U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 0-21743
NEOMEDIA TECHNOLOGIES, INC.
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(Name of Small Business Issuer in Its Charter)
DELAWARE 36-3680347
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2201 SECOND STREET, SUITE 600, FORT MYERS, FLORIDA 33901
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number (Including Area Code) 941-337-3434
Securities Registered Under Section 12(b) of the Exchange Act: NONE
Securities Registered Under Section 12(g) of the Exchange Act:
TITLE OF EACH CLASS
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COMMON STOCK, PAR VALUE $.01
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSM [ ]
Issuer's consolidated revenue for its most recent fiscal year was
$17,518,000.
The aggregate market value of the voting stock held by non-affiliates of
the issuer based on the price at which shares of common stock closed on March
14, 1997 was $12,500,944.
As of March 14, 1997, there were outstanding 5,369,768 shares of the
issuer's Common Stock and 3,130,938 warrants.
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PART I
ITEM 1. BUSINESS
GENERAL
ORGANIZATIONAL HISTORY. The Registrant, NeoMedia Technologies, Inc.
("Technologies"), was incorporated under the laws of the State of Delaware on
July 29, 1996, under the name DevSys, Inc. to acquire by tax-free merger
Dev-Tech Associates, Inc. ("Dev-Tech"), Technologies' predecessor, which was
organized in Illinois in December, 1989. In October, 1996, the Registrant's name
was changed from DevSys, Inc. to NeoMedia Technologies, Inc. In March, 1996,
Dev-Tech's common stock was split, with an aggregate of 2,551,120 shares of
common stock being issued in exchange for the 164 then issued and outstanding
shares of common stock. On August 5, 1996, Technologies acquired all of the
shares of Dev-Tech in exchange for the issuance of shares of Technologies'
common stock to Dev- Tech's stockholders ("Dev-Tech Merger"). Each stockholder
of Dev-Tech received one share of NeoMedia's common stock in exchange for one
share of Dev-Tech's common stock, or an aggregate of 2,551,120 shares. The
Dev-Tech Merger was effected under applicable provisions of the Internal Revenue
Code as a tax-free transaction to the corporations and stockholders. As a result
of the Dev-Tech Merger, holders of options and warrants to purchase Dev-Tech's
common stock have the right to purchase Technologies' common stock. As an
additional result of the Dev-Tech Merger, NeoMedia is the successor to the
business and the operations of Dev-Tech. In November, 1996, a reverse stock
split was effected whereby each shareholder received .90386 shares of common
stock for each one share of common stock then owned.
In November, 1996, Dev-Tech Migration, Inc., an Illinois corporation
("DTM") and an affiliate of Dev-Tech, was merged into a subsidiary of
Technologies. DTM provides migration services. Migration services consist of
adapting computer software that operates only with a specific brand of hardware
and operating and data base software (called a "legacy system"), such as Wang,
to operate with most, if not all brands of hardware and operating software
(called an "open system platform" or an "open system environment"). Management
determined that DTM's services complimented Dev-Tech's services as a systems
integrator, and that the synergies between the two companies would be
beneficial. Accordingly, on November 20, 1996, DTM was merged ("Migration
Merger") into NeoMedia Migration, Inc. ("Migration), a wholly-owned subsidiary
of Technologies in exchange for the issuance of shares of Technologies' common
stock to Charles W. Fritz, the sole stockholder of DTM and a principal
shareholder, officer and director of Technologies. Mr. Charles Fritz received an
aggregate of 827,525 shares of common stock on the basis of one share of DTM's
common stock for .90386 share of Technologies' Common Stock. As a result of the
Migration Merger, holders of options to purchase DTM common stock have the right
to purchase Technologies' common stock. Accordingly, an aggregate of 330,816
shares of Technologies' common stock have been reserved for issuance upon
exercise of such options. The Migration Merger was also effected under
applicable provisions of the Internal Revenue Code as a tax free transaction to
the corporations and Mr. Fritz. As a result of Migration Merger, Migration is
the successor to the business and operations of DTM.
These two mergers were accounted for in a manner similar to the pooling of
interests method of accounting using historical book values rather than fair
market value as all entities involved were under common control. As a result of
NeoMedia's reverse stock split in November, 1996, and following the Migration
Merger, there were 3,133,378 shares of common stock issued and outstanding as of
November 20, 1996.
In August, 1996, Migration formed a wholly-owned subsidiary, Distribuidora
Vallarta, S.P.A., a Guatemalan corporation where NeoMedia employs computer
software developers and system integrators.
Unless the context indicates otherwise, all references herein to
"NeoMedia", "Technologies" or the "Company" mean and refer to the Registrant and
its wholly-owned subsidiaries.
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INITIAL PUBLIC OFFERING. On November 25, 1996, NeoMedia completed an
initial public offering of 1,700,000 units at $6.00 per unit (the"IPO"). Each
unit consisted of one share of common stock, $.01 par value and one five-year
redeemable common stock purchase warrant ("Warrant"). The common stock and the
warrants are traded on the NASDAQ SmallCap Market under the symbols "NEOM" and
"NEOMW," respectively. Of the 1,700,000 units of NeoMedia offered, 1,235,000
shares of common stock and 1,700,000 warrants were sold by NeoMedia and 465,000
shares of common stock were sold by certain stockholders of NeoMedia (the
"Bridge Financing Selling Stockholders"). NeoMedia did not receive any of the
proceeds from sale of common stock by the Bridge Financing Selling Stockholders.
On January 16, 1997, an additional 255,000 units were sold by NeoMedia upon the
exercise by Joseph Charles & Associates, Inc., the representative of the
underwriters in the IPO ("Joseph Charles"), of its option to cover
over-allotments in the IPO.
BRIDGE FINANCING PRIVATE PLACEMENT. Prior to the IPO, in August 1996,
NeoMedia consummated the sale of an aggregate of $2,975,000 principal amount of
10% Unsecured Subordinated Convertible Promissory Notes, due September 30, 1997
(the "Bridge Promissory Notes"), in a private placement to certain investors
(the "Bridge Financing Private Placement"). On November 23, 1996, NeoMedia
prepaid an aggregate of $262,500 principal amount of the Notes. Upon
consummation of the IPO, the Bridge Promissory Notes were automatically
converted for each $50,000 principal amount into 13,750 shares of common stock
and 13,750 warrants. Since $2,712,500 aggregate principal amount of Notes were
outstanding following such prepayment, upon the consummation of the IPO, the
Bridge Promissory Notes were automatically converted into an aggregate of
745,938 shares of common stock of NeoMedia and 745,938 warrants, and the Bridge
Promissory Notes were no longer outstanding. 465,000 of the converted common
shares were sold in IPO and the remaining 280,938 converted common shares may be
sold from time to time in the open market by the holders of the converted common
shares (the "Bridge Financing Selling Stockholders"), at any time after November
25, 1997. The Warrants owned by the Bridge Financing Selling Stockholders are
not subject to any restrictions on sale and may be sold at any time; however,
the common stock received by a Bridge Financing Selling Stockholder upon
exercise of such a Warrant may not be sold by a Bridge Financing Selling
Stockholder until after November 25, 1997.
BUSINESS OVERVIEW
NeoMedia provides computer software and consulting services:
* to link printed documents to the computer, the Internet and the World
Wide Web;
* to assist clients in the creation, production and management of
printed documents; and
* to enable clients to update their computer software that operates only
with a specific brand of hardware such as Wang, to operate with most,
if not all, brands of hardware.
NeoMedia has developed its own technology, and has rights to use the
technology of others, to generate printed documents which can be automatically
"read" by machines, such as computers equipped with scanners and appropriate
software. These "machine readable" documents incorporate printed codes which
contain thousands of bytes of information, including computer programs rendering
them functionally equivalent to a computer floppy disk with a limited capacity
to hold information. These codes are referred to in the industry as "high
capacity symbologies" and "multi-dimensional" or "two-dimensional" bar codes.
This technology has been thoroughly designed, developed and tested during
the past decade, and has resulted in its recent commercial introduction in a
variety of applications, such as shipping documents and identification cards, in
the United States and abroad. NeoMedia currently provides software and services
to support these applications. In addition, the potential applications of using
high capacity symbologies to link printed material to electronic media are
limitless. NeoMedia believes that its Intelligent Document technology is broad
and generally innovative which can be applied in a variety of industries
including information management services, banking and financial services,
health care, government services, publishing, advertising, gaming and
entertainment.
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NeoMedia refers to documents that incorporate high capacity symbologies as
"Intelligent Documents", and intends to offer systems that incorporate this
technology, including those containing proprietary components and
configurations. Management believes that NeoMedia has the expertise, and is
positioned, to commercially link the worlds of print and electronic media
through this technology.
NeoMedia provides consulting, software and systems integration services for
printing and document processing applications. NeoMedia provides these solutions
using its own proprietary software products, and equipment and software of third
parties, such as IBM Corporation, Xerox Corporation, Oce Printing Systems
(formerly Siemens Nixdorf Printing Systems), Sun Microsystems Computer Company,
and Oracle Corporation. These products and services enable their customers, such
as Fidelity Investments, Discover Card Services, Inc., Charles Schwab & Co.,
Inc. and the State of Wisconsin, to reduce their costs by using computer
technology to produce on demand customized forms instead of using more expensive
pre-printed stock forms. These products and services also allow NeoMedia's
customers to customize the data contained in these forms on demand for marketing
and communications purposes. In addition, they also allow them to implement
their high speed production printing systems on lower cost distributed
client-server platforms. NeoMedia places special emphasis on applications that
involve both print and electronic media.
Such solutions often require NeoMedia to recommend, specify, supply and
install equipment and software products from third party suppliers, many of whom
have associations with NeoMedia. NeoMedia acts as a re- marketer of equipment
and software products for a number of suppliers and, to date, has generated
substantial revenue from these activities.
Migration provides consulting and systems integration services to
facilitate the migration of business applications running on legacy systems,
such as the Wang environment, to open-system platforms, such as Unix. Such
migrations can reduce customer capital, training and operating costs as well as
improve performance and increase functionality in the new system environment.
Migration has a group of proprietary programs ("tools") which facilitate this
process and reduce the time, cost and risk involved in such development efforts.
The products and services offered by Migration complement NeoMedia's more
general systems integration products and services, which management believes
provide clear synergies with NeoMedia's other commercial activities.
NeoMedia currently offers its services and products through its three
principal business units, the Document Systems Solutions Unit, the Systems
Transition Solutions Unit and Intelligent Document Solutions Unit which,
although separate in name, often function as a team in providing solutions for
its customers.
As part of the services provided in connection with the solutions it
offers, NeoMedia often recommends, specifies, supplies and installs equipment
and software products from third party suppliers, many of whom have associations
with NeoMedia. NeoMedia acts as a re-marketer of equipment and software products
for a number of suppliers and, to date, has generated the largest portion of its
revenue from these activities.
NeoMedia renders its services to all sizes and types of organizations, from
the small, privately-owned company to large, multi-national organizations, and
has performed services for many customers, such as Discover Card Services, Inc.,
Sun Trust Bank, Inc., Charles Schwab & Co., Inc., Fidelity Investments and the
State of Wisconsin. In addition, NeoMedia currently has strategic business
relationships with many industry leaders, such as IBM Corporation, Sun
Microsystems Computer Company, Xerox Corporation, Symbol Technologies, Inc.,
Oracle Corporation, Netscape and Oce Printing Systems (formerly Siemens Nixdorf
Printing Systems).
INTELLIGENT DOCUMENT SOLUTIONS UNIT
THE LIMITATIONS OF PRINTED DOCUMENTS. Printed documents constitute the
principal means by which information has been transmitted and exchanged in
recorded form for hundreds of years. As such, they have provided the basis and
infrastructure for formal communication and commerce worldwide.
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During the past half century, electronic data processing systems have
played an increased role in the distribution and storage of information and are
rapidly supplanting the use of printed information as the standard for
communication. However, even in today's world of electronic "information on
demand", it is useful, and often necessary, to transfer computer based
information into printed form since paper continues to be an inexpensive,
portable and non-volatile display and storage media ideally suited for
computer-to-human communications. The result, therefore, has been that instead
of decreasing the number of documents generated, the adoption of electronic data
processing has actually increased the volume of computer generated print
documents.
Unfortunately, the conversion of information to print has traditionally
been a one way street -- from electronic media to a printed form. Although it is
now easier to convert information from electronic media ("machine readable
information") to printed human readable information through "print-on-demand",
it is exceedingly difficult, and often impossible, to reverse this process and
convert information in printed form back into a machine readable format. This is
not a trivial problem. For example, it is common in business and government
operations to take information stored in an electronic media format and print it
into human readable form and then re-enter the same information back into
electronic format. This process of printing and re-entering into electronic
format often occurs multiple times since the information in the electronic
format must be available for multiple parties or business departments in
traditional human readable print in addition to its original electronic format.
Text conversion from printed "human readable" form to a machine readable format
can be accomplished through either manual re-entry or through the use of optical
character recognition ("OCR") software contained in scanning devices. Neither
manual transcription nor the use of scanning devices are an efficient or
effective method of conversion. Manual transcription is both labor intensive and
error prone. Scanning devices are, at best, 98% efficient which is not suitable
for transcription of un-proofed text and is potentially disastrous for the
conversion of documents containing numerical information. Furthermore, neither
method can fully restore a print document to its original machine readable form
which often contains non-printable "latent" information, such as spreadsheet
formulas, database references, embedded programs and multi-media data.
HIGH CAPACITY SYMBOLOGIES: PRESERVING MACHINE READABLE INFORMATION IN HUMAN
READABLE PRINT DOCUMENTS. The use of high capacity symbologies is today the most
effective and efficient means of transmitting printed information between
computers. High capacity symbologies are data communications protocols which
allow the preservation and communication of virtually all machine readable data
represented as highly structured patterns on conventional print media. These
patterns can be decoded using conventional document scanning devices and
appropriate software. The result is a system which literally functions as a
"modem" for print, virtually eliminating the need for manual or OCR conversion
while providing 100% accuracy and preserving the "latent" elements previously
available only in the electronic data processing environment.
Management believes that Intelligent Document technology can be used to
increase operational efficiencies in a business by reducing the labor currently
required to manually re-enter data conveyed by computer generated print
documents into data processing systems for transaction, document and record
management purposes. In contrast to traditional "first generation" linear bar
codes which, due to space limitations, only hold less than 40 characters, the
high capacity symbologies used in Intelligent Documents convey significantly
greater amounts of information; up to 2,000 characters in single symbols and
tens of thousands when multiple symbols are used. In addition, unlike
traditional linear bar codes, high capacity symbologies are not limited to
representing character information but can also convey pure binary data
including formatting information, charts and graphs, multi-media elements such
as color photographs and audio and fully executable programs and macros. High
capacity symbologies, in conjunction with other Intelligent Document software
technology that NeoMedia has developed, can also be used to automatically link
any printed document, such as books, newspapers, magazines, invoices and cards
to on-line sources of computer information including those available through the
Internet and the World Wide Web.
Since the Intelligent Document Solutions Unit has only been formed
recently, to date it has provided only limited software and consulting services.
However, due to the rapidly emerging era of electronic commerce fostered by the
proliferation of the Internet and the World Wide Web, NeoMedia anticipates that
the large number of potential
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Intelligent Document applications will, in terms of revenue, make this the
fastest growing unit of NeoMedia, although no assurances can be given that this
will occur.
SERVICES AND PRODUCTS. NeoMedia either currently provides or plans to
provide the following Intelligent Document service and software products:
/bullet/ TECHNOLOGY AND SOLUTIONS CONSULTING are engagements where
NeoMedia consults with clients to advise them on general
capabilities of Intelligent Document technology and specific
advantages and limitations of different implementations,
including custom solution designs and impact studies to assist
them in their businesses.
/bullet/ SYSTEMS DEVELOPMENT AND INTEGRATION is the design, development,
implementation and service of Intelligent Document systems and
applications for client purposes. It is anticipated that these
systems will incorporate both equipment and software available
from third party suppliers, as well as proprietary components and
licenses developed by and controlled by NeoMedia.
/bullet/ INTELLIGENT DOCUMENT MIDDLEWARE includes multi-platform utility
software products, such as print drivers, symbology encoders and
decoders, compaction modules and application engines which
support and enable Intelligent Document applications.
NeoMedia believes that it is currently the leading provider of
high capacity symbology print drivers to the high speed printing
environment. NeoMedia has provided such services to various
customers, such as UPS and Symbol Technologies, Inc. and their
customers, such as J.C, Penney, Amway, various state departments
of motor vehicles, and the country of Bahrain.
/bullet/ INTELLIGENT DOCUMENT APPLICATIONS includes specific applications
software which apply Intelligent Document technology and
principles to provide specific commercial solutions.
DOCUMENT SYSTEMS SOLUTIONS UNIT
The function of the Document Systems Solutions Unit is to assist clients in
optimizing their document creation, production and management processes. These
efforts have historically focused on designing and providing high speed document
formatting and printing solutions, although services of this unit have recently
been expanded to include document management, scanning and archive management,
as well as automated format conversion for alternative electronic distribution
channels, such as the Internet. In connection with the services of this unit,
NeoMedia is a supplier of proprietary and third party software and third party
equipment. The companies represented by NeoMedia in the sale of software and/or
equipment include Oracle Corporation, IBM Corporation, Xerox Corporation, Symbol
Technologies, Oce Printing Systems (formerly Siemens Nixdorf Printing systems),
Elixir, I-Data, and PrintSoft Americas.
