MONTH PERIOD.
IGT SOFTWARE: Flashpoint Software license supplied with IGT Hardware, includes
all software pre-loaded in the data storage devices of any IGT Hardware Product
by IGT as well as all of the files included on the following diskettes:
- ------------------------------------------------------------------------------
PART NUMBER PRODUCT DESCRIPTION - IGT SOFTWARE
- ------------------------------------------------------------------------------
2
<PAGE>
- ------------------------------------------------------------------------------
120370 Flashpoint Model 5000 Installation Disk
- ------------------------------------------------------------------------------
121575 Diskette, Flashpoint Sensor Assembly Calibration File
- ------------------------------------------------------------------------------
Notice: This list is not all-inclusive. Any IGT Software, whether released or
prototypal, which is transferred or made available to Licensee during the term
of the Agreement shall be deemed licensed pursuant to the terms and conditions
of this Agreement.
- ------------------------------------------------------------------------------
PART NUMBER PRODUCT DESCRIPTION - ACCESSORIES PRICE
- ------------------------------------------------------------------------------
120538 100mm Industrial 2 Emitter Probe [ ]
- ------------------------------------------------------------------------------
103859 300mm Industrial 2 Emitter Probe [ ]
- ------------------------------------------------------------------------------
131791 LED OD-30 (1)
- ------------------------------------------------------------------------------
OEM DISCOUNT SCHEDULE FOR IGT ACCESSORIES OR CATALOG ITEMS PURCHASED SEPARATELY:
QUANTITY PERCENTAGE DISCOUNT
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
more than [ ] [ ]
(1) PRICE QUOTATION AT TIME OF PURCHASE
NOTICE: DISCOUNTS ARE BASED ON QUANTITIES ORDERED UNDER A SINGLE OEM PURCHASE
ORDER.
3
<PAGE>
SCHEDULE B
PRODUCT WARRANTY
1. IGT Product Warranty.
IGT warrants that the IGT Product will be free from defects in
materials, parts and workmanship for a period of the earlier of one (1)
year from delivery to the End User or eighteen (18) months to OEM, and
conforms to IGT's specifications applicable to such IGT Product (at the
time of OEM's purchase thereof), except that IGT does not warrant total
system performance if a device or accessory not supplied by IGT causes
the IGT product to fail or not meet specified performance standards,
for a period of the earlier of one (1) year from delivery to End User
or eighteen (18) months to OEM. NOTWITHSTANDING THE FOREGOING, IGT
MAKES NO WARRANTIES AS TO THE IGT ACCESSORIES, SUCH IGT ACCESSORIES
BEING SOLD "AS IS." THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
2. Warranty Repair Misuse.
IGT's sole obligation under the foregoing warranty shall be to repair
or replace or, where applicable, recalibrate, at IGT's option, at IGT's
plant, without charge, all defective IGT Products returned for
inspection within the applicable warranty period and which have been
mutually determined by IGT and OEM to be defective. To complete such
repair, IGT may use, at its sole discretion, new, used or
re-manufactured parts and IGT will retain and own any such parts
replaced. All transportation charges for the defective IGT Product
shall be paid by IGT (provided the method of shipment is pre-approved
by IGT). IGT shall not be responsible for any modifications or changes
to the IGT Product (and OEM shall pay IGT for any services necessitated
by any such modifications or changes) nor shall IGT be liable for any
defects arising out of misuse, neglect, failure of electric power,
cause other than ordinary use or other causes beyond IGT's control.
3. Limitation of IGT Liability.
IN NO EVENT SHALL IGT's LIABILITY UNDER THIS AGREEMENT INCLUDE ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR CLAIMS FOR
LOSS OF BUSINESS OR PROFITS, EVEN IF IGT SHALL HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE. NOTWITHSTANDING ANY
FAILURE OF THE CENTRAL PURPOSE OF ANY LIMITED REMEDY, IGT'S LIABILITY
FOR BREACH OF WARRANTY SHALL NOT EXCEED THE PURCHASE PRICE FOR SUCH
PRODUCT.