The services of this unit are directed principally to firms which operate
high speed and large volume printing operations. The development of reliable
high speed laser printers not only resulted in the creation of large print-to-
mail operations, it also facilitated the production and delivery of large
volumes of documents in relatively short time frames, permitting printing and
mailing of as many as 30 million documents in a month. The United States Postal
Service ("USPS") has encouraged the production of high speed computer generated
mail by providing postage discounts to those companies which produce their mail
in a manner that assists the USPS routing and delivery process. Large volume
mailers have been able to reduce their postage expenses significantly by using
computers to prepare and print mail in USPS specified delivery sequence. There
are now many print-to-mail sites in the United States generating enormous
volumes of documents per month. The Document Systems Solutions Unit provides
services and products to these high volume printing operations to automate and
control their document production process. The
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services performed by the Document Systems Solutions Unit represented 18.8% of
NeoMedia's total sales for the year ended December 31, 1996.
SERVICES. NeoMedia provides services in this market as both a consultant
and systems integrator, consisting of the following:
/bullet/ ENTERPRISE OUTPUT STRATEGIES are consulting engagements in which
NeoMedia professionals analyze customer business requirements and
design comprehensive document systems solutions to resolve
business problems. NeoMedia has rendered services to a number of
Fortune 100 and 500 clients since its inception in 1989, which
typically have focused on business enablement and market share
growth through enhanced document solutions. Recent emphasis has
focused on the design of systems that provide a technology bridge
from paper to electronic media.
/bullet/ DOCUMENT MANUFACTURING EXECUTION SYSTEMS is the application of
technology used in the typical manufacturing operation to the
document production process. Large scale print-to-mail operations
are essentially manufacturing operations. However, unlike
successful manufacturing operations, print-to-mail operations
typically lack control systems, such as those to ensure quality.
NeoMedia actively consults in these areas and is currently
developing customized versions of established manufacturing
execution systems for the document generation environment.
/bullet/ INTELLIGENT DOCUMENT SOLUTIONS, in the context of the Document
Systems Solutions Unit, are the consulting and systems
integration of the software products and applications provided by
the Intelligent Document Solutions Unit. As related to the
document production process, Intelligent Documents can also be
used to control such processes and facilitate document return
processing and archive retrieval.
SOFTWARE PRODUCTS. NeoMedia offers a variety of third-party and proprietary
software products to be used in connection with its document systems solutions.
STRATEGIC PARTNERS. In providing Document Systems Solutions to customers,
NeoMedia often "partners" with companies such as PrintSoft Americas, Elixir
Technologies, Xerox Corporation, Oce Printing Systems (formerly Siemens Nixdorf
Printing Systems), IBM and I-Data. These arrangements often result in the
"partner" introducing customers to NeoMedia, that purchase NeoMedia's and/or the
"partner's" services and/or products, the use by the partner of NeoMedia as a
subcontractor, the re-marketing by NeoMedia of the "partner's" products, and the
sharing of responsibility with the partner. Depending upon the product or
service involved, the association with the partner may be on an exclusive basis.
SYSTEMS TRANSITION SOLUTIONS UNIT
LEGACY ENVIRONMENT AND OPEN SYSTEMS DEVELOPMENT. Prior to the late 1980's,
mid-sized to large companies relied upon either a mainframe or minicomputers to
perform critical business functions, such as inventory and production control,
financial reporting, document generation and mailing and administrative support
functions. Each manufacturer of these computers sought to differentiate and gain
competitive advantage by developing "closed" environments which would work only
with that manufacturer's proprietary equipment and software products. This
approach effectively "locked" a customer into a given supplier for equipment and
systems software including data- communications networks, databases and
application development environments. This in turn resulted in the development
of business software which would run only on these closed proprietary systems.
These closed, proprietary systems and applications are referred to in the
industry as "legacy systems".
In the late 1980's and early 1990's, widespread technological advances in
microprocessors and memory devices, communications networks, peripheral storage
devices and system software made practical the implementation of
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enterprise wide distributed computing environments which offered
price/performance advantages over traditional closed systems. It became possible
to connect large numbers of personal computers ("PCs") via local area networks
("LANs"). Even though the operating systems for these PCs and LANs were
generally proprietary (e.g., MS DOS, Novell, branded-UNIX), they were "open" in
that they could be installed on equipment from a variety of manufacturers and
allowed widespread software development in standard computer languages. The
result was rapid proliferation of these "open system platforms" solutions, and
market competition led to rapid improvements in price/performance for open
systems.
In addition to price/performance benefits, software written for use with
these open systems also provided functionality which was largely absent from
traditional legacy systems. A significant innovation was the widespread
implementation of graphical user interfaces ("GUIs)" - "point and click"
applications - on networked PCs and workstations, which greatly improved ease of
use and training and increased productivity. Another advantage of using open
systems is the ability to facilitate cooperative work among users by managing
the distribution of data and applications in a networked client-server
environment. In addition, client-server systems are scalable in that additional
capacity can be added in small increments, essentially on an individual
workstation basis, as compared to the major investment required to add
incremental capacity to traditional mainframe and minicomputer systems.
MIGRATION TO OPEN SYSTEM ENVIRONMENT. As a result of these developments and
the cost and productivity advantages of the open system environment, many
business users employing legacy systems desired to convert their systems to the
open system environment. However, in many cases, the applications used on the
legacy systems could not be moved directly from their "closed" environment to
the open, client-server system. Two solutions typically used to implement this
conversion have been (1) to move directly to a client-server application,
resulting in the loss of use of the existing applications on the legacy system,
incurring the consequent loss of specific functionality and increase in
training, or (2) to rewrite the existing application in the open systems
environment, which was expensive, time-consuming and often not entirely
effective in transferring functionality.
A third approach to this conversion, and the one employed by NeoMedia, is
to employ migration "tools" (programs) which translate legacy application
programs and databases from their closed proprietary form to equivalent source
code and record structures which can be run directly in the open client-server
environment. The advantages of this migration approach is that (1) most, if not
all, of the functionality of the original legacy application is maintained in
the new open environment, (2) the conversion entails less time, resources and
risk than other methods, and (3) the conversion provides a base for
modernization of the legacy application in the new open environment.
Since technology in the computer industry changes so rapidly, the "new and
improved" system of today is the legacy system of tomorrow. Consequently,
NeoMedia believes that there is a substantial and will continue to be a
continuing market for transition services.
THE NEOMEDIA SOLUTION. In 1994, Migration acquired and has since further
developed a group of automated legacy conversion tools. These proprietary tools
support migrations from proprietary Wang VS and Hewlett Packard HP3000 to
multiple varieties of UNIX systems.
NeoMedia takes an evolutionary, rather than a revolutionary, approach to
migration. When assisted by NeoMedia, the client takes smaller, safer and more
manageable steps toward its conversion objective. At the completion of each
"migration" stage, the client evaluates a variety of "modernization" paths which
may be available to it, such as running Microsoft Windows interfaces to their
applications, taking advantage of special features of a new database or
development environment, integrating their custom application with third-party
applications or enhancing their abilities to create custom form documents from
their internal applications.
The "modernization" aspect of NeoMedia's migration services highlights the
synergies that exist with NeoMedia's expertise in providing products and
services for open systems. After NeoMedia has completed the migration of the
client's legacy software to an open system, this software can be modernized
(i.e. updated) to take
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advantage of modern technologies to improve system performance, enhance user
interfaces and generally bring the system into an up-to-date condition.
NeoMedia's "migration and modernization" approach allows for fast, cost
effective migration of legacy software with a minimum of disruption to the
client's business operations, coupled with controlled modernization projects
that, in a well-planned and logical manner, result in the legacy software having
the latest technology. Since NeoMedia has the expertise to accomplish both the
migration from the legacy platform to the open system and to modernize the
software, it acts as "one-stop shopping" for all of its client's needs. NeoMedia
believes that since it has the capability to be a single source of solutions for
its customers, it has a competitive advantage.
SERVICES. The Systems Transition Solutions Unit of NeoMedia presently
offers four approaches to assist clients to implement business applications in
open computing environments:
/bullet/ OPEN SYSTEM DEVELOPMENT. This approach is employed when an
application must be written or rewritten for use on an open
systems platform. NeoMedia provides consulting services for
technology assessment, systems analysis and design as well as
full systems integration and support services. These services
include mainframe and workstation integration, application
program selection and design, custom program development,
equipment and software installation, customer training and
acceptance testing. The initial focus of these services was on
the Unix workstation and server environment due to its "open"
nature and ability to support enterprise database applications on
workstation environments. These services have broadened to
include other platforms, including Windows NT, which NeoMedia
believes will be increasingly competitive during the latter half
of this decade.
/bullet/ TOTAL ASSISTED MIGRATION. This approach is employed when the
legacy application effectively can be converted and "ported"
(moved) to the open system environment using largely automated
processes with minimal custom development. This approach is
superior to the Open System Development in time, cost and
development risk. Consequently, it is usually preferred.
Conversion and porting of the legacy application is accomplished
by the use of the proprietary migration tools employed by
NeoMedia. NeoMedia's migration-development tools and application
products are based on the technology of widely used Informix,
Microsoft Corporation, IBM, Hewlett Packard, Oracle Corporation,
Sun Microsystems Computer Company, Micro Focus Cobol and
Accucobol.
/bullet/ MICRO-MAINFRAME PORTS. In the first half of 1996, IBM introduced
a family of products (IBM P390 and R390 processors), which allows
users to run mainframe applications on a downsized air cooled
platform in addition to either OS2 or AIX (IBM's version of
Unix). On these new systems, users can run and maintain the
integrity of existing and proven mainframe systems at a price and
support cost comparable to the cost of an open system. While the
transfer of applications to these new processors is not a
conversion, it does involve migration services since special
expertise is required in the configuration and tuning of the new
processors in order to co-host the proprietary IBM applications
in conjunction with either OS2 or AIX. NeoMedia, as an authorized
re-marketer for IBM, offers these new systems and provides
migration services in connection with their installation.
/bullet/ INTERNET EXTENSIONS. Information currently on the Internet is
predominately housed in open system environments, primarily UNIX
servers which have become the machine of choice in academic and
other distributed computing environments during the past decade.
The vast majority of new information currently being formatted
for the World Wide Web is also hosted in open system
environments. However, the majority of corporate information is
housed in legacy mainframe and mini-computer environments which
are not connected to the Internet, primarily for security
reasons. This condition is the major barrier to the application
of Internet technology to inter and intra enterprise
communications and applications often referred to as Intranet
solutions. NeoMedia offers services in this arena, which include:
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* Implementation of new Internet compatible systems through open
systems integration products and services.
* Migrations of existing proprietary legacy applications and
databases to open system platforms compatible with
modernization to the Internet environment.
* Porting of IBM mainframe applications to air cooled
micro-frames which bridge both legacy and open system
environments.
/bullet/ MILLENNIA IMPACT STUDIES AND CORRECTIONS. Computer programs
within the past thirty-five years have relied on the assumption
that the dates used in calculations occur within the twentieth
century. For example, in these programs the year "1901" is
represented only by the last two digits ("01"), with the "19"
assumed. This method of programming allowed computer programmers
to make optimal use of memory resources which, until recently,
were limited. Unfortunately, at the turn of the century, this
method of programming will cause calculations based on these
current programs to be invalid, since dates will be interpreted
incorrectly by the computer. For example, unless the computer
program is corrected, the date "2001" will be interpreted by the
computer as "1901", which will result in serious errors in
calculations which are dependent upon dates, such as mortgage
calculations and, in particular, those in the financial industry.
This is commonly referred to as the "Year 2000" or "millennia"
problem. NeoMedia uses its expertise to advise clients as to the
extent of their Year 2000 problem for their particular computer
system and software, and to suggest methods for its correction.
NeoMedia has determined to primarily focus its efforts in this
area in the markets in which it performs migration and
modernization services, and in particular to users of Wang and HP
3000 systems. This will allow NeoMedia to specialize on a
specific market, and will also afford it additional opportunity
to sell its migration and modernization services. Thus, by
assisting in the Year 2000 problem, NeoMedia is cross-marketing
its services.
In addition to these services, NeoMedia plans to engage in the design and
development of proprietary applications to enhance ported systems when the
migration is complete. These proprietary systems will include the support of
Virtual Private Networks which emulate local area network access via the
Internet using secure encryption methods to route data traffic. The result will
be a Virtual Private Web which will allow computers within companies to be
networked via the Internet, with the assurance of security so that there would
not be any unauthorized use.
In each of these areas of service, NeoMedia provides consulting services
which include strategic consulting, analysis and evaluation of user
applications, systems analysis, design, implementation, integration and support
services and client training and configuration, installation and maintenance of
equipment. The services performed by the Systems Transition Solutions Unit
represented 80.6% of NeoMedia's total sales for the year ended December 31,
1996. For the years ended December 31, 1996 and 1995, revenues from NeoMedia's
migration services represented 7.9% and 10.9%, respectively, of NeoMedia's total
revenue.
As a systems integrator, NeoMedia supplies and installs, as a re-marketer
for a number of companies, a variety of computer and related products. For the
years ended December 31, 1996 and 1995, revenues from this activity represented
72.7% and 66.0%, respectively, of NeoMedia's total revenue.
BUSINESS RELATIONSHIPS. As part of the services provided in connection with
the Systems Transition Solutions Unit, NeoMedia acts as a re-marketer of
equipment in connection with open systems development and migrations. NeoMedia
has maintained relationships with a number of major companies under which
NeoMedia re-markets the equipment and software products of those companies.
These relationships include those identified with respect to the Document
Systems Solutions Unit.
PROPRIETARY MIGRATION SOFTWARE TOOLS AND PRODUCTS. NeoMedia has acquired
and developed a line of proprietary products and software tools utilized in its
migrations services solutions.
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CUSTOMERS
Although NeoMedia provides services and products to a spectrum of
customers, ranging from closely-held companies to Fortune 100 and 500 companies,
for the years ended December 31, 1996 and 1995, one customer, Ameritech
Services, Inc. ("Ameritech"), accounted for 39.6% and 49.0%, respectively, of
NeoMedia's revenue. NeoMedia expects sales to Ameritech as a percentage of total
sales to continue to decline. Furthermore, NeoMedia does not have a written
agreement with Ameritech and, therefore, there are no contractual provisions to
prevent Ameritech from terminating its relationship with NeoMedia at any time.
Accordingly, the loss of this customer, or a significant reduction by it in
buying the products and services offered by NeoMedia, absent diversification,
would materially and adversely affect NeoMedia's revenues and results of
operations. In addition, the equipment and software which is re-marketed to this
customer is supplied by a single supplier. Accordingly, the loss of this
supplier would materially adversely affect NeoMedia. For these reasons, NeoMedia
is seeking, and continues to seek, to diversify its sources of revenue.
SALES AND MARKETING
NeoMedia markets its products, as well as those for which it acts as a
re-marketer, and its services primarily through its direct sales force, which
was composed of 20 personnel as of December 31, 1996. NeoMedia currently
maintains sales locations in four states. The sales organization is responsible
for achieving quarterly and annual sales quotas, and, to a significant extent,
is compensated based upon the profitability of their efforts. NeoMedia also
relies upon its strategic alliances with industry leaders to help market its
products and services, provide lead referrals and establish informal
co-marketing arrangements. Although NeoMedia in the past has engaged in limited
telemarketing activities, it may in the future expand such marketing activities.
Representatives of NeoMedia also attend seminar and trade shows, both as
speakers and participants, to help market its products and services.
NeoMedia currently has arrangements with independent distributors to
promote their products and services outside of the United States. NeoMedia
currently has representation in England, the Netherlands, Canada, Central
America, South America and Singapore, although its revenue from sales outside
the United States is insignificant.
RESEARCH AND DEVELOPMENT
The computer industry is characterized by rapid technological change,
frequent new product and service introductions, evolving industry standards and
changes in customer demands. The introduction of products and services embodying
new technologies and the emergence of new industry standards can, in a
relatively short period of time, render existing products and services obsolete
and unmarketable. NeoMedia, therefore, believes that its success depends upon
its ability continuously to develop new products and services, as well as
enhancements to its existing products, and to introduce them promptly into the
market. Research and development is especially critical to NeoMedia's intention
to develop new software products and services related to high capacity
symbologies. NeoMedia employed nine persons in the area of product development
as of December 31, 1996. During the years ended December 31, 1996 and 1995,
NeoMedia incurred total research and development costs of $628,000 and $714,000,
respectively, of which $293,000 and $278,000, respectively, were capitalized as
software development costs and $335,000 and $436,000, respectively, were
expensed as research and development costs.
Although, NeoMedia currently is seeking patents for certain of its
proprietary technology related to Intelligent Documents, NeoMedia presently has
no patents with respect to its proprietary technology and products. No
assurances can be given that such patent protection will be granted, and if
granted, that it will be adequate to protect NeoMedia's rights. In addition,
NeoMedia relies upon copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions, all of which afford only
limited protection, to protect its proprietary technology and products. Although
NeoMedia takes steps to protect its trade secrets, such as requiring employees
with access to NeoMedia's proprietary information to execute confidentiality and
non-disclosure agreements, it may be possible for unauthorized parties to copy
or reverse engineer all or part of any one of NeoMedia's proprietary technology
and products. Furthermore, just as there can be no assurance that a
misappropriation of NeoMedia's proprietary
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technology and products will not occur, there can be no assurance that
copyright, trademark and trade secret laws will be available in all
circumstances to protect NeoMedia's rights. In addition, although the laws of
the United States may protect NeoMedia's proprietary rights in its technology
and products, the laws of foreign countries where NeoMedia's products may be
used may not protect its proprietary rights at all or to the same extent as the
laws of the United States.