4. No Warranties by IGT to End Users.
4
<PAGE>
IGT is not making, and this Agreement does not extend, any warranties
of the IGT Product to End Users, provided that the sale, lease or other
use of the IGT Products by the End Users shall not limit IGT's
liability hereunder. OEM may, in its discretion, extend warranties to
End Users of OEM's Product. However, it is understood and agreed that
IGT is not a party to and does not bear any responsibility or liability
for such warranties by OEM to End Users, provided that the sale, lease
or other use of the IGT Products by the End Users shall not limit IGT's
liability hereinabove.
5. Service of Warranties to End Users.
OEM has the sole responsibility and obligation to provide service and
support on OEM's Product to End Users under warranties or otherwise.
5
<PAGE>
SCHEDULE C
PROVISION FOR THE LICENSE OF USE OF SOFTWARE
Computer software provided with the Product remains the property of
_____________ and _____________'s licensors. _____________ hereby grants
customer a personal non-transferable, non-exclusive license and a sublicense
duly authorized by its licensors to use such software solely for customer's
own use and only with the Product, or part thereof, with which such software
is provided. The software may not be copied, modified, reverse engineered or
disassembled in whole or in part by customer. Customer may not sublicense,
transfer or otherwise make available the software in whole or in part to any
third party. This license and sublicense shall terminate when customer
discontinues use of the software or the Product with which such software is
provided, and upon such termination all software media and materials shall be
returned to _____________ by customer without any delay.
<PAGE>
EXHIBIT 10.22
The brackets ("[ ]") which appear in various places in the following
exhibit indicate areas where confidential information has been redacted by
the Company. Such redacted information is the subject of a request for
confidential treatment and is therefore being filed separately with the
Commission.
<PAGE>
ESCROW AGREEMENT
IN RELATION WITH THE OEM AGREEMENT
BETWEEN NU-TECH, INC. AND
IMAGE GUIDED TECHNOLOGIES, INC.
THIS ESCROW AGREEMENT, is entered into and effective as of the date of
the OEM Agreement hereinafter referred to, by and between IMAGE GUIDED
TECHNOLOGIES, INC., a Colorado company located at 5710-B Flatiron Parkway,
Boulder, CO 80301, the owner of certain hardware and software ("Owner"),
Nu-Tech, Inc. (d.b.a. Brewco 360DEG. Collision Repair Systems), a Kentucky
corporation with offices at 601 Front Street, Central City, KY 42330 (mailing
address PO Box 67, Central City, KY) ("Licensee") and NORWEST BANK, Corporate
Trust Department, located at 1740 Broadway, Denver, CO 80274-8693, USA
("Escrow Agent"), with reference to the following:
A. Owner and Licensee desire to enter into an Escrow Agreement pursuant
to the terms and conditions of the OEM Agreement between Owner and Licensee
(the "OEM Agreement").
B. Owner desires to provide for the availability of the source code on a
3 1/2 inch floppy disk and 8mm data tape for all IGT Software and the
availability of the entire IGT Hardware electrical and mechanical design
drawings and specifications (as defined in the OEM Agreement; such disk and
tape, and hardware electrical and mechanical design drawings and
specifications, and the calibration procedures being referred to hereinafter
as the "Escrowed Material"), to Licensee under certain conditions as set
forth below.
C. Escrow Agent desires to hold the Escrowed Material and deliver it to
Licensee or Owner, as appropriate, in accordance with the provisions set
forth in this Escrow Agreement.
NOW, THEREFORE, based upon the premises and respective promises and
obligations contained herein, the parties agree as follows:
1. DELIVERY OF ESCROWED MATERIAL. Within fifteen days of the signing
this Escrow Agreement, Owner shall deposit with Escrow Agent, and from time
to time shall deposit upgrades to, the Escrowed Material. Within seven (7)
days after any deposit of additional Escrowed Material with Escrow Agent
subsequent to the original deposit of the Escrowed Material, the Escrow Agent
shall give written notice of receipt to Owner and Licensee. All costs
associated with the preparation and delivery of the Escrowed Material shall
be borne by Licensee; such costs not to exceed U.S. $1,250.00 per deposit.