NeoMedia believes that its proprietary technology and products do not
infringe upon the rights of any third parties; however, there can be no
assurance that a third party will not in the future claim infringement by
NeoMedia. Similarly, infringement claims could be asserted against products and
technologies which NeoMedia licenses from third parties. NeoMedia has never
received notification that any of its products, products it licenses or the
technology of such products infringe upon the proprietary rights of third
parties.
NeoMedia may provide some of its products to end users using non-exclusive,
non-transferable licenses which provide that the licensee may use the software
solely for internal operations on designated computers at specific sites or by a
specified number of users. NeoMedia generally does not make source codes
available for NeoMedia's products.
Due to the difficulty of doing so, NeoMedia has never policed, nor has it
ever attempted to police, the unauthorized use of its products. Even though
piracy of NeoMedia's proprietary rights could materially adversely affect it,
NeoMedia believes that the threat of piracy, or the unavailability of protection
under applicable laws, is less significant to its competitive and fiscal well
being than its ability to respond to the rapid change in technology which
characterizes the computer industry.
COMPETITION
The markets in which NeoMedia competes are highly competitive, and NeoMedia
believes that such competition is likely to intensify. Many of NeoMedia's
competitors have substantially greater financial resources, larger research and
development and sales staffs and greater name recognition than NeoMedia and,
therefore, can respond more quickly and efficiently to changing technology and
user needs. As usually occurs when competition increases, there is corresponding
downward pressure on prices and profit margins, either of which could materially
and adversely affect NeoMedia. NeoMedia believes that a potential source of
competition is from its present customers who could choose to develop and
produce products and render services in-house similar to those provided by
NeoMedia.
Since NeoMedia offers a variety of products and services, no generalities
can be made as to its competitors, all of which differ depending upon the
product or service offered.
The largest competition, in terms of number of competitors, is for
customers desiring systems integration, including the re-marketing of another
party's products, and document solutions. These competitors range from the
local, small privately held company to the large national and international
organizations, including the large consulting firms, such as Andersen
Consulting. A large number of companies act as re-marketers of another party's
products, and therefore, the competition in this area is intense. In some
instances, NeoMedia, in acting as a re-marketer, may compete with the original
manufacturer.
There are a number of companies that compete with NeoMedia for customers
wishing to migrate from a legacy to an open systems environment. In addition,
there are different competitors, depending upon the platform from which the
migration is being done. Generally, as with competitors for NeoMedia's open
systems services and products, the competitors for transition services business
range from small to large companies. NeoMedia believes, however, that not a
significant number of its competitors for the transition services business use
automated tools to facilitate the migration. This, NeoMedia believes, gives it a
competitive advantage in this area.
Since the development of high capacity symbologies are in their relative
infancy, at the current time there is very little competition. However, it can
be expected that as this area develops, competitors will appear and
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competition will be significantly increased. No assurances can be given that
NeoMedia will be able to compete successfully in this area should this occur.
New or improved products and services can be expected from NeoMedia's
competitors in the future. Market participants must compete on many fronts,
including development time, engineering expertise, product quality, performance
and reliability, price, name recognition, customer support and access to
distribution channels. NeoMedia believes that it has been able to compete to
date primarily through product quality, technical excellence, customer service
and its ability to achieve desired results. NeoMedia's ability to compete in the
future will depend upon many factors, including the ability to attract new
customers and to diversify its customer base and products and services so as not
to be dependent upon any one or several customers or product or service, to
attract and retain qualified management, sales and technical personnel, to
develop new products and services and to respond quickly and efficiently to new
technology. There is no assurance that NeoMedia will be able to compete
successfully or develop competitive products and services in the future.
LIABILITY INSURANCE
NeoMedia has never had any liability claim asserted against it. However,
NeoMedia could be subject to liability claims in connection with the use of the
products and services that it sells. There can be no assurance that NeoMedia
would have sufficient resources to satisfy any liability resulting from these
claims or would be able to have its customers indemnify or insure NeoMedia
against such claims. Although NeoMedia maintains insurance against such claims,
there can be no assurance that such coverage will be adequate in terms and scope
to protect NeoMedia against material adverse effects in the event of a
successful claim.
GOVERNMENT REGULATION
NeoMedia has no knowledge of any government regulation to which it is
subject or which would materially adversely affect its business operations.
ENVIRONMENTAL PROTECTION COMPLIANCE
NeoMedia has no knowledge of any federal, state or local environmental
compliance regulations which affect its business activities. NeoMedia has not
expended any capital to comply with any environmental protection statutes and
does not anticipate that such expenditures will be necessary in the future.
EMPLOYEES
As of December 31, 1996, NeoMedia employed 54 full-time and 5 part-time
employees, located in ten states, which included 14 full-time employees and 1
part-time employee in systems integration, 9 full-time employees in product
development, 16 full-time employees and 4 part-time employees in sales, 4
full-time employees in marketing and 11 full-time employees in executive and
administrative positions. None of NeoMedia's employees are represented by a
labor union or bound by a collective bargaining agreement. NeoMedia believes
that its employee relations are good.
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The statements contained in Item 1 (Business) and Item 6 (Management's
Discussion and Analysis of Financial Condition and Results of Operations) that
are not historical facts may be forward-looking statements that are subject to a
variety of risks and uncertainties more fully described in NeoMedia's filings
with the Securities and Exchange Commission including, without limitation, those
described under "Risk Factors" in NeoMedia's Prospectus dated November 25, 1996.
NeoMedia cautions readers that these risks and uncertainties could cause
NeoMedia's actual results in 1997 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, NeoMedia.
These risks and uncertainties include, without limitation, NeoMedia's limited
operating
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history on which expectations regarding its future performance can be based,
general economic and business conditions affecting the industries of NeoMedia's
customers in existing and new geographical markets, competition from, among
others, national and regional software developers and software/hardware sellers
that have greater financial, technical and marketing resources and distribution
capabilities than NeoMedia, the availability of sufficient capital, NeoMedia's
ability to identify the right product mix, NeoMedia's ability to successfully
acquire and integrate the operations of additional businesses and NeoMedia's
ability to operate effectively in geographical areas in which it has no prior
experience.
ITEM 2. DESCRIPTION OF PROPERTIES
NeoMedia's principal executive, marketing and support facility is located
at 2201 Second Street, Suite 600, Fort Myers, Florida 33901. NeoMedia occupies
approximately 10,615 square feet under terms of a written lease from an
unaffiliated party expiring on January 31, 2000. NeoMedia's principal sales
facility is located at 280 West Shuman Boulevard, Suite 100, Naperville,
Illinois 60563. NeoMedia occupies approximately 9,324 square feet under the
terms of a written lease from an unaffiliated party expiring on December 31,
2000. NeoMedia subleases approximately 5,035 square feet of the sales facility
under the terms of a written sublease to an unaffiliated party expiring on
December 31, 2000.
NeoMedia also leases, from an unaffiliated party, approximately 890 square
feet of office space, pursuant to a written lease terminating August 31, 1997,
at 112 South Tryon Street, Suite 1440, Charlotte, North Carolina 28284. Pursuant
to the agreement by which NeoMedia purchased the migration tools from
International Digital Scientific, Inc., NeoMedia occupied until January 31, 1997
approximately 4,900 square feet of office space at 28460 Stanford Avenue, Suite
100, Valencia, California 91355. In addition, NeoMedia leases, from an
unaffiliated party, approximately 880 square feet of office space, pursuant to a
written lease terminating January 31, 1997, at 12 Calle 1-25 Zona 10, Edificio
Geminis, Torre Norte Officina 1006, Guatemala City, Guatemala 01010.
NeoMedia also leases from Charles W. Fritz (NeoMedia's President) and his
wife, pursuant to a verbal, month-to-month lease, space at 6054 Timberwood
Circle, #240, Fort Myers, Florida 33908, which it currently uses as temporary
housing for employees relocating to Fort Myers. Although this lease is between
affiliated parties, NeoMedia believes that it is on terms no less favorable to
it than could be obtained from unaffiliated parties.
NeoMedia believes that its existing office space is adequate to meet its
current and short-term requirements.
ITEM 3. LEGAL PROCEEDINGS
NeoMedia is not a party to any material legal proceedings, nor to
NeoMedia's knowledge is any material legal proceedings threatened against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of NeoMedia security holders during the
fourth quarter of the year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION. NeoMedia's common stock and Warrants began trading
on NASDAQ SmallCap Market on November 25, 1996, the date of its initial public
offering. Prior to such time there was no established public trading market for
NeoMedia's common stock or Warrants. Set forth below is the range of high and
low sales
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prices for the common stock and Warrants for the periods indicated as reported
by NASDAQ. The quotations do not include retail markups, markdowns or
commissions and may not represent actual transactions.
TYPE OF SECURITY PERIOD ENDED HIGH LOW
- - ---------------- ------------ ---- ---
Common Stock December 31, 1996(1) $7.50 $5.13
March 14, 1997(2) $6.31 $5.28
Warrants December 31, 1996(1) $1.50 $0.50
March 14, 1997(2) $1.75 $1.06
- - ---------------------------------
(1) Includes only the period November 25, 1996 through December 31, 1996.
(2) Includes only the period January 1, 1997 through March 14, 1997.
(b) HOLDERS. As of February 28, 1997, there were 63 holders of record of
NeoMedia's common stock and 42 holders of record of its warrants. NeoMedia
believes that it has a greater number of shareholders because management
believes that a substantial number of NeoMedia's common stock and Warrants are
held of record in street name by broker-dealers for their customers.
(c) DIVIDENDS. As of March 14, 1997, NeoMedia has not paid any dividends
on its common stock and does not expect to pay a cash dividend in the
foreseeable future, but intends to devote all funds to the operation of its
businesses. As of March 14, 1997, NeoMedia has a letter of credit with First
National Bank of Chicago, Chicago, Illinois, the terms of which require First
National Bank of Chicago's written permission prior to the declaration of cash
dividends. Currently, NeoMedia is in discussions with a number of financial
institutions to obtain additional lines of credit. If any such additional lines
are obtained, their terms may also contain provisions restricting NeoMedia's
ability to pay dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Dev-Tech Associates, Inc., NeoMedia's predecessor, was organized in
December, 1989, and through the year ended December 31, 1996, a substantial part
of NeoMedia's revenue was derived from software resales and equipment resales.
NeoMedia couples its proprietary software products with independent vendor
products it resells, enabling it to provide a complete "turn-key" service for
its customers. Currently, NeoMedia's revenue consists of software license fees,
resales of software developed by independent vendors ("software resales"),
resales of computer equipment manufactured by independent vendors ("equipment
resales"), and fees for services, including consulting, education and
postcontract software support. In addition, NeoMedia recently formed its
Intelligent Document Solutions Unit to develop enabling technology and
applications for printed materials containing high-capacity symbologies, which
NeoMedia believes to be an expanding area in the emerging world of electronic
commerce.
NeoMedia's strategy is to increase sales of its proprietary software
transition tools and applications as a percentage of total sales. License fees
for the year ended December 31, 1996 increased 180.8% from the year ended
December 31, 1995, and, as a percentage of total sales, increased to 4.4% of
total sales during the year ended December 31, 1996 from 2.2% during the year
ended December 31, 1995, while total sales increased to $17.5 million during
1996 as compared to $12.8 million during 1995, or an increase of 36.8%. NeoMedia
has built and intends to continue to build an infrastructure that assumes this
strategy will succeed. Therefore, the failure to achieve this strategy could
have a material adverse effect on NeoMedia's business, financial condition and
results of operations.
A substantial portion of NeoMedia's operating expense is related to
personnel, facilities and amortization. Such operating expenses cannot be
adjusted quickly and are therefore fixed in the short term. NeoMedia's expense
levels
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for these items are based, in significant part, on NeoMedia's expectations of
future sales. If actual sales levels are below management's expectations,
results of operations are likely to be adversely affected by a similar amount
because a relatively small amount of NeoMedia's expense varies with its sales in
the short term.
In general, NeoMedia's sales are difficult to forecast as the market for
client/server equipment and software is rapidly evolving and NeoMedia's sales
cycle, from the initial proposal to the customer through the purchase of product
and related services varies substantially from customer to customer and from
product to product. Also, NeoMedia's operating results may fluctuate
significantly from period to period as a result of a variety of factors,
including changes in the composition of NeoMedia's revenue, the timing of new
product introductions and NeoMedia's expenditures on research and development
and promotional programs, as well as the general state of the national and
global economies. Demand for the products sold by NeoMedia may increase or
decrease as a result of a number of factors, such as client preferences and
product announcements by competitors.
In the past, NeoMedia has realized a substantial portion of its sales in
the last quarter of the year. It is not uncommon for equipment resellers and
software companies to experience strong fourth quarters followed by weak first
quarters. Such seasonality arises from many factors, such as the timing of
product introductions and business cycles of NeoMedia's customers, and could be
material to NeoMedia's interim results. Such cycles vary from customer to
customer, and the overall impact on NeoMedia's results of operations cannot be
predicted. There can be no assurances that NeoMedia will not display this
pattern in future years. In addition, its business and results of operations
could be affected by the overall seasonality of the industry.
NeoMedia's quarterly operating results have been subject to variation and
will continue to be subject to variation, depending upon factors, such as the
mix of business among NeoMedia's services and products, the cost of material,
labor and technology, particularly in connection with the delivery of business
services, the costs associated with initiating new contracts or opening new
offices, the economic condition of NeoMedia's target markets, and the cost of
acquiring and integrating new businesses.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 1995
GENERAL. Loss before income taxes for the year ended December 31, 1996 was
$2.9 million as compared to $1.3 million during the year ended December 31,
1995. During the first quarter of 1996, NeoMedia decided to invest in the
infra-structure needed to manage current and expected future growth. The 1996
loss resulted primarily from increased general, administration, sales and
marketing expenses associated with NeoMedia investing in expanding its
infra-structure by hiring management, sales and other personnel to develop,
market and sell new products. Using a portion of the proceeds from the IPO,
NeoMedia intends to continue to expand its development, sales and marketing
positions to increase revenue in each of its three business units: Document
Systems Solutions Unit, Systems Transition Solutions Unit and Intelligent
Document Solutions Unit. To a lesser extent, the increased loss was due to an
increase in net interest expense, including expense associated with NeoMedia's
private placement during the third quarter of 1996 of its 10% uncollateralized
subordinated convertible promissory notes, due September 30, 1997.
LICENSE FEES. NeoMedia's license fees are derived from licensing NeoMedia's
internally developed and purchased software tools. During 1994, NeoMedia
purchased the intellectual property rights to certain software tools which
support migrations from proprietary computer environments to multiple varieties
of UNIX systems. Additionally, NeoMedia developed its own proprietary software
products for high speed printing and migration services. License fees for the
year ended December 31, 1996 were $775,000 compared to $276,000 for the year
ended December 31, 1995, an increase of $499,000 or 180.8%. This increase
resulted primarily from $88,000 of initial sales of newly developed software and
the $411,000 increase in sales of existing software transition tools. Cost of
sales for license fees consisted primarily of fees paid to an independent
software developer. Cost of sales as a percentage of related sales increased to
40.8% during 1996 from 30.1% during 1995 primarily due to the increased sales
where fees were paid to an independent software developer.
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SOFTWARE RESALES. NeoMedia's software resales are derived from NeoMedia's
strategic alliances with independent manufacturers of client/server computer
equipment and independent developers of software applications and tools.
Software resales increased by $1.0 million, or 87.2%, from $1.2 million for the
year ended December 31, 1995 to $2.2 million for the year ended December 31,
1996. Reselling of UNIX client server administrative software began during 1996
and contributed $631,000 of sales for 1996. NeoMedia also began selling newly
introduced micro- mainframe computers, which contributed $245,000 of sales for
1996. Cost of sales as a percentage of related sales increased to 63.0% during
1996 from 39.7% during 1995. This increase resulted primarily from the cost of
the newly introduced products being 68.6% on average of related sales, while the
cost of the existing software products resold being 59.4% on average of related
sales. In addition, cost of sales for 1996 were affected by certain inventory
received in 1994 at approximately $135,000 less than its estimated fair market
value of $260,000 in exchange for an agreement with the vendor to pay the vendor
royalties based on future sales. The inventory received was recorded at
NeoMedia's estimated obligation under this royalty agreement. This inventory was
depleted during 1995 resulting in an increase in the cost of sales during 1996.
EQUIPMENT RESALES. NeoMedia's equipment resales are also derived from
NeoMedia's strategic alliances with independent manufacturers of client/server
computer equipment, including IBM Corporation and Sun Microsystems Computer
Company. These alliances provide marketing support and sales leads in the
client/server marketplace. Equipment resales increased by $3.9 million, or
45.7%, to $12.4 million for the year ended December 31, 1996, as compared to
$8.5 million for the year ended December 31, 1995 primarily as the result of an
expanded customer base. For the year ended December 31, 1996, increased
equipment resales related to IBM RS/6000 workstations totaled $2.2 million
principally as a result of changes in a vendor's sales incentive programs. Also,
additional sales of Sun Microsystems workstations and servers were $1.7 million,
while sales of mid-range printers decreased $176,000. Cost of sales as a
percentage of related sales increased to 85.7% during 1996 from 83.3% during
1995 primarily due to a $500,000 one-time shipment of desktop printers to a
major customer at cost.
SERVICE FEES. NeoMedia's service fees consisting of sales from consulting,
education and postcontract support services decreased by $721,000, or 25.8%, to
$2.1 million for the year ended December 31, 1996, as compared to $2.8 million
for the year ended December 31, 1995. A customer specific development project
was completed during 1995, which contributed service fees of $133,000 during
1995. Moreover, NeoMedia's focus changed during 1995 to providing services using
NeoMedia's proprietary software tools and licensing software rather than through
service fees. Cost of services as a percentage of related sales increase to
91.9% during 1996 from 86.4% during 1995 primarily due to an increase in
compensation expenses.
AMORTIZATION OF SOFTWARE. Amortization of software for the year ended
December 31, 1996, as compared to the year ended December 31, 1995, increased
$84,000 as a result of the amortization of software costs capitalized during
1996; however, as a percentage of total net sales decreased to 3.7% during 1996
from 4.5% during 1995 due to the increase in net sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$1.4 million, or 152.3%, to $2.3 million for the year ended December 31, 1996,
from $907,000 in the year ended December 31, 1995. This increase was due mainly
to an increase in the provision for bad debts, rent expenses, professional fees
and compensation as NeoMedia builds an administration infra-structure to manage
current and expected future growth.
SALES AND MARKETING. A portion of the compensation to the sales and
marketing staff constitutes salary and is fixed in nature, while the rest of
this compensation is directly related to sales volume. Sales and marketing
expenses have increased $500,000, or 27.4%, to $2.3 million for the year ended
December 31, 1996 from $1.8 million for the year ended December 31, 1995, as a
result of the increase in net sales. NeoMedia anticipates that sales and
marketing costs will increase as NeoMedia grows.
RESEARCH AND DEVELOPMENT. During the year ended December 31, 1996, NeoMedia
charged to expense 1.9% of total net sales in research and development expenses
as compared to 3.4% during the year ended December 31,
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1995. This percentage decrease was due to an increase in total net sales.
NeoMedia currently intends to continue to make significant investments in
research and development.
INTEREST EXPENSE, NET. Interest expense consists primarily of interest paid
to creditors as part of financed purchases, capitalized leases, the bridge loan
received by NeoMedia in August, 1996 in a private placement and NeoMedia's
asset-based collateralized line of credit. Interest expense increased by
$260,000, or 92.9%, to $540,000 for the year ended December 31, 1996 from
$280,000 for the year ended December 31, 1995, due to an increase in debt
outstanding during 1996 over 1995.
PROVISION (BENEFIT) FOR INCOME TAXES. During 1996, NeoMedia established in
its provision for income taxes a valuation allowance for all of the net deferred
income tax assets. As of December 31, 1996, NeoMedia had a $1.6 million net
operating loss carryforward which does not include the net operating losses of
DTM prior to the Migration Merger. Until the Migration Merger, DTM was treated
as an S Corporation for federal and state income tax purposes. Accordingly,
federal income taxes on any earnings of DTM were payable by DTM's shareholder
rather than by NeoMedia. With the Migration Merger, the S Corporation status of
Migration was terminated and Migration became subject to statutory corporate
income taxes. Consequently, the benefit for income taxes differs from the amount
computed by applying the statutory federal rate of 34% primarily because of the
net losses incurred by Migration.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, NeoMedia has financed its operation through shareholder
loans and borrowings from a commercial bank and under a line of credit. In
December, 1995 and in January, 1996, in several series of transactions between
affiliates, funds were loaned and borrowed pursuant to promissory notes bearing
interest at the rate of 8% per annum. See "Item 12 -- Certain Relationships and
Related Transactions." In December, 1996 and February, 1997, NeoMedia repaid in
full all of these related party loans. Also, in December, 1995 and in January,
1996, NeoMedia borrowed $250,000 each month from a commercial bank bearing
interest at the bank's prime rate plus 0.5%.
During 1995, NeoMedia had available a line of credit with a commercial bank
that permitted borrowings up to the lesser of $2.0 million or 80% of eligible
accounts receivable, as defined in the financing agreement. The line of credit
had an interest rate equal to the bank's prime rate plus 1.0%. The line of
credit was collateralized by accounts receivable and inventories, and required
NeoMedia to maintain certain financial ratios. NeoMedia used this facility for
funding its operations during 1995 and through the closing of the IPO shortly
after which NeoMedia repaid in full the line of credit with its commercial bank.
In November, 1996, NeoMedia completed its IPO receiving net proceeds of
$5.7 million. As of December 31, 1996, NeoMedia's working capital was $5.0
million which represented a $5.9 million increase from December 31, 1995. In
January, 1997, NeoMedia closed the IPO's over-allotment and received net
proceeds of $1.3 million. In February, 1997, NeoMedia began discussions with a
number of financial institutions for a line of credit to replace the bank line
repaid in November, 1996, and enhance the line of credit with a commercial
finance company.
Net cash used in operating activities for the years ended December 31, 1996
and 1995, was $1.9 million and $937,000, respectively. During 1996, trade
accounts receivable increased $1.9 million, while accounts payable and accrued
expenses increased $1.8 million. During 1995, collections on trade receivables
provided NeoMedia with cash of $1.7 million which was used primarily to reduce
trade payables which decreased $2.2 million.
NeoMedia's net cash flow used in investing activities for the years ended
December 31, 1996 and 1995, was $433,000 and $444,000, respectively. Net cash
provided by financing activities for the years ended December 31, 1996 and 1995,
was $6.5 million and $1.3 million, respectively. During 1996, NeoMedia completed
the IPO
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receiving net cash proceeds of $5.7 million, closed the private placement of
bridge financing receiving net cash proceeds of $2.7 million and repaid notes
totaling $1.9 million.
To date, inflation has not had a material effect on NeoMedia's financial
results. There can be no assurance, however, that inflation may not adversely
affect NeoMedia's financial results in the future.
NeoMedia utilizes various computer software packages as tools in running
its daily operations. Management does not believe that NeoMedia will encounter
any material problems with this software as a result of the change of the
millennium on January 1, 2000.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"), which becomes effective for NeoMedia for the year ended December 31,
1997. FAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share which excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted earnings per share is computed similarly to fully diluted
earnings per share pursuant to Accounting Principles Board Opinion No. 15,
"Earnings Per Share." FAS 128 also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all entities
with complex capital structure and requires a reconciliation of the numerator
and denominator of the basic earnings per share computation to the numerator and
denominator of the diluted earnings per share computation. NeoMedia has not yet
determined the impact of implementing FAS 128.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements to this Form 10-KSB are attached commencing on page
F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
In 1995, NeoMedia voluntarily changed its independent accountants from McGladrey
& Pullen, LLP to Coopers & Lybrand L.L.P. This change was approved by NeoMedia's
Board of Directors. The financial statements for each of the two years in the
two-year period ending December 31, 1996, were audited by Coopers & Lybrand
L.L.P. NeoMedia did not have any disagreements on accounting and financial
disclosures with its accountants in the years ending December 31, 1996 or 1995.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
As of December 31, 1996 and March 14, 1997, NeoMedia's directors and
executive officers were:
NAME AGE POSITION HELD
Charles W. Fritz 40 President, Chief Executive Officer, Director
and Chairman of the Board
William E. Fritz 66 Secretary and Director
Charles T. Jensen 53 Chief Financial Officer, Vice-President and
Treasurer and Director
Robert T. Durst, Jr. 44 Chief Technical Officer, Vice-President of
Technologies and Business Development and
Director
Dan Trampel 44 Senior Vice-President -- Sales
A. Hayes Barclay 66 Director
James J. Keil 69 Director
Paul Reece 60 Director
CHARLES W. FRITZ is a founder of NeoMedia and has served as its President
and a Director since its inception, and as Chief Executive Officer and the
Chairman of the Board of Directors since August 6, 1996. Prior to founding
NeoMedia, Mr. Fritz was an Account Executive with IBM Corporation from 1986 to
1988, Director of Marketing and Strategic Alliances for the Information
Consulting Group from 1988-1989, and a Consultant for McKinsey & Company. Mr.
Fritz holds an M.B.A. from Rollins College and a B.A. in finance from the
University of Florida. Mr. Fritz is the son of William E. Fritz, a Director of
NeoMedia and its Secretary.
WILLIAM E. FRITZ is a founder of NeoMedia and has served as Secretary and a
Director since its inception. He also served as Treasurer of NeoMedia from its
inception until May 1, 1996. Mr. Fritz, who has over thirty-two years in
establishing and operating privately owned companies, currently is, and for at
least the past ten years has been, an officer and either the sole stockholder or
a majority stockholder, of Gen-Tech, Inc., Dev-Mark, Inc. and EDSCO, three
railroad freight car equipment manufacturing companies. Mr. Fritz also has
ownership interests and executive positions in several other companies. Mr.
Fritz holds a B.S.M.E. and a Bachelor of Naval Science degree from the
University of Wisconsin. Mr. Fritz is the father of Charles W. Fritz, NeoMedia's
President, Chief Executive Officer and Chairman of the Board.
CHARLES T. JENSEN has been Chief Financial Officer, Treasurer and Vice
President of NeoMedia since May 1, 1996. He has been a Director since August 6,
1996. Prior to joining NeoMedia in November, 1995, Mr. Jensen, who has over 27
years of audit, finance and business experience, including audit experience with
Price Waterhouse & Co., was Chief Financial Officer of Jack M. Berry, Inc., a
Florida corporation which grows and processes citrus products from December,
1994 to October, 1995, and at Viking Range Corporation, a Mississippi
corporation, a
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manufacturer of gas ranges from November, 1993 to December, 1994. From December,
1992 to February, 1994, Mr. Jensen was Treasurer of Lin Jensen, Inc., a Virginia
corporation specializing in ladies clothing and accessories. Prior to that, from
January, 1982 to March, 1993, Mr. Jensen was Controller and Vice-President of
Finance of The Pinkerton Tobacco Co., a tobacco manufacturer. Mr. Jensen holds a
B.B.A. in Accounting from Western Michigan University and is a Certified Public
Accountant.
ROBERT T. DURST, JR. has been Chief Technical Officer and Vice President of
Technologies and Business Development since April 1, 1996. He has been a
Director since August 6, 1996. Prior to joining NeoMedia, Mr. Durst held
management positions with Symbol Technologies, Inc., Bohemia, New York, from
February, 1992 to March, 1995 where, among other things, he worked extensively
on two dimensional bar code technology. From March, 1986 to February, 1992, Mr.
Durst was employed as a Technical Director by Pitney Bowes, Inc., Stamford,
Connecticut. Mr. Durst holds a M.A. in Cognitive Psychology from the University
of Illinois and a B.A. from Allegheny College.
DAN TRAMPEL has been Senior Vice-President of Sales since July 3, 1996. Mr.
Trampel has approximately twenty years of experience in sales, marketing, sales
management and general management. Prior to joining the Company, from September,
1993 to May, 1994, Mr. Trampel was Vice-President of Sales for the Great Lakes
region for Hitachi Data Systems, a California based company which markets
mainframe computers and peripherals to Fortune 500 companies. From July, 1991 to
August, 1993, Mr. Trampel was Vice-President of Sales, Marketing and Customer
Support for Data-Link Systems, Incorporated, an Indiana based company which acts
as a data servicer and software development concern to large banks and mortgage
servicers. From February, 1989 to January, 1991, Mr. Trampel was Vice-President
of Sales for the Central Region for Network Equipment Technologies,
Incorporated, a California based company which provides high-speed hardware and
software to Fortune 500 companies desiring to install and operate their own
private data networks. From July, 1974 to February, 1989, Mr. Trampel worked for
IBM Corporation where he worked in its Data Processing Division and National
Accounts Division until 1985, when he became the Branch Manager of its Midtown
Branch in Chicago, Illinois. Mr. Trampel holds a B.A. in Economics and Public
Administration from Drake University.
A. HAYES BARCLAY has been a Director of NeoMedia since August 6, 1996. Mr.
Barclay has practiced law for approximately 33 years and since 1985, has been an
officer, owner and employee of the law firm of Barclay & Damisch, Ltd. and its
predecessor, with offices in Chicago, Wheaton, and Arlington Heights, Illinois.
Mr. Barclay holds a B.A. degree from Wheaton College, a B.S. from the University
of Illinois and a J.D. from the Illinois Institute of Technology - Chicago Kent
College of Law.
JAMES J. KEIL has been a Director of NeoMedia since August 6, 1996. He is
founder and president of Keil & Keil Associates, a business and marketing
consulting firm located in Washington, D.C., specializing in marketing, sales
and document technology projects. Prior to forming Keil & Keil Associates in
1990, Mr. Keil worked for approximately thirty-eight years at IBM Corporation
and Xerox Corporation in various marketing and sales positions. From 1989-1995,
Mr. Keil was on the Board of Directors of Elixir Technologies Corporation (a
non-public corporation), and from 1990-1992 was the Chairman of its Board of
Directors. From 1992-1996, Mr. Keil served on the board of directors of Document
Sciences Corporation. Mr. Keil holds a B.S. degree from the University of
Dayton.
PAUL REECE has been a Director of NeoMedia since August 6, 1996. From 1987
until 1994, when he retired from Pitney Bowes, Inc., Stamford, Connecticut, Mr.
Reece served at various times as its Vice-President of Operations and Technology
Division, Vice-President of Technical Systems and Advanced Products and
Vice-President of Corporate Engineering and Technology. Prior to joining Pitney
Bowes, Inc., Mr. Reece worked for nineteen years at General Electric Company in
various technical, marketing and engineering positions. Mr. Reece holds a B.S.,
M.S. and Ph.D. in electronics and engineering from the University of Manchester,
England.
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Directors are elected on an annual basis. Each director of NeoMedia holds
office until the next annual meeting of the shareholders or until that
director's successor has been elected and qualified. At present, NeoMedia's
by-laws provide for not less than one director nor more than ten. Currently,
there are seven directors. NeoMedia's by-laws permit the Board of Directors to
fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Officers of
NeoMedia are elected by the Board of Directors on an annual basis and serve
until the next annual meeting of the Board of Directors and until their
successors have been duly elected and qualified.
NeoMedia has agreed, for a period of four years from November 25, 1996, if
so requested by the Joseph Charles & Associates, Inc. ("Joseph Charles") the
representative of the several underwriters of NeoMedia's IPO, to nominate a
designee of Joseph Charles as a director of NeoMedia.
DIRECTOR COMPENSATION
Directors are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors. Non-employee directors received
options to purchase 3,000 shares of NeoMedia's common stock at $5.90 per share
as of November 25, 1996 and will receive additional options to purchase 1,000
shares of NeoMedia's common stock as of the date of each annual meeting at which
such person is re-elected or continues to serve as director. See "Executive
Compensation - Stock Option Plan". NeoMedia anticipates that the Board of
Directors will meet at least six times a year.
COMMITTEES OF THE BOARD OF DIRECTORS
NeoMedia's Board of Directors has an Audit Committee, Compensation
Committee and a Stock Option Committee. The Board of Directors does not have a
Nominating Committee, and the functions of such committee are performed by the
Board of Directors.
AUDIT COMMITTEE. NeoMedia's Board of Directors acts as the Audit Committee,
which is responsible for nominating NeoMedia's independent accountants for
approval by the Board of Directors, reviewing the scope, results and costs of
the audit with NeoMedia's independent accountants, and reviewing the financial
statements, audit practices and internal controls of NeoMedia.
COMPENSATION COMMITTEE. The Compensation Committee is responsible for
recommending compensation and benefits for the executive officers of NeoMedia to
the Board of Directors and for administering NeoMedia's Incentive Plan for
Management. Charles W. Fritz and Charles T. Jensen served as the members of
NeoMedia's Compensation Committee. On February 20, 1997, James J. Keil and Paul
Reece were elected as additional members of NeoMedia's Compensation Committee.
STOCK OPTION COMMITTEE. The Stock Option Committee, which is comprised of
non-employee directors, is responsible for administering the Company's Stock
Option Plan. Effective November 25, 1996, A. Hayes Barclay and James J. Keil
became the members of NeoMedia's Stock Option Committee.
CERTAIN SIGNIFICANT EMPLOYEES
KEVIN E. LEININGER has been in charge of managing NeoMedia's systems
transition solutions business from May, 1996 until March, 1997, when he became
director of NeoMedia's business development. From 1991 to 1996, he managed
NeoMedia's open systems development services, which currently are part of
NeoMedia's systems transition solutions services. From 1987 to 1991, prior to
joining NeoMedia, Mr. Leininger held a Group Leadership Position with Fermi
National Accelerator Laboratories. To date, Mr. Leininger has authored or
co-authored six books on UNIX and the Internet, three of which have been McGraw
Hill Book of the Month selections. Mr. Leininger holds
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a M.B.A. from the University of Chicago and a B.S. in Physics and Math from Iowa
State University. Mr. Leininger is 32.
RICK D. HOLLINGSWORTH has been Vice President of Technical Operations since
August 19, 1996. Mr. Hollingsworth has twenty years of experience in software
development. Prior to joining NeoMedia, from December 1994 to August 1996, Mr.
Hollingsworth served as a consultant for a number of organizations in Southwest
Florida. From June 1992 to November 1994, he was with Allen Systems Group as
Chief Technical Officer. Prior to serving in this position, he served as
Executive Vice President for product development. From May 1986 to June 1992, he
served as Executive Vice President of Master Control Systems where he
coordinated the development and marketing of new products. Mr. Hollingsworth
holds a Bachelor of Business Administration from Baylor University. Mr.
Hollingsworth is 44.
SECTION 16(A) COMPLIANCE
With respect to compliance with Section 16(a) of the Securities Exchange
Act of 1934, James J. Keil, a director of NeoMedia, filed in March, 1997, a Form
4, Statement of Changes in Beneficial Ownership, for purchases of NeoMedia's
common stock made in December, 1996 and February, 1997.