2. TERMINATION. This Escrow Agreement shall remain in effect until the
first of the following events occur: (a) the Escrowed Material is delivered
to Owner or Licensee in accordance with Section 3 of this Escrow Agreement;
(b) Licensee fails to pay Escrow
<PAGE>
Agent's fees after thirty (30) days' notice, as described in Paragraph 6, in
which case Escrow Agent shall deliver all Escrowed Material to Owner; or (c)
ten (10) days after Owner and Licensee deliver to Escrow Agent written notice
of their mutual intent to terminate the Escrow Agreement, in which case
Escrow Agent shall deliver all Escrowed Material as provided in such written
notice. Owner and Licensee agree to terminate this Escrow Agreement in
accordance with subparagraph (c) above (i) if, at the date of the first
anniversary of the OEM Agreement, other than for a reason of force majeure
applicable to Owner or Licensee, the number of FlashPoint Model 5000 systems
purchased by the Licensee during the year preceding the said anniversary is
less than [ ] units; or (ii) if, at the date of each subsequent anniversary
of the OEM Agreement, other than for a reason of force majeure applicable to
Owner or Licensee, the number of FlashPoint Model 5000 systems purchased by
the Licensee during the year preceding the said anniversary is less than [ ]
units; provided that the foregoing agreement to terminate shall not apply if
the failure to make such purchases in any year results solely or primarily
from Owner's inability or failure to supply the Owner's products in
accordance with the OEM Agreement.
3. ACCESS TO ESCROWED MATERIALS.
(a) Upon termination of all of Owner's obligations under the OEM
Agreement or this Escrow Agreement, the Escrowed Material shall be returned
to Owner upon ten (10) business days notification given jointly by Owner and
Licensee to Escrow Agent.
(b) If Escrow Agent is notified in writing by Licensee of the occurrence
of a Release Condition (as defined in Paragraph (e), below), the Escrow Agent
shall so notify Owner in writing within ten (10) business days of receipt of
notice from Licensee, and shall include in such notice to Owner a copy of the
notice from Licensee. Unless a written opposition stating the reason for the
opposition to the release of the Escrowed Material is received by the Escrow
Agent from Owner within twenty (20) business days of the receipt by Owner of
the Escrow Agent's notice, Escrow Agent shall deliver the Escrowed Material
immediately to Licensee, and Licensee shall exercise its license to use the
Escrowed Material only to the extent permitted by Section 5 hereunder.
(c) If a written opposition is timely delivered by Owner to Escrow Agent
as provided in Paragraph (b), above, Escrow Agent shall (i) immediately
deliver to Licensee a copy of such opposition, and (ii) not release the
Escrowed Material until otherwise jointly directed by Licensee and Owner or
until resolution of the dispute as to the occurrence of a Release Condition
has been settled as provided in Paragraph (d), below.
(d) The parties hereto agree that the unavailability of the Escrowed
Material to Licensee, on the one hand, and the release of such Escrowed
Material to Licensee and subsequent loss of confidentiality thereof for
Owner, on the other hand, could in each case cause Licensee or the Owner,
respectively, to suffer irreparable and continuing injury. Therefore, any
dispute between Licensee and Owner as to the occurrence of a Release
Condition and any other dispute between them hereunder shall be submitted by
the parties (including Escrow Agent) to binding arbitration in accordance
with Section 11.5 of the OEM
<PAGE>
Agreement. The party (but not the Escrow Agent) against whom a decision is
made shall pay all fees and expenses of the other party and the Escrow Agent,
including reasonable attorneys' fees and expenses.