ITEM 10.EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid to (i) NeoMedia's Chief Executive Officer and (ii) each of
NeoMedia's other executive officers who received aggregate cash compensation in
excess of $100,000 for services rendered to NeoMedia (collectively, "the Named
Executive Officers") during the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
--------------------------------------------------------------
SECURITIES
UNDERLYING
WARRANTS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS COMPENSATION
- - --------------------------- ------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Charles W. Fritz .............. 1996 $146,666 $ 36,667 260,000(3) $5,486(4)
President .............. 1995 110,000 -0-
.............. 1994 145,000 230,000
Charles T. Jensen ............. 1996 95,000 50,782 90,386(5) $3,780(4)
Chief Financial Officer..... 1995(6) 10,833 -0-
Robert T. Durst, Jr. .......... 1996 104,994 22,967 153,657(5) $4,704(4)
Chief Technical Officer ....
<FN>
- - ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission
("Commission"), other compensation in the form of perquisites and other
personal benefits has been omitted in those instances where the aggregate
amount of such perquisites and other personal benefits constituted less
than the lesser of $50,000 or 10% of the total of annual salary and bonuses
for the Named Executive Officer for such year.
(2) The 1996 bonuses were paid in February, 1997, except $30,000 of the bonus
to Mr. Jensen which was paid in August, 1996. The 1994 bonus was paid in
December, 1994.
(3) Represents a warrant, exercisable for a period of four years commencing
November 25, 1997, to purchase up to 260,000 shares of common stock at an
exercise price of $8.85.
(4) Includes life insurance premiums and the corresponding income tax effects
of these transactions.
</FN>
</TABLE>
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(5) Represents options granted under NeoMedia's Stock Option Plan.
(6) Amounts cover the period from date of employment by NeoMedia in November,
1995 until December 31, 1995.
EMPLOYMENT AGREEMENTS
NeoMedia has entered into five year employment agreements ending April 30,
2001, with each of Charles W. Fritz, its President and Chief Executive Officer
and Charles T. Jensen, its Chief Financial Officer, Vice President and
Treasurer, and with Robert T. Durst, Jr., its Chief Technical Officer and
Vice-President of Technologies and Business Development, ending March 31, 2001.
The employment agreements for Messrs. Fritz, Durst and Jensen provide for an
annual salary of $170,000, $140,000 and $110,000, respectively, subject to
annual review by the Board of Directors which may increase but not decrease,
such salary, and participation in all benefits and plans available to executive
employees of NeoMedia. Each employment agreement terminates upon the employee's
death or retirement, and may be terminated by NeoMedia upon the employee's total
disability, as defined in the agreement, or for cause which is defined, among
other things, as the willful failure to perform duties, embezzlement or
conviction of a felony. In addition, Messrs. Fritz, Durst and Jensen participate
in a special insurance disability plan and receive life insurance benefits not
generally offered to other employees and are entitled to certain severance
benefits. These severance benefits vary depending upon the reason for
termination and whether there has been a change in control of NeoMedia. If
termination occurs by NeoMedia (except for cause or total disability) or by the
employee for good reason, as defined in the employment agreement, the agreement
provides that NeoMedia will pay to the terminated employee (i) his salary
through the date of termination, (ii) any deferred and unpaid amounts due under
NeoMedia's Incentive Plan for Management, (iii) any accrued deferred
compensation, (iv) an amount equal to two times the sum of his annual base
salary plus his highest incentive compensation for the last two years, (v)
unpaid incentive compensation including a pro rata amount of contingent
incentive compensation for uncompleted periods, (vi) in lieu of any stock
options granted whether under NeoMedia's Stock Option Plan or otherwise (which
are canceled upon the following payment) a cash amount equal to the aggregate
spread between the exercise prices of all options held at such time by such
terminated employee and the higher of the highest bid price of the common stock
during the twelve months immediately preceding the date of termination, or the
highest price per share of common stock actually paid in connection with any
change in control (as defined in the employment agreement) of NeoMedia provided
that such payments do not violate the provisions of any option or the Stock
Option Plan or other plan then in effect, (vii) an amount equal to any taxes
payable on these payments, (viii) all relocation expenses if he moves his
principal residence more than 50 miles within one year from the date of
termination, and (ix) all legal fees and expenses incurred as a result of the
termination. In addition, unless termination is for cause, NeoMedia must
continue to fund through the terminated employee's normal retirement age any key
man insurance that is in effect on the date of termination, or make a lump sum
payment necessary to continue to pay such premiums and, for a period of two
years following termination, maintain in effect for the benefit of the
terminated employee all employee benefit plans, programs or arrangements in
effect immediately prior to the date of termination. If the terminated
employee's continued participation under such plan and programs is not
allowable, NeoMedia is obligated to provide him with similar benefits. Each
employment agreement provides that services may be performed for companies,
other entities and individuals whether or not affiliated with NeoMedia provided
that the performance of such services does not prevent the employee from
attending to the affairs of NeoMedia and such companies are not in competition
with NeoMedia. The employment agreements of Messrs. Fritz and Durst contain
provisions prohibiting their competing with NeoMedia both during and, depending
upon the reason for such termination, for one year following the termination of
their employment.
INCENTIVE PLAN FOR MANAGEMENT
Effective as of January 1, 1996, NeoMedia adopted an Annual Incentive Plan
for Management ("Incentive Plan"), which provides for annual cash bonuses to
eligible employees based upon the attainment of certain corporate and individual
performance goals during the year. The Incentive Plan is designed to provide
additional incentive to NeoMedia's management to achieve these growth and
profitability goals. Participation in the Incentive Plan is limited to those
employees holding positions assigned to incentive eligible salary grades and
whose participation is authorized
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<PAGE>
by NeoMedia's Compensation Committee which administers the Incentive Plan,
including determination of employees eligible for participation or exclusion.
The Board of Directors can amend, modify or terminate the Incentive Plan for the
next plan year at any time prior to the commencement of such next plan year on
January 1.
To be eligible for consideration for inclusion in the Incentive Plan, an
employee must be on NeoMedia's payroll for the last three months of the year
involved. Death, total and permanent disability or retirement are exceptions to
such minimum employment, and awards in such cases are granted on a pro-rata
basis. In addition, where employment is terminated due to job elimination, a pro
rata award may be considered. Employees who voluntarily terminate their
employment, or who are terminated by NeoMedia for unacceptable performance,
prior to the end of the year are not eligible to participate in the Incentive
Plan. All awards are subject to any governmental regulations in effect at the
time of payment.
Performance goals are determined for both NeoMedia's and the employee's
performance during the year, and if performance goals are attained, eligible
employees are entitled to an award based upon a specified percentage of their
base salary.
STOCK OPTION PLAN
Effective as of February 1, 1996 (and amended and restated effective July
18, 1996 and further amended through November 18, 1996), NeoMedia adopted its
1996 Stock Option Plan ("Stock Option Plan"), the purpose of which is to retain
the services of selected employees and attract new employees, consultants and
directors by providing them with the opportunity to acquire a proprietary
interest in NeoMedia and thus share in its growth and success. The Stock Option
Plan provides for the granting of non-qualified stock options and "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and provides for the issuance of a maximum of 1,500,000 shares
of common stock. Incentive stock options may be granted only to employees of
NeoMedia or its subsidiaries. Stock options, other than incentive stock options,
may be granted to any employee, officer, director or consultant. An employee may
receive more than one grant of a stock option, including simultaneous grants of
different forms of stock options. Options to purchase up to 3,000 shares of
common stock are granted to non-employee directors on the date that such person
first becomes a member of the Board of Directors. Non-employees currently
serving as directors received such options to purchase 3,000 shares as of
November 25, 1996. In addition, beginning with NeoMedia's first annual
stockholder's meeting options to purchase up to an additional 1,000 shares of
common stock will automatically be granted to each non-employee director as of
the date of each annual meeting at which such person is re-elected or continues
to serve as a director.
The Stock Option Plan is currently administered by the Stock Option
Committee of the Board of Directors The Stock Option Committee is currently
composed of A. Hayes Barclay and James J. Keil and may not include an officer or
employee of NeoMedia. No member of the Committee is eligible to receive stock
options under the Stock Option Plan while serving on the Committee other than
the automatic grant of options to non-employee directors. Subject to the
provisions of the Stock Option Plan, the Committee has exclusive authority to
interpret and administer the Stock Option Plan, to select the persons to whom
stock options are granted, to determine the number of shares to be covered by
each stock option and whether the option granted is an incentive stock option or
a non-qualified stock option, to determine whether the shares covered by the
option are restricted as to transferability and to determine the terms and
conditions upon which each stock option may be exercisable. No stock options
under the Stock Option Plan can be granted after January 31, 1999, and the
maximum term of an option is ten years from the date of its grant. Upon the
occurrence of certain transactions, including a sale, transfer or other
disposition resulting in Charles W. Fritz, William E. Fritz and their affiliates
owning less than a specified percentage of the voting stock of NeoMedia or the
execution of a definitive agreement for the sale of all or substantially all of
NeoMedia's assets or its consolidation or merger where NeoMedia is not the
surviving entity, each then outstanding option immediately becomes exercisable.
Under certain circumstances, the shares of common stock issuable upon exercise
of the options may be increased or decreased.
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<PAGE>
The exercise price of each option is determined by the Committee and must
be either the fair market value of each share subject to the option on the date
the option is granted, or at such other price as the Committee determines, but
not less than 100% of the fair market value on the date of the grant.
In lieu of tendering a cash payment to satisfy the option price, the
optionee may, in the Committee's discretion, satisfy all or a portion of such
option price by delivering shares of NeoMedia's common stock. Such shares of
common stock are valued at their fair market value at the time of exercise.
Options under the Stock Option Plan are non-transferable other than by
will, the laws of descent or distribution or pursuant to a qualified domestic
relations order. Options may be exercised only during the lifetime of the
optionee and, except as may otherwise be provided, only by such individual. The
Committee, in its discretion, may provide that an option is exercisable in
installments and at specified times, and, at any time after the granting of an
option, may accelerate the installment exercise dates. Each grant of an option
is confirmed by an agreement ("Stock Option Agreement") between NeoMedia and the
optionee, which provides, among other things, that shares received upon exercise
of the option cannot be sold, transferred or otherwise disposed of for at least
six months from the date of the Stock Option Agreement, none of the outstanding
options can be exercised by the optionee thereof unless such optionee has been
in the continuous employ of NeoMedia to the date of exercise, subject to
termination of employment, death and disability and gives NeoMedia the right,
under certain circumstances, to suspend an optionee's right to exercise an
option.
For options granted prior to July 18, 1996, depending upon the
circumstances of an optionee's termination of employment, such optionee's stock
options may be exercisable following such termination for up to three months,
which is extended to twelve months from the date of death if the optionee dies
during such three month period. If the termination is due to death, the option
is exercisable for twelve months following the date of death. If the optionee's
employment with NeoMedia is terminated without the consent of NeoMedia (other
than due to the optionee's death) or for cause, as determined by the Committee,
then such optionee's right to exercise the then-outstanding stock options
terminates immediately. Options granted subsequent to July 18, 1996, terminate
on the earlier of an optionee's termination of employment for any reason or the
expiration of the term of the option, although the Committee, in its sole
discretion, may allow the option to be exercised for any period following such
termination but no longer than the expiration of the term. If at any time after
termination an optionee engages in "detrimental activity", as defined in the
Stock Option Plan, the Committee, in its discretion, may cause the optionee's
right to exercise the option to be forfeited. Options then exercisable held by a
non-employee director when such person ceases being a director must be exercised
within twelve months following the date such person is no longer serving as a
director, unless such termination of service as a director is due to such
person's death, permanent disability or retirement pursuant to a Company policy,
in which case, such options are exercisable during their remaining terms. The
employment agreements of Messrs. Fritz, Durst and Jensen each provide that upon
termination of employment by NeoMedia, other than for cause, death or
retirement, or by the employee for "Good Reason" as defined in the employment
agreement, any time following this offering, any options granted to the
terminated employee are canceled and, in lieu thereof, such terminated employee
is to receive a cash amount equal to the aggregate spread between the exercise
prices of all options held at such time by such terminated employee and the
higher of the highest bid price of the common stock during the twelve months
immediately preceding the date of termination, or the highest price per share of
common stock actually paid in connection with any change in control of NeoMedia
(as defined), provided that such payments do not violate the provisions of any
option or the Stock Option Plan or other plan then in effect.
As of March 14, 1997, options to purchase an aggregate of 760,804 shares of
common stock, at an exercise price of $.84, were granted and are outstanding
under NeoMedia's Stock Option Plan, including options to Charles T. Jensen, its
Chief Financial Officer, and to Robert T. Durst, Jr., its Vice-President of
Technologies and Business Development, to purchase 90,386 and 153,657 shares of
common stock, respectively. In addition, options to purchase an aggregate of
216,907 shares of common stock in a range of $5.50 to $6.19 per share have also
been granted to employees, directors and consultants and are outstanding.
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Effective February 1, 1996 (and amended and restated effective July 18,
1996), DTM adopted a 1996 stock option plan providing for the issuance of a
maximum of 400,000 shares of DTM common stock and identical in all other
material respects to NeoMedia's Stock Option Plan. As a result of the Migration
Merger, the DTM stock option plan is no longer in effect, no further options
under the DTM stock option plan will be issued and holders of options to
purchase shares of DTM common stock will, in lieu thereof, receive shares of
NeoMedia's Common stock upon exercise of their options. As of the March 14,
1997, options to purchase 326,296 and 4,520 shares of common stock under the DTM
stock option plan, at an exercise price of $.84 and $5.90 per share,
respectively, have been granted and are outstanding.
Following the Migration Merger, the aggregate number of shares of common
stock issuable under NeoMedia's Stock Option Plan was not increased by the
number of shares of stock issuable under the DTM stock option plan but remains
at a maximum of 1,500,000 shares, including options granted under the DTM stock
option plan. As of March 14, 1997, of the 1,500,000 options issuable under
NeoMedia's Stock Option Plan, there are currently options granted to purchase an
aggregate of 1,308,527 shares of common stock (including 330,816 options granted
under the DTM stock option plan), and 183,021 options reserved for future
issuance under the Stock Option Plan, and NeoMedia is obligated to grant 8,000
options in March 1997, as a result of the hiring of new employees.
In consideration of loans made by him to it, NeoMedia has also granted to
Charles W. Fritz a warrant to purchase up to 260,000 shares of common stock at
an exercise price of $8.85. This warrant is exercisable for four years
commencing November 25, 1997, and contains anti-dilution provisions.
NeoMedia has agreed with Joseph Charles that except with respect to options
granted as of November 25, 1996 and the grant of options under the Stock Option
Plan, it will not issue any options until after November 25, 1997.
In addition, grantees of options to purchase common stock who are eligible
to resell the common stock issuable upon exercising the option under Rule 701 of
the Securities Act have agreed (i) not to sell such common stock until after
November 25, 1997 and (ii) following such period, to sell in accordance with the
volume limitations of Rule 144(e)(1) of the Securities Act which limits the
number of shares that may be sold by such person during any three month period
to no more than the greater of (a) one percent of NeoMedia's then outstanding
shares of common stock or (b) the average weekly trading volume of the common
stock during the four calendar weeks preceding the filing of notice of sale with
the Commission, or if no notice is required to be filed, the date of receipt by
a broker to sell or the date of execution of the sale.
The following presents certain information on stock options and warrants
for the Named Executive Officers for the year ended December 31, 1996:
<TABLE>
<CAPTION>
OPTION/WARRANT GRANTS IN 1996
NUMBER OF % OF TOTAL
SECURITIES OPTIONS /
UNDERLYING WARRANTS
OPTIONS / GRANTED TO
WARRANTS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN 1996 PRICE DATE
- - ---- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Charles W. Fritz..................... 260,000 100.0% $8.85 11/25/01
Charles T. Jensen.................... 90,386 6.4% $ .84 02/01/06
Robert T. Durst, Jr.................. 153,657 10.8% $ .84 04/01/06
</TABLE>
401(K) PLAN
NeoMedia maintains a 401(k) Profit Sharing Plan and Trust (the "401(k)
Plan"). All employees of NeoMedia who are 21 years of age and who have completed
three months of service are eligible to participate in the 401(k) Plan. The
401(k) Plan provides that each participant may make elective contributions of up
to 20% of such participant's pre-tax salary (up to a statutorily prescribed
annual limit, which is $9,500 for 1996) to the 401(k) Plan, although the
26
<PAGE>
percentage elected by certain highly compensated participants may be required to
be lower. All amounts contributed to the 401(k) Plan by employee participants
and earnings on these contributions are fully vested at all times. The 401(k)
Plan also provides for matching and discretionary contributions by NeoMedia. To
date, NeoMedia has not made any such contributions.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of NeoMedia's common stock as of March 14, 1997, (i) by each person or
entity known by NeoMedia to own beneficially more than five percent of
NeoMedia's Common Stock, (ii) by each of NeoMedia's directors, (iii) by each
executive officer of NeoMedia named in the Summary Compensation Table and (iv)
by all executive officers and directors of NeoMedia as a group.
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF OWNER OWNED(1) OWNED(1)
- - ------------------------- ------------ ------------
Charles W. Fritz (2)(3) ............... 1,446,169 26.9%
William E. Fritz(2)(4) ................ 1,000 *
Fritz Family Limited
Partnership (2)(4) .................... 1,511,742 28.2%
Chandler T. Fritz
1994 Trust(2)(5)(6) ................... 58,489 1.1%
Charles W. Fritz
1994 Trust(2)(5)(7) ................... 58,489 1.1%
Debra F. Schiafone
1994 Trust(2)(5)(8) ................... 58,489 1.1%
Charles T. Jensen(9) .................. 90,386 1.7%
Robert T. Durst, Jr.(9) ............... 153,657 2.8%
A. Hayes Barclay(10) .................. 1,000 *
c/o Barclay & Damisch Ltd
115 West Wesley Street
Wheaton, Illinois 60187
James J. Keil ......................... 10,000 *
c/o Keil & Keil Associates
733 15th Street, N.W.
Washington, D.C. 20005
Paul Reece(11) ........................ 2,000 *
380 Gulf of Mexico Drive
Long Boat Key, Florida 34228
All executive officers and
directors as a group (8 persons)...... 3,391,421 60.4%
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<PAGE>
- - ---------------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with rules of the
Commission, and includes generally voting power and/or investment power
with respect to securities. Shares of common stock subject to options
currently exercisable or exercisable within sixty days of March 14, 1997
are deemed outstanding for computing the beneficial ownership percentage of
the person holding such options but are not deemed outstanding for
computing the beneficial ownership percentage of any other person. Options
granted to Messrs. Trampel, Barclay, Keil and Reece and warrants (the
"Principal Stockholder's Warrants") granted to Charles Fritz are not
currently exercisable or exercisable within sixty days from March 14, 1997.
Accordingly, the number of shares of common stock issuable upon the
exercise of any option or warrant owned by such person or entity are not
included in this table. Except as indicated by footnote, to the knowledge
of NeoMedia, the persons named in the table above have the sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) c/o NeoMedia Technologies, Inc.
2201 Second Street, Suite 600
Fort Myers, Florida 33901
(3) Mr. Fritz may be deemed to be a parent and promoter of NeoMedia, as those
terms are defined in the Securities Act. Shares beneficially owned do not
include the Principal Stockholder's Warrants to purchase 260,000 shares of
common stock at $8.85 per share after November 25, 1997.
(4) William E. Fritz, Secretary of NeoMedia, and his wife, Edna Fritz, are the
general partners of this Limited Partnership, and therefore each are deemed
to be the beneficial owner of the 1,511,742 shares held in the Fritz Family
Partnership. As Trustee of each of the Chandler T. Fritz 1994 Trust,
Charles W. Fritz 1994 Trust and Debra F. Schiafone 1994 Trust, William E.
Fritz is deemed to be the beneficial owner of the shares of the Company
held in each trust. Accordingly, Mr. William E. Fritz is deemed to be the
beneficial owner of an aggregate of 1,688,209 shares (175,467 of which as a
result of being trustee of the Chandler T. Fritz 1994 Trust, Charles W.
Fritz 1994 Trust and Debra F. Schiafone 1994 Trust, 1,511,742 shares as a
result of being co-general partner of the Fritz Family Partnership and
1,000 shares owned in his own name). Mr. William E. Fritz may be deemed to
be a parent and promoter of NeoMedia, as those terms are defined in the
Securities Act.
(5) William E. Fritz is the Trustee of this Trust and therefore is deemed to be
the beneficial owner of such shares.
(6) Chandler T. Fritz, son of William E. Fritz, is primary beneficiary of this
trust.
(7) Charles W. Fritz, son of William E. Fritz and President and Chief Executive
Officer of NeoMedia, is primary beneficiary of this trust.
(8) Debra F. Schiafone, daughter of William E. Fritz, is primary beneficiary of
this trust.
(9) Represents options granted under the 1996 Stock Option Plan which can be
exercised, but cannot be sold until after November 25, 1997 in accordance
with an agreement made with Joseph Charles.
(10) Does not include 1,000 shares of common stock owned by Mr. Barclay's adult
child living at Mr. Barclay's home, beneficial ownership of which is
disclaimed.
(11) Does not include 2,000 Warrants owned by Mr. Reece.
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<PAGE>
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994, NeoMedia paid to William E. Fritz the aggregate amount of $390,000
for a series of loans, in the aggregate amount of $803,000, made by him to
NeoMedia in 1993 and 1994. The net result of such transactions was that as of
December 31, 1994, NeoMedia was indebted to Mr. Fritz in the aggregate amount of
$413,000, which is represented by a promissory note, payable within thirty days
of demand, bearing interest at the rate of nine percent payable on the last day
of each calendar month. As described below, in the series of transactions
occurring in December, 1995, and January, 1996, this loan was repaid in full,
with $230,000 and $183,000 of this loan being repaid in December, 1995 and
January, 1996, respectively.
At various times, Dev-Mark, Inc. ("Dev-Mark"), an Illinois corporation,
solely owned by William E. Fritz and Gen-Tech, Inc. ("Gen-Tech"), an Illinois
corporation, owned by William E. Fritz (or a limited partnership of which Mr.
Fritz is a general partner) and three minority stockholders, each of which is a
separate trust, with William E. Fritz, as trustee, and one of his three children
(including Charles W. Fritz) as the primary beneficiary of one of the trusts,
loaned money to NeoMedia and DTM. Until as of March 13, 1996, Dev-Mark and
Gen-Tech were shareholders of NeoMedia, at which time the respective stock
ownership in NeoMedia of such corporations was distributed to their respective
stockholders.
In 1994, Dev-Mark, in several transactions loaned to NeoMedia the aggregate
principal amount of $255,000, $180,000 of which was repaid within approximately
one week. The remaining $75,000 is represented by a promissory note, payable
within thirty days of demand, bearing interest at the rate of nine percent
payable on the last day of each calendar month. As set forth below, in the
series of transactions occurring in December, 1995, and January, 1996, this loan
was paid in full in January, 1996.
In November, 1994, NeoMedia borrowed from Charles W. Fritz the principal
sum of $45,000, which was repaid in less than one week.
In 1994, Charles W. Fritz loaned DTM the principal sum of $10,000,
represented by a promissory note, payable within thirty days of demand, bearing
interest at the rate of nine percent payable on the last day of each calendar
month. This loan was paid in full in February, 1997.
In December, 1994, William E. Fritz loaned DTM the principal sum of
$90,000, represented by a promissory note, payable within thirty days of demand,
bearing interest at the rate of nine percent, payable on the last day of each
calendar month. As described below, in the series of transactions occurring in
December, 1995, and January, 1996, $70,000 and $20,000 of this loan were repaid
in December, 1995, and January, 1996, respectively.
In August, 1995, Gen-Tech loaned DTM the principal sum of $150,000,
represented by a promissory note, payable within thirty days of demand, bearing
interest at nine percent payable on the last day of each calendar month. As
described below in the series of transactions occurring in December, 1995, and
January, 1996, this loan was paid in full in December, 1995.
In December, 1994 and throughout 1995, NeoMedia loaned to DTM the aggregate
principal amount of approximately $600,000, represented by a $500,000 promissory
note, payable within five days of demand, bearing interest at the prime rate of
interest announced from time to time by NBD Bank, plus one percent, payable on
the last day of each calendar month. This loan was paid in full in the series of
transactions described below occurring in December, 1995, and January, 1996,
with $230,000 being repaid in December, 1995, and $370,000 being repaid in
January, 1996.
DECEMBER, 1995 AND JANUARY, 1996 TRANSACTIONS
In December, 1995 and January, 1996, in a series of transactions between
affiliates, funds were loaned and borrowed between Charles W. Fritz, William E.
Fritz, Gen-Tech, Dev-Mark, DTM and NeoMedia.
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<PAGE>
In the transactions occurring in December, 1995: (1) Charles W. Fritz
loaned $450,000 to DTM, which used such funds to pay existing indebtedness of
$230,000, $150,000 and $70,000 to NeoMedia, Gen-Tech and William E. Fritz,
respectively, and (2) NeoMedia paid $230,000 to William E. Fritz in partial
payment of existing indebtedness.
In the transactions occurring in January, 1996: (1) Charles W. Fritz loaned
$750,000 to DTM, which used such funds to pay existing indebtedness of $20,000
and $370,000 to William E. Fritz and NeoMedia, respectively, (2) DTM loaned
$360,000 to NeoMedia, (3) NeoMedia paid $183,000 and $75,000 to William E. Fritz
and Dev-Mark, respectively, for existing indebtedness, and (4) NeoMedia loaned
William E. Fritz $472,000.
The result of such transactions occurring in December, 1995, and January,
1996, with respect to NeoMedia was that (1) NeoMedia and DTM paid in its
entirety any indebtedness owed by them to William E. Fritz, (2) NeoMedia loaned
to William E. Fritz the principal sum of $472,000, represented by a note payable
within 30 days of demand, bearing interest at eight percent per annum, (3)
NeoMedia paid in its entirety any indebtedness owed by it to Dev-Mark, (4)
Charles W. Fritz loaned to DTM the aggregate principal sum of $1,200,000,
represented by notes payable within thirty days of demand, bearing interest at
eight percent per annum, (5) DTM paid to William E. Fritz, NeoMedia and
Gen-Tech, in their entirety, any indebtedness existing prior to or incurred as a
result of such transactions, (6) DTM loaned to NeoMedia the principal sum of
$360,000, which is represented by a note payable within 30 days of demand,
bearing interest at eight percent per annum. The $472,000 loan receivable from
William E. Fritz was repaid in full in February, 1997.
Following these series of transactions occurring in December, 1995 and
January, 1996, Migration was indebted to Charles W. Fritz in the aggregate
principal amount of $1,210,000, which was comprised of the $1,200,000 resulting
from these transactions and a $10,000 loan in 1994 described above. This
$1,210,000 principal amount remained unpaid until October 1996, at which time
Mr. Fritz contributed $738,000 of such indebtedness to additional paid-in
capital of NeoMedia, thus reducing such aggregate principal indebtedness to him
from Migration to $472,000. This loan was repaid in full in February, 1997.
In March 1996, Dev-Mark loaned to NeoMedia the principal sum of $135,000,
represented by a promissory note, payable within thirty days of demand, bearing
interest at the rate of eight percent payable on the last day of each calendar
month. This loan was repaid in full in December, 1996.
In March, 1996, Charles W. Fritz loaned to NeoMedia the principal sum of
$35,958.19, represented by a promissory note, payable within thirty days of
demand, bearing interest at the rate of eight percent payable on the last day of
each calendar month. $6,000 of the principal amount of this loan was repaid in
several days from the date of the loan. The remaining principal amount of
$29,958.19 was paid in August, 1996.
In June, 1996, Charles W. Fritz loaned to NeoMedia the principal sum of
$200,000, represented by a promissory note, payable within thirty days of
demand, bearing interest at the rate of eight percent payable on the last day of
each calendar month. This loan was repaid in full in December, 1996.
In June, 1996, in consideration of loans made by Charles W. Fritz to it,
NeoMedia granted to him a warrant (the "Principal Stockholder's Warrant") to
purchase up to 260,000 shares of common stock at an exercise price $8.85. This
warrant is exercisable for a period of four years commencing on November 25,
1997 and contains anti-dilution provisions.
In connection with the extension of credit facilities by NBD Bank to
NeoMedia in 1994, and in connection with the renewal of such credit facility (1)
Gen-Tech (with respect to the first renewal in 1995 of the facility) and Dev-
Mark (with respect to the initial facility) guaranteed NeoMedia's obligations to
the Bank; (2) William E. Fritz pledged to the lender, as collateral for the
loan, all shares of Gen-Tech stock owned by him until the second renewal in
August, 1996, when such stock was released; (3) NeoMedia assigned to the Bank
all of its rights in the demand promissory note for $500,000 from DTM to
NeoMedia, and the security agreement between NeoMedia and DTM until the second
renewal in August, 1996, when NeoMedia and DTM became co-borrowers; and (4)
William E. Fritz
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<PAGE>
(and Dev-Mark and Gen-Tech with respect to the first renewal of the facility)
subordinated rights to the Bank. In February, 1997, William E. Fritz, Dev-Mark
and Gen-Tech were released from the guarantees on the NBD credit facility,
including the letter of credit.
In July, 1995, NeoMedia purchased from the estate of a deceased
stockholder, 36 shares (506,161 shares on a post-exchange, post reverse stock
split basis) of NeoMedia's common stock for $450,000. The purchase price, which
was arrived at through negotiations between management and the estate of the
deceased stockholder, is evidenced by a non-interest bearing promissory note
payable in 36 equal installments of $12,500 each. Such shares were all of the
shares of common stock owned by such deceased stockholder and represented 18% of
the then issued and outstanding shares of common stock of NeoMedia.
During the years ended December 31, 1996 and 1995, NeoMedia performed
administrative services for Gen- Tech in the amount of $6,838 and $3,500,
respectively, and for Dev-Mark in the amount of $11,363 and $27,364,
respectively. During the years ended December 31, 1996 and 1995, NeoMedia
performed administrative services for Storage 2000, Inc., an affiliated company,
in the amount of $9,048 and $8,400, respectively, and for The Loop Group, Inc.,
an affiliated company, in the amount of $-0- and $3,000, respectively. In
addition, for the years ended December 31, 1996 and 1995, NeoMedia has received
rental payments from Storage 2000, Inc. in the amount of $10,992 and $2,748,
respectively.
From July 15, 1995 to February 15, 1996, Charles W. Fritz and his wife,
pursuant to a verbal lease, leased space owned by them at 6054 Timberwood
Circle, #240, Fort Myers, Florida 33908, to NeoMedia for use as an office at a
monthly rental of $350. During this period, the condominium was also used by
several employees as their personal living quarters, who paid Mr. Fritz monthly
rental of $500. Since February 15, 1996, the space has been leased exclusively
to NeoMedia at a monthly rental of $950.
Charles W. Fritz, Gen-Tech and Dev-Mark have each guaranteed NeoMedia's
obligations to IBM Credit Corporation ("ICC") under credit and financing
accommodations granted by ICC to NeoMedia. In addition, each guarantor
subordinated to ICC any liabilities and obligations owed to them by NeoMedia. If
any guarantor breaches the guaranty, ICC has the right, among other things, to
require immediate payment of all indebtedness of NeoMedia. In February, 1997,
Gen-Tech and Dev-Mark were released from the guarantees to ICC.
In November, 1996, NeoMedia entered into a lease with a William E. Fritz
whereby Mr. Fritz leased to NeoMedia an exhibition booth which cost $85,435. The
lease is for 36 months with monthly payments of $2,858.
ITEM 13.EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits required by Item 601 of Regulation S-B to be filed
herewith are hereby incorporated by reference to NeoMedia's Registration
Statement and Exhibits thereto (SEC registration number 333-5534):
3.1 Articles of Incorporation of Dev-Tech Associates, Inc. and amendment
thereto (Incorporated by reference to Exhibit 3.1 to NeoMedia's
Registration Statement No. 333-5534 (the"Registration Statement")).
3.2 By-laws of Dev-Tech Associates, Inc. (Incorporated by reference to
Exhibit 3.2 to NeoMedia's Registration Statement).
3.3 Restated Certificate of Incorporation of DevSys, Inc. (Incorporated by
reference to Exhibit 3.3 to NeoMedia's Registration Statement).
3.4 By-laws of DevSys, Inc. (Incorporated by reference to Exhibit 3.4 to
NeoMedia's Registration Statement).
3.5 Articles of Merger and Agreement and Plan of Merger of DevSys, Inc and
Dev-Tech Associates, Inc. (Incorporated by reference to Exhibit 3.5 to
NeoMedia's Registration Statement).
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3.6 Certificate of Merger of Dev-Tech Associates, Inc. into DevSys, Inc.
(Incorporated by reference to Exhibit 3.6 to NeoMedia's Registration
Statement).
3.7 Articles of Incorporation of Dev-Tech Migration, Inc. and amendment
thereto (Incorporated by reference to Exhibit 3.7 to NeoMedia's
Registration Statement).
3.8 By-laws of Dev-Tech Migration, Inc. (Incorporated by reference to
Exhibit 3.8 to NeoMedia's Registration Statement).
3.9 Restated Certificate of Incorporation of DevSys Migration, Inc.
(Incorporated by reference to Exhibit 3.9 to NeoMedia's Registration
Statement).
3.10 Form of By-laws of DevSys Migration, Inc. (Incorporated by reference to
Exhibit 3.10 to NeoMedia's Registration Statement).
3.11 Form of Agreement and Plan of Merger of Dev-Tech Migration, Inc. into
DevSys Migration, Inc. (Incorporated by reference to Exhibit 3.11 to
NeoMedia's Registration Statement).
3.12 Form of Certificate of Merger of Dev-Tech Migration, Inc. into DevSys
Migration, Inc. (Incorporated by reference to Exhibit 3.12 to NeoMedia's
Registration Statement).
3.13 Certificate of Amendment to Certificate of Incorporation of DevSys, Inc.
changing its name to NeoMedia Technologies, Inc. (Incorporated by
reference to Exhibit 3.13 to NeoMedia's Registration Statement).
3.14 Form of Certificate of Amendment to Certificate of Incorporation of
NeoMedia Technologies, Inc. authorizing a reverse stock split
(Incorporated by reference to Exhibit 3.14 to NeoMedia's Registration
Statement).
4.1 Form of Certificate for Common Stock of DevSys, Inc. (Incorporated by
reference to Exhibit 4.1 to NeoMedia's Registration Statement).
4.2 Form of Joseph Charles' Warrant Agreement (Incorporated by reference to
Exhibit 4.2 to NeoMedia's Registration Statement).
4.3 Form of Private Placement Financing Converted Securities Registration
Rights Agreement (Incorporated by reference to Exhibit 4.4 to NeoMedia's
Registration Statement).
4.4 Form of 10% Unsecured Subordinated Convertible Promissory Note
(Incorporated by reference to Exhibit 4.5 to NeoMedia's Registration
Statement).
4.5 Form of Principal Stockholder's Warrant (Incorporated by reference to
Exhibit 4.6 to NeoMedia's Registration Statement).
4.6 Form of Placement Agent's Warrant Registration Rights Agreement
(Incorporated by reference to Exhibit 4.7 to NeoMedia's Registration
Statement).