(e) A "Release Condition" shall mean:
(i) If Owner files a petition in bankruptcy under
Chapter 7 of the U.S. Bankruptcy Code or any similar
law or regulation pursuant to which Owner intends to
liquidate its business; or
(ii) If any other event or circumstance occurs which
demonstrates with reasonable certainty the inability
or unwillingness of Owner to fulfill its obligations
to Licensee under the OEM Agreement;
provided, however, that in the event of a Release Condition, Owner shall
retain the right to transfer its obligations under OEM Agreement, and its
rights and obligations under this Escrow Agreement to any other person with
the consent of Licensee, which consent shall not be unreasonably withheld.
Licensee reserves the right to determine whether or not the proposed
transferee is credit worthy, competent to perform the work, and able to
satisfy the obligations of Owner hereunder in a timely manner.
4. OBLIGATIONS OF ESCROW AGENT.
(a) The Escrowed Material shall be placed and maintained in an
appropriate air conditioned vault at Escrow Agent; provided, however, Escrow
Agent cannot ensure that the storage media will not be harmed due to
inappropriate temperature and humidity, and the Escrow Agent is not required
to take any unusual precautions to control the environment in which the
storage media will stored but will maintain same as it does its own offices.
(b) Control over entrance to the Escrowed Material shall
rest with the Escrow Agent.
(c) The Escrow Agent shall make delivery of the Escrowed
Material to Owner and/or Licensee in accordance with the provisions of this
Escrow Agreement.
(d) Except as provided in this Escrow Agreement, Escrow Agent
agrees that it shall protect the confidentiality of the Escrowed Material and
shall not disclose or otherwise make available to any third party, make any
use of, or copy the Escrowed Material or any portion thereof without Owner's
prior written consent.
<PAGE>
(e) Escrow Agent shall have the right to take such other
actions, including engaging the services of legal counsel, and incur such
costs as may be reasonably required to carry out its duties hereunder.
5. ESCROWED MATERIAL. Licensee's right to and interest in the Escrowed
Material in the event the Escrowed Material is delivered to Licensee
following a Release Condition shall be a non-transferable, non-exclusive and
limited license to use the Escrowed Material for the sole purpose of
maintaining and supporting the installed base of Licensee customers that
utilize Owner's products; provided, however, if a Release Condition described
in Section 3(e)(i) occurs and Owner has not transferred or does not intend to
transfer its obligations under the OEM Agreement to another person with the
consent of Licensee in accordance with the proviso of Section 3(e), then
Licensee shall in addition have a royalty-free license to use the Escrowed
Material to make or have made (but only for sale to its own customers)
Owner's product until a satisfactory substitute for Owner's product has been
obtained.
6. COMPENSATION OF THE ESCROW AGENT.
(a) Upon execution of this Escrow Agreement, Licensee shall pay Escrow
Agent reasonable compensation for its escrow service in accordance with the
fee schedule then in effect, which fees shall be non-refundable. The current
fee is $1,250.00 per year, and is due and payable at the initial set-up of
the Escrow Agreement. The Escrow Agent reserves the right to charge whatever
its prevailing standard fee schedule is on the annual renewal dates.
(b) Thereafter, an annual fee shall be payable by Licensee on the
anniversary date of each succeeding year for which this Escrow Agreement is
still in effect. In the event of non-payment of Escrow Agent's fees by
Licensee, Escrow Agent shall give Licensee and Owner thirty (30) days' notice
thereof. If the thirty (30) day notice period elapses without Escrow Agent
having received payment from Licensee, Escrow Agent shall terminate this
Escrow Agreement and deliver to Owner all Escrowed Material.
(c) Licensee shall reimburse Escrow Agent for all reasonable expenses it
incurs in performing its duties hereunder, said reimbursement to occur within
thirty (30) days after such expense has been incurred and an invoice has been
received therefore, provided that Escrow Agent has supplied Licensee with all
information reasonably required to determine if such expenses are reasonable.
7. INDEMNIFICATION OF ESCROW AGENT. The Escrow Agent shall not, by
reason of its execution of this Agreement, assume any responsibility or
liability for any transactions between Owner and Licensee other than for the
performances of Escrow Agent's obligations with respect to the Escrowed
Material held by it in accordance with this Escrow Agreement. Except as
otherwise provided by Section 3(d), above, the party on whose behalf, or
pursuant to whose directions the Escrow Agent acts, shall indemnify and hold
harmless the Escrow Agent from any and all liability, damages, costs, or
expenses including reasonable
<PAGE>
attorneys' fees, which may be sustained or incurred by the Escrow Agent as a
result of the taking of such action.
8. LIMITATION OF LIABILITY. In no event shall Escrow Agent be liable
to Owner or Licensee for any indirect, special or consequential damages or
lost profits, arising out of or related to this Escrow Agreement, even if
Escrow Agent has been advised of the possibility thereof.
9. CESSATION OF BUSINESS BY ESCROW AGENT. In the event that the Escrow
Agent ceases to do business, written notice thereof will be provided to Owner
and Licensee, and Escrow Agent will give permission to Owner to enter and
remove the Escrowed Material upon terms and conditions mutually agreeable to
Owner and Licensee.
10. NOTICES. All notices required by this Escrow Agreement shall be
sufficiently given by (a) mailing the same by certified or registered U.S.
mail, return receipt requested, (b) hand delivery or express courier
delivery, or (c) by telecopy, to the parties at their respective addresses
and fax numbers, as follows:
Owner: Image Guided Technologies, Inc.
Attn: President
5710B Flatiron Parkway Boulder, CO 80301 USA
Fax No.: (303) 447-3905
Licensee: Nu-Tech, Inc.
d.b.a. Brewco 360DEG. Collision Repair Systems
Attn: President and Chief Executive Officer
301 Front Street
PO Box 67
Central City, KY 42330
Escrow Agent: Norwest Bank
Attn: Mr. Lee Lutz
1740 Broadway
Denver, CO 80274-8693
USA
Fax No.: (303) 863-5645
A party may change its address or fax number by giving notice to the other
parties as required by this Section 10. Notice by mail, hand delivery,
express courier delivery or fax shall be deemed given upon actual receipt.
11. SUCCESSION; ASSIGNMENT. The rights and obligations hereunder shall
inure to the benefit of and become the responsibility of the permitted
successors and/or assigns of the parties hereto. This Agreement may not be
assigned by any party without the prior
<PAGE>
written consent of the other parties; provided, however, that a successor in
interest by operation of law, merger, assignment, purchase or otherwise of
all or substantially all of Owner's business, may be assigned the interest of
said party in this Agreement.
12. ENTIRE AGREEMENT. This Escrow Agreement constitutes the entire
understanding of the parties. This Escrow Agreement may be amended or
altered only by an instrument in writing signed by all parties hereto.
13. GOVERNING LAW. This Escrow Agreement shall be deemed made in the
State of Colorado and shall be interpreted in accordance with the laws
thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be executed by their duly authorized representatives and to become
effective as of the date first above written.
OWNER:
IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ Robert E. Silligman
Title: President/COO
LICENSEE:
NU-TECH, INC.
By: /s/ Clarence Brewer Jr.
Title: President
ESCROW AGENT:
NORWEST BANK
By: /s/ Leigh M. Lutz
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4799
<SECURITIES> 0
<RECEIVABLES> 1014
<ALLOWANCES> 66
<INVENTORY> 426
<CURRENT-ASSETS> 6253
<PP&E> 544
<DEPRECIATION> 194
<TOTAL-ASSETS> 6619
<CURRENT-LIABILITIES> 528
<BONDS> 81
0
0
<COMMON> 8798
<OTHER-SE> (2788)
<TOTAL-LIABILITY-AND-EQUITY> 6619
<SALES> 2496
<TOTAL-REVENUES> 2621
<CGS> 1114
<TOTAL-COSTS> 1432
<OTHER-EXPENSES> 927
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 238
<INCOME-TAX> 0
<INCOME-CONTINUING> 238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