4.7 Form of Placement Agent's Warrant for the Purchase of Shares of Common
Stock and Warrants (Incorporated by reference to Exhibit 4.8 to
NeoMedia's Registration Statement).
4.8 Form of Warrant Agreement and Warrant (Incorporated by reference to
Exhibit 4.9 to NeoMedia's Registration Statement).
10.1 Form of "Lock Up" Agreement to be entered into by NeoMedia and its
officers, directors and shareholders (Incorporated by reference to
Exhibit 10.1 to NeoMedia's Registration Statement).
10.2 Form of Nonsolicitation and Confidentiality Agreement (Incorporated by
reference to Exhibit 10.2 to NeoMedia's Registration Statement).
10.3 Employment Agreement dated May 1, 1996 between Dev-Tech Associates, Inc.
and Charles W. Fritz (Incorporated by reference to Exhibit 10.3 to
NeoMedia's Registration Statement).
10.4 Employment Agreement dated April 1, 1996 between Dev-Tech Associates,
Inc. and Robert T. Durst, Jr. (Incorporated by reference to Exhibit 10.4
to NeoMedia's Registration Statement).
10.5 Employment Agreement dated May 1, 1996 between Dev-Tech Associates, Inc.
and Charles T. Jensen (Incorporated by reference to Exhibit 10.5 to
NeoMedia's Registration Statement).
10.6 Lease Agreement dated September 1, 1994, for premises located at
112 South Tryon Street, Charlotte, North Carolina (Incorporated by
reference to Exhibit 10.6 to NeoMedia's Registration Statement).
10.7 Lease dated August 29, 1995 for premises located at 280 Shuman
Boulevard, Naperville, Illinois (Incorporated by reference to Exhibit
10.8 to NeoMedia's Registration Statement).
10.8 Promissory Note, dated as of December 31, 1994, in the principal amount
of $413,000, from Dev-Tech Associates, Inc. payable to William E. Fritz
(Incorporated by reference to Exhibit 10.9 to NeoMedia's Registration
Statement).
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10.9 Promissory Note, dated as of December 31, 1994, in the principal amount
of $75,000, from Dev-Tech Associates, Inc., payable to Dev-Mark, Inc.
(Incorporated by reference to Exhibit 10.10 to NeoMedia's Registration
Statement).
10.10 Promissory Note, dated as of December 31, 1994, in the principal amount
of $10,000, from Dev-Tech Migration, Inc. to Charles W. Fritz
(Incorporated by reference to Exhibit 10.11 to NeoMedia's Registration
Statement).
10.11 Promissory Note, dated as of December 31, 1994, in the principal amount
of $90,000, from Dev-Tech Migration, Inc. to William E. Fritz
(Incorporated by reference to Exhibit 10.12 to NeoMedia's Registration
Statement).
10.12 Promissory Note, dated August 15, 1995, in the principal amount of
$150,000, from Dev-Tech Migration, Inc. to Gen-Tech, Inc. (Incorporated
by reference to Exhibit 10.13 to NeoMedia's Registration Statement).
10.13 Demand Promissory Note, dated December 9, 1994, in the principal amount
up to $500,000, from Dev- Tech Migration, Inc. to Dev-Tech Associates,
Inc. (Incorporated by reference to Exhibit 10.14 to NeoMedia's
Registration Statement).
10.14 Promissory Note, dated December 28, 1995, in the principal amount of
$450,000, from Dev-Tech Migration, Inc. to Charles W. Fritz
(Incorporated by reference to Exhibit 10.15 to NeoMedia's Registration
Statement).
10.15 Promissory Note, dated January 2, 1996, in the principal amount of
$360,000, from Dev-Tech Associates, Inc. to Dev-Tech Migration, Inc.
(Incorporated by reference to Exhibit 10.16 to NeoMedia's Registration
Statement).
10.16 Promissory Note, dated January 2, 1996, in the principal amount of
$472,000, from William E. Fritz to Dev-Tech Associates, Inc.
(Incorporated by reference to Exhibit 10.17 to NeoMedia's Registration
Statement).
10.17 Promissory Note, dated January 2, 1996, in the principal amount of
$750,000, from Dev-Tech Migration, Inc. to Charles W. Fritz.
(Incorporated by reference to Exhibit 10.18 to NeoMedia's Registration
Statement).
10.18 Promissory Note, dated December 31, 1994, in the principal amount of
$46,748, from Dev-Tech Migration, Inc. to Brandon Edenfield.
(Incorporated by reference to Exhibit 10.19 to NeoMedia's Registration
Statement).
10.19 Promissory Note, dated June 19, 1995, in the principal amount of
$20,000, from Dev-Tech Migration, Inc. to Brandon Edenfield.
(Incorporated by reference to Exhibit 10.20 to NeoMedia's Registration
Statement).
10.20 Security Agreement, dated December 9, 1994, between Dev-Tech Associates,
Inc. and Dev-Tech Migration, Inc. (Incorporated by reference to Exhibit
10.34 to NeoMedia's Registration Statement).
10.21 Agreement for Wholesale Financing (Security Agreement), dated October
20, 1992, to IBM Credit Corporation from Dev-Tech Associates, Inc.
(Incorporated by reference to Exhibit 10.35 to NeoMedia's Registration
Statement).
10.22 Guaranty from Gen-Tech, Inc. to IBM Credit Corporation (Incorporated by
reference to Exhibit 10.36 to NeoMedia's Registration Statement).
10.23 Guaranty from Dev-Mark, Inc. to IBM Credit Corporation (Incorporated by
reference to Exhibit 10.37 to NeoMedia's Registration Statement).
10.24 Amendment to Agreement for Wholesale Financing and to Addendum to
Agreement for Wholesale Financing -- Large Sale Financing Option, dated
August 16, 1994, from Dev-Tech Associates, Inc. to IBM Credit
Corporation (Incorporated by reference to Exhibit 10.38 to NeoMedia's
Registration Statement).
10.25 Assignment Agreement, dated September 15, 1994, from Dev-Tech
Associates, Inc. to IBM Credit Corporation (Incorporated by reference to
Exhibit 10.39 to NeoMedia's Registration Statement).
10.26 Guaranty (By Individual) dated October 20, 1992, to IBM Credit
Corporation from Charles W. Fritz, as Guarantor (Incorporated by
reference to Exhibit 10.40 to NeoMedia's Registration Statement).
10.27 Collateralized Guaranty, dated August 16, 1994, to IBM Credit
Corporation from Gen-Tech, Inc. (Incorporated by reference to Exhibit
10.41 to NeoMedia's Registration Statement).
33
<PAGE>
10.28 Collateralized Guaranty, dated August 16, 1994, to IBM Credit
Corporation from Dev-Mark, Inc. (Incorporated by reference to Exhibit
10.42 to NeoMedia's Registration Statement).
10.29 Dev-Tech Associates, Inc. Annual Incentive Plan for Management
(Incorporated by reference to Exhibit 10.43 to NeoMedia's Registration
Statement).
10.30 Dev-Tech Associates, Inc. 1996 Stock Option Plan (Incorporated by
reference to Exhibit 10.44 to NeoMedia's Registration Statement).
10.31 First Amendment and Restatement of Dev-Tech Associates, Inc. 1996 Stock
Option Plan (Incorporated by reference to Exhibit 10.45 to NeoMedia's
Registration Statement).
10.32 Form of Stock Option Agreement - Dev-Tech Associates, Inc.
(Incorporated by reference to Exhibit 10.46 to NeoMedia's Registration
Statement).
10.33 Dev-Tech Migration, Inc. 1996 Stock Option Plan (Incorporated by
reference to Exhibit 10.47 to NeoMedia's Registration Statement).
10.34 First Amendment and Restatement of Dev-Tech Migration, Inc. 1996 Stock
Option Plan (Incorporated by reference to Exhibit 10.48 to NeoMedia's
Registration Statement).
10.35 Form of Stock Option Agreement - Dev-Tech Migration, Inc. (Incorporated
by reference to Exhibit 10.49 to NeoMedia's Registration Statement).
10.36 Dev-Tech Associates, Inc. 401(k) Plan and amendments thereto
(Incorporated by reference to Exhibit 10.50 to NeoMedia's Registration
Statement).
10.37 Engagement Letter, dated March 13, 1995, with Compass Capital, Inc. and
Amendments thereto (Incorporated by reference to Exhibit 10.51 to
NeoMedia's Registration Statement).
10.38 Mutual General Release and Stock Purchase Agreement with the Estate of
Thomas Ruberry (Incorporated by reference to Exhibit 10.52 to NeoMedia's
Registration Statement).
10.39 Form of "Lock-Up" Agreement with Bridge Financing Selling Stockholders
and Form of Addendum to Subscription Agreement (Incorporated by
reference to Exhibit 10.53 to NeoMedia's Registration Statement).
10.40 Forms of Agreements Not to Sell (Incorporated by reference to
Exhibit 10.58 to NeoMedia's Registration Statement).
10.41 Letter of Intent dated October 11, 1996 between NeoMedia Technologies,
Inc. and E-Stamp Corporation (Incorporated by reference to Exhibit 10.59
to NeoMedia's Registration Statement).
10.42 First Amendment and Restatement of NeoMedia Technologies, Inc. 1996
Stock Option Plan (As Established Effective February 1, 1996, and as
amended through November 18, 1996) (Incorporated by reference to Exhibit
10.60 to NeoMedia's Registration Statement).
The following exhibits are filed herewith:
10.43 Agreement of Lease Between First Union National Bank of Florida and
NeoMedia Technologies, Inc. Dated November 27, 1996
10.44 Sublease Agreement Between NeoMedia Technologies, Inc. and Lancaster
Annuity Services Company Dated November 8, 1996
10.45 Agreement for Sale of Assets Between Basic Developments, Inc., a Panama
Company, and Meja Sistemas C. A., a Guatemala Company, and NeoMedia
Technologies, Inc. Dated February 12, 1997
10.46 Master Lease Between William E. Fritz and NeoMedia Technologies, Inc.
Dated November 6, 1996
10.47 Agreement for Wholesale Financing (Security Agreement) Between IBM
Credit Corporation and NeoMedia Technologies, Inc. Dated February 20,
1997
10.48 Collateralized Guaranty Between IBM Credit Corporation and NeoMedia
Migration, Inc. Dated February 20, 1997
10.49 Termination of Collateralized Guaranty Between IBM Credit Corporation,
Gen-Tech, Inc. and Dev-Mark, Inc. Dated February 5, 1997
21 Subsidiaries
27 Financial Data Schedule
- - --------------------------------------------
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1996.
34
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Fort Myers, State of
Florida, on the 25th day of March, 1997.
NEOMEDIA TECHNOLOGIES, INC.
---------------------------
Registrant
By: /s/ CHARLES W. FRITZ
-------------------------------------
Charles W. Fritz, President, Chief
Executive Officer and
Chairman of the Board
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1997.
SIGNATURES TITLE
/s/ CHARLES W. FRITZ President, Chief Executive Officer,
- - ---------------------------- Chairman of the Board and Director
Charles W. Fritz
/s/ WILLIAM E. FRITZ Secretary and Director
- - ----------------------------
William E. Fritz
/s/ CHARLES T. JENSEN Chief Financial Officer,
- - ---------------------------- Treasurer and Director
Charles T. Jensen
/s/ ROBERT T. DURST, JR. Director
- - ----------------------------
Robert T. Durst, Jr.
/s/ A. HAYES BARCLAY Director
- - ----------------------------
A. Hayes Barclay
/s/ JAMES J. KEIL Director
- - ----------------------------
James J. Keil
/s/ PAUL REECE Director
- - ----------------------------
Paul Reece
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of NeoMedia Technologies, Inc.
We have audited the accompanying consolidated balance sheets of NeoMedia
Technologies, Inc. and subsidiaries ("NeoMedia") as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the NeoMedia's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NeoMedia as of
December 31, 1996 and 1995, and the consolidated results of operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
- - ----------------------------
Coopers & Lybrand L.L.P.
Chicago, Illinois
March 14, 1997
F - 1
<PAGE>
NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------
ASSETS 1996 1995
------- --------
(In thousands)
Current assets:
Cash and cash equivalents ...................... $ 4,159 $ 11
Trade accounts receivable, net of allowance for
doubtful accounts of $216 and $311 .......... 4,983 3,473
Amounts due from related parties ............... 496 58
Inventories .................................... 105 129
Costs and estimated earnings in excess of
billings on uncompleted contracts ........... 40 127
Deferred income taxes .......................... -- 193
Deposits ....................................... 19 203
Prepaid expenses and other ..................... 529 340
------- --------
Total current assets ........................ 10,331 4,534
------- --------
Property and equipment, net of accumulated
depreciation ................................ 278 269
Capitalized software costs, net of accumulated
amortization ................................ 657 1,030
------- --------
Total assets ................................... $11,266 $ 5,833
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................... $ 3,800 $ 2,041
Accrued expenses ............................... 1,043 670
Bank financing ................................. -- 1,625
Notes payable to related parties ............... -- 352
Current portion of long-term debt .............. 262 245
Other .......................................... 245 518
------- --------
Total current liabilities ................... 5,350 5,451
------- --------
Long-term debt, net of current portion ............ 1,589 1,830
------- --------
Total liabilities ........................... 6,939 7,281
------- --------
Shareholders' equity (deficit):
Common stock, $.01 par value, 15,000,000 shares
authorized, 5,114,316 and 3,639,539 shares
outstanding ................................. 51 36
Additional paid-in capital ..................... 8,801 (34)
Accumulated deficit ............................ (4,525) (1,059)
------- --------
Subtotal .................................... 4,327 (1,057)
Less treasury stock, at cost ................... -- (391)
------- --------
Total shareholders' equity (deficit) ........ 4,327 (1,448)
------- --------
Total liabilities and shareholders' equity ..... $11,266 $ 5,833
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
F - 2
<PAGE>
NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
(dollars in thousands,
except per share data)
NET SALES:
License fees .................................... $ 775 $ 276
Software product resales ........................ 2,231 1,192
Technology equipment resales .................... 12,438 8,538
Service fees .................................... 2,074 2,795
---------- ----------
Total net sales .............................. 17,518 12,801
---------- ----------
COST OF SALES:
License fees .................................... 316 83
Software product resales ........................ 1,406 473
Technology equipment resales .................... 10,665 7,112
Service fees .................................... 1,906 2,414
Amortization of capitalized software costs ...... 655 571
---------- ----------
Total cost of sales .......................... 14,948 10,653
---------- ----------
GROSS PROFIT ....................................... 2,570 2,148
General and administrative expenses ................ 2,288 907
Sales and marketing expenses ....................... 2,326 1,826
Research and development costs ..................... 335 436
---------- ----------
Loss from operations ............................... (2,379) (1,021)
Interest expense, net .............................. 540 280
---------- ----------
LOSS BEFORE INCOME TAXES ........................... (2,919) (1,301)
Provision (Benefit) for income taxes ............... 156 (170)
---------- ----------
NET LOSS ........................................... $ (3,075) $ (1,131)
========== ==========
PER SHARE DATA:
Net loss per share .............................. $ (0.72) $ (0.26)
========== ==========
Weighted average common and common
equivalent shares outstanding ............... 4,266,753 4,362,420
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
----------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $(3,075) $(1,131)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for doubtful accounts ................................ 431 311
Depreciation and amortization .................................. 797 679
Gain on sale of property and equipment ......................... -- 4
Deferred income taxes provision (benefit) ...................... 193 (139)
Changes in operating assets and liabilities:
Trade accounts receivable ................................... (1,941) 1,704
Other current assets ........................................ (161) (353)
Accounts payable and accrued expenses ....................... 1,759 (2,155)
Other current liabilities ................................... 100 143
------- -------
Net cash used in operating activities ....................... (1,897) (937)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs and purchased software (293) (278)
Proceeds from sales of property and equipment ..................... -- 19
Acquisition of property and equipment ............................. (140) (185)
------- -------
Net cash used in investing activities ....................... (433) (444)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of units ............................... 5,701 --
Advance to shareholders ........................................... (472) --
Borrowings under notes payable and long-term debt ................. 3,225 3,554
Repayments on notes payable and long-term debt .................... (2,283) (2,311)
Borrowings from shareholders and related parties .................. 1,123 140
Repayments to shareholders and related parties .................... (816) (42)
------- -------
Net cash provided by financing activities ................... 6,478 1,341
------- -------
NET INCREASE (DECREASE) IN CASH ................................... 4,148 (40)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...................... 11 51
------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................ $ 4,159 $ 11
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .................................................. $ 566 $ 134
Income taxes paid .............................................. 65 58
Non-cash investing and financing activities:
Conversion of bridge loan to common stock ................... 2,411 --
Capital contribution from related party ..................... 738 --
Retirement (Acquisition) of treasury
stock for a note payable ................................... 391 (391)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
ADDITIONAL RETAINED NUMBER
COMMON PAID-IN- EARNINGS TREASURY OF
STOCK CAPITAL (DEFICIT) STOCK SHARES
------ ---------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ............ $36 $ (34) $ 72 $-- 3,639,539
Acquisition of treasury stock, at cost. -- -- -- (391) --
Net loss .............................. -- -- (1,131) -- --
--- ------ ------- ----- ---------
Balance, December 31, 1995 ............ 36 (34) (1,059) (391) 3,639,539
Retirement of treasury stock, at cost.. (5) 5 (391) 391 (506,161)
Capital contribution from related party -- 738 -- -- --
Proceeds from issuance of 1,700,000
units, net of $1,756 of
issuance costs ..................... 17 5,684 -- -- 1,700,000
Conversion of bridge loan to
common stock ....................... 3 2,408 -- -- 280,938
Net loss .............................. -- -- (3,075) -- --
--- ------ ------- ----- ---------
Balance, December 31, 1996 ............ $51 $8,801 $(4,525) $-- 5,114,316
=== ====== ======= ===== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F - 5
<PAGE>
NEOMEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS
BASIS OF PRESENTATION
NeoMedia Technologies, Inc. ("Technologies") was incorporated under the laws
of the state of Delaware in July 1996 to acquire by merger Dev-Tech Associates,
Inc. ("Dev-Tech"), an Illinois corporation, which was incorporated in December
1989. On August 5, 1996, Technologies acquired all of the shares of Dev-Tech in
exchange for the issuance of shares of Technologies' common stock to the
shareholders of Dev-Tech. Dev-Tech Migration, Inc. ("DTM") was incorporated in
June 1994 in Illinois. On November 20, 1996, DTM was merged into NeoMedia
Migration, Inc. ("Migration"), a Delaware corporation and a wholly owned
subsidiary of Technologies, in exchange for the issuance of 827,525 shares of
Technologies' common stock to the shareholder of DTM (the "Migration Merger").
Technologies and Migration (collectively, "NeoMedia" or the "Company"), since
Migration's inception, have shared certain management and were controlled by
common shareholders. These transactions have been accounted for in a manner
similar to the pooling of interests method of accounting using historical book
values rather than fair market value as all entities involved were under common
control. Distribuidora Vallarta, S.P.A. is a wholly-owned subsidiary of
Migration and was incorporated in Guatemala in August, 1996, to employ computer
software developers and system integrators. As these transactions were completed
as of December 31, 1996, the financial statements of NeoMedia have been
presented on a consolidated basis for all periods presented. The financial
position and results of NeoMedia as of and for the periods prior to these
mergers have been combined in a manner consistent with NeoMedia's consolidation
principles as of December 31, 1996. All significant intercompany accounts and
transactions have been eliminated in preparation of the consolidated financial
statements.
The historical number of shares of common stock have been restated to give
effect to a stock split in March, 1996, whereby each holder of common stock
received 15,555.60975 shares of common stock for each share of common stock then
owned and to a reverse stock split on November 1, 1996, whereby each holder of
common stock received .90386 shares of common stock for each one share then
owned. The reverse stock split applied to all outstanding stock options as of
November 1, 1996.
In July, 1995, Dev-Tech purchased 36 shares of its common stock in exchange
for a non-interest bearing uncollateralized note payable for $450,000. The note
payable is due in 36 monthly installments of $12,500 commencing August, 1995. As
of December 31, 1995, the acquired shares were recorded in treasury stock in the
consolidated balance sheet at cost of $391,000 which equals the carrying value
of the note discounted at Dev-Tech's incremental borrowing rate of 10%. The
discount is being accreted to interest expense over the term of the note. In
May, 1996, Dev-Tech filed an amendment to its Articles of Incorporation to
retire these 36 shares (506,161 shares on a post-exchange and reverse stock
split basis) of common stock.
The effect of this exchange and reverse stock split has been incorporated
into the consolidated financial statements and notes of NeoMedia for all periods
presented as follows:
SHARES ISSUED
----------------------
SUBSEQUENT
PRIOR TO TO
EXCHANGE EXCHANGE
AND SPLIT AND SPLIT
--------- ----------
Dev-Tech:
Shares outstanding ....................... 164 2,305,853
Shares in treasury ....................... 36 506,161
Migration .................................... 1,000 827,525
---------
Total shares issued as of December 31, 1995... 3,639,539
=========
F - 6
<PAGE>
NATURE OF BUSINESS OPERATIONS
NeoMedia operates in one business segment which is comprised of three
principal applications markets: (i) Intelligent Document Solutions, (ii)
Document Systems Solutions and (iii) Systems Transition Solutions.
The INTELLIGENT DOCUMENT SOLUTIONS UNIT was established to assist clients in
linking printed material to electronic media. NeoMedia has developed its own
technology, and has rights to use the technology of others, to generate printed
documents which can be automatically "read" by machines, such as computers
equipped with scanners and appropriate software. These "machine readable"
documents incorporate printed codes which contain thousands of bytes of
information, including computer programs rendering them functionally equivalent
to a computer floppy disk with a limited capacity to hold information. These
codes are referred to in the industry as "high capacity symbologies" and
"multi-dimensional" or "two-dimensional" bar codes. NeoMedia refers to documents
that incorporate high capacity symbologies as "Intelligent Documents," and
currently provides software and services to support the application of this
technology.
The DOCUMENTS SYSTEMS SOLUTIONS UNIT was established to assist clients in
definition, design, implementation and management of their document system
environments. These services include strategic consulting to define and optimize
enterprise wide documents strategies, as well as systems integration and
development to implement effective document generation, archive and management
systems. NeoMedia specializes in the technical areas of electronic forms
management, document production systems and intelligent document solutions
incorporating multi-dimensional bar code technologies. The document system
process provided by NeoMedia also includes electronic media alternatives such as
Internet and Intranet channels.
The SYSTEMS TRANSITION SOLUTIONS UNIT was established to enable clients to
migrate applications on closed, proprietary ("legacy") systems to more cost
effective and extendable open systems platforms. NeoMedia has acquired and
developed a line of proprietary products and tools utilized in its migration
services. NeoMedia also provides strategic consulting, systems development,
systems engineering and support services in connection with its systems
transition solutions.
As part of the services provided in connection with system transition
solutions service engagements, NeoMedia acts as a reseller of purchased hardware
in connection with open systems development and migrations. NeoMedia maintains
relationships with a number of major companies under which NeoMedia sells third
party purchased hardware and software products of those companies.
NeoMedia has established several strategic alliances with third party
software and hardware vendors, leading consulting firms and major system
integrators. These alliances are integral to NeoMedia's business operations.
NeoMedia principally markets and distributes its products through
distributors in the United States (although it has distributors in Europe, Asia,
the Middle East, Indonesia and Latin America), and currently has U. S. district
offices located in Illinois, California, Minnesota, and Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
F - 7
<PAGE>
REVENUE RECOGNITION
License fees represent revenue from the licensing of NeoMedia's proprietary
software tools and applications products. NeoMedia licenses its development
tools and application products pursuant to non-exclusive and non-transferable
license agreements. Software product and technology equipment sales represent
revenue from the resale of purchased third party hardware and software products.
Service fees represent revenue from consulting, education, and post contract
software support services.
NeoMedia recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position 91-1, "Software Revenue
Recognition." Software license fees are recognized upon shipment to the customer
to the extent that collection is probable and the remaining obligations of
NeoMedia are insignificant. When all components necessary to run hardware have
been shipped and only insignificant post-delivery obligations remain, revenue
and costs are recognized at the time of shipment, based upon the sales price and
the cost of specific items shipped. Historically, product returns and allowances
have been insignificant.
Service revenues include maintenance fees for providing system updates for
software products, user documentation and technical support, and sales of
NeoMedia's proprietary software which is not bundled with hardware or software
of third parties. Hardware maintenance is generally billed to the customers in
advance on a monthly, quarterly or annual basis and recognized as revenue
ratably over the term of the maintenance contract. Other service revenues,
including training and consulting, are recognized as the services are performed.
Revenues related to custom programming and other services provided under fixed
fee contract arrangements are recognized based on the percentage of completion
method, measured by the percentage of direct labor and subcontractor costs
incurred to date in relation to total estimated direct labor and subcontractor
costs for each contract. Unrecognized amounts are recorded as deferred revenue.
Contract costs include all direct material, labor and subcontractor costs
related to contract performance. General and administrative costs are charged to
expense as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determinable. Changes in job
performance, job conditions and estimated profitability, including amounts
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and revenue and are recognized in the period in
which such revisions are determinable. Costs and estimated earnings in excess of
billings on uncompleted contracts, represents revenue recognized in excess of
amounts billed.
INVENTORIES
Inventories are stated at the lower of cost or market and are comprised
principally of purchased computer technology resale products including equipment
and software products. Cost is determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less allowances for accumulated
depreciation. Repairs and maintenance are charged to expense as incurred.
Depreciation is generally computed using the straight line method over the
estimated useful lives of the related assets. The estimated useful lives range
from three to five years for equipment and up to seven years for furniture and
fixtures. Upon retirement or sale, cost and accumulated depreciation are removed
from the accounts and any gain or loss is reflected in the statement of
operations.
CAPITALIZED SOFTWARE COSTS
Software development costs are accounted for in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed." Costs associated with the
planning and designing phase of software development, including coding and
testing activities
F - 8
<PAGE>
necessary to establish technological feasibility, are classified as product
development and expensed as incurred. Once technological feasibility has been
determined, additional costs incurred in development, including coding, testing,
quality assurance and documentation writing, are capitalized.
Amortization of purchased and developed software is provided on a
product-by-product basis over the estimated economic life of the software,
generally not exceeding three years, using the straight-line method.
Amortization commences when a product is available for general release to
customers. Unamortized capitalized costs determined to be in excess of the net
realizable value of a product are expensed at the date of such determination.
INCOME TAXES
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"), income taxes are accounted for using
the assets and liabilities approach. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities, and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be recognized. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period of
enactment.
DTM, with the consent of its shareholder, elected to be treated as a small
business corporation (S corporation under the Internal Revenue Code) for income
tax purposes. Accordingly, until the Migration Merger, DTM's taxable income and
related tax credits were reportable by the shareholder on the individual's
income tax returns. The pro forma benefit for income taxes, net loss and per
share information for the years ended December 31, 1996 and 1995 of the combined
operations of Dev-Tech and DTM calculated using the statutory tax rates in
effect during the applicable periods, as if DTM were taxable as a C Corporation,
are identical to the historic information presented in NeoMedia's consolidated
financial statements. Such pro forma calculations assume the adoption of FAS 109
by DTM as of June 1994 (date of incorporation of DTM). No income tax benefit
would have been recognized from the net operating losses of DTM as a 100%
valuation allowance would have been recorded against a deferred tax asset as a
result of the uncertainty of DTM's ability to generate future taxable income.
COMPUTATION OF LOSS PER SHARE
The computation of net loss per share is based on the weighted average number
of common and common equivalent shares outstanding during the period. Common
stock equivalents consist of outstanding stock options, which pursuant to Staff
Accounting Bulletin No. 83 of the Securities and Exchange Commission, are
included in the weighted average shares as if they were outstanding for the
entire period to the extent granted within the twelve months preceding the
contemplated public offering date, using the treasury stock method until such
time as shares are issued. For the years ended December 31, 1996 and 1995, the
computation of the weighted average number of common shares and common share
equivalents outstanding was as follows:
1996 1995
--------- ---------
Common stock ................................. 3,328,758 3,420,434
Effect of stock options ..................... 937,995 941,986
--------- ---------
Total ........................................ 4,266,753 4,362,420
========= =========
F - 9
<PAGE>
For the years ended December 31, 1996 and 1995, information regarding loss
per share computed on a historical basis under the provisions of Accounting
Principles Board Opinion No. 15, "Earnings per Share," was as follows:
1996 1995
---------- ----------
Net loss per share .......................... $ (0.92) $ (0.33)
========== ==========
Weighted average common shares outstanding... 3,328,758 3,420,434
=========== ==========
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"),
which becomes effective for NeoMedia for the year ended December 31, 1997. FAS
128 replaces the presentation of primary earnings per share with a presentation
of basic earnings per share which excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that would occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Diluted
earnings per share is computed similarly to fully diluted earnings per share
pursuant to Accounting Principles Board Opinion No. 15, "Earnings Per Share."
FAS 128 also requires dual presentation of basic and diluted earnings per share
on the face of the income statement for all entities with complex capital
structure and requires a reconciliation of the numerator and denominator of the
basic earnings per share computation to the numerator and denominator of the
diluted earnings per share computation. NeoMedia has not yet determined the
impact of implementing FAS 128.
FINANCIAL INSTRUMENTS
The fair value of NeoMedia's debt, current and long-term, is estimated to
approximate the carrying value of these liabilities based upon borrowing rates
currently available to NeoMedia for borrowings with similar terms.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject NeoMedia to concentrations of
credit risk consist primarily of trade accounts receivable with customers.
Credit risk is generally minimized as a result of the large number and diverse
nature of NeoMedia's customers which are located throughout the United States.
NeoMedia extends credit to its customers as determined on an individual basis
and has included an allowance for doubtful accounts of $216,000 and $311,000 in
its December 31, 1996 and 1995 consolidated balance sheets, respectively.
NeoMedia had net sales to one major customer in the telecommunications industry
of $6,932,000 and $6,257,000 during the years ended December 31, 1996 and 1995,
respectively, resulting in trade accounts receivable of $2,507,000 and
$1,690,000 as of December 31, 1996 and 1995, respectively. Revenue generated
from the remarketing of computer equipment has accounted for a significant
percentage of NeoMedia's revenue. Such sales accounted for approximately 71% and
67% of NeoMedia's revenue for the years ended December 31, 1996 and 1995,
respectively.
ACCOUNTING FOR STOCK OPTIONS
Effective January 1, 1996, NeoMedia adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123") which
requires certain disclosures about stock-based employee compensation
arrangements, regardless of the method used to account for them, and defines a
fair value based method of accounting for an employee stock option or similar
equity instrument and encourages all entities to adopt that method of accounting
for all of their employee stock compensation plans. However, FAS 123 also allows
an entity to continue to measure compensation cost for stock-based compensation
plans using the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Entities electing to continue using the accounting method in APB 25
must make pro forma disclosures of net income and earnings per share as if the
fair value method of accounting had been adopted. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the
F - 10
<PAGE>
service period, which is usually the vesting period. Under the intrinsic value
based method, compensation cost is the excess, if any, of the quoted market
price of the stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock. Because NeoMedia elected to continue
using the accounting method in APB 25, no compensation expense was recognized in
the consolidated statement of operations for the year ended December 31, 1996
for stock-based employee compensation. Assuming a risk-free interest rate of
5.05% with the options granted at $.84 and 6.00% with the remaining options, an
expected life of three years, an expected volatility of 25.00% and no expected
dividends, the effect of using the fair value method of accounting on net loss
for the year ended December 31, 1996 would have increased net loss to
$3,399,000, or $(.80) per share.
CASH AND CASH EQUIVALENTS
For the purposes of the balance sheet and statement of cash flows, all highly
liquid investments with original maturities of three months or less are
considered cash equivalents.
3. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
NeoMedia periodically enters into long-term software development and
consultation agreements with certain customers. As of December 31, 1996 and
1995, certain contracts were not completed and information regarding these
uncompleted contracts was as follows:
1996 1995
----- -----
(In thousands)
Total amount of contracts in progress .................... $ 119 $ 687
===== =====
Costs incurred to date on uncompleted contracts .......... $ 65 $ 260
Estimated earnings on uncompleted contracts .............. 54 181
----- -----
Subtotal .............................................. 119 441
Less customer billings to date ........................... 79 314
----- -----
Costs and estimated earnings in excess of
billings on uncompleted contracts ..................... $ 40 $ 127
===== =====
4. PROPERTY AND EQUIPMENT
As of December 31, 1996 and 1995, property and equipment consisted of the
following:
1996 1995
----- -----
(In thousands)
Furniture and fixtures ................................... $ 135 $ 130
Equipment ................................................ 642 507
----- -----
Total ................................................. 777 637
Less accumulated depreciation ............................ (499) (368)
----- -----
Total property and equipment, net of accumulated
depreciation ........................................... $ 278 $ 269
===== =====
F - 11
<PAGE>
5. CAPITALIZED SOFTWARE COSTS
As of December 31, 1996 and 1995, capitalized software costs consisted of the
following:
1996 1995
------- -------
(In thousands)
Purchased software ................................... $ 1,495 $ 1,567
Internally developed software ........................ 459 210
------- -------
Total ............................................. 1,954 1,777
Less accumulated amortization ........................ (1,297) (747)
------- -------
Total capitalized software costs, net of
accumulated amortization ............................ $ 657 $ 1,030
======= =======
During the years ended December 31, 1996 and 1995, NeoMedia recognized
amortization expense applicable to purchased software of $531,000 and $500,000,
respectively, and amortization expense applicable to internally developed
software of $124,000 and $71,000, respectively.
In October 1994, DTM purchased via seller financing certain computer software
from International Digital Scientific, Inc. ("IDSI"). The aggregate purchase
price was $2,000,000 and was funded by an uncollateralized seller payable,
without interest, in an amount equal to the greater of : (i) 5% of the collected
gross revenues of Migration for the preceding month; or (ii) the minimum
installment payment as defined. The minimum installment payment is the amount
necessary to provide an average monthly payment for the most recent twelve month
period of $16,000 per month. The present value of $2,000,000 discounted at 9%
(DTM's incremental borrowing rate) for 125 months was approximately $1,295,000,
the capitalized cost of the assets acquired. The discount is being accreted to
interest expense over the term of the note. The software acquired is being
amortized over its estimated useful life of three years. The balance of the note
payable, net of unamortized discount, as December 31, 1996 and 1995 was
$1,115,000 and $1,203,000, respectively.
On February 12, 1997, NeoMedia entered into an agreement to purchase certain
computer software from Basic Developments, Inc. for an aggregate purchase price
of $220,000, of which $120,000 was paid at closing and $100,000 is due on
February 12, 1998.
6. FINANCING AGREEMENTS
Technologies entered into an agreement with a commercial finance company that
provides short-term financing for certain computer hardware and software
purchases. Under the agreement, there are generally no financing charges for
amounts paid within 30 or 45 days, depending on the vendor used to source the
product. Borrowings are collateralized by accounts receivable generated from the
sales of merchandise to NeoMedia's customers and are personally guaranteed by
certain shareholders of NeoMedia. As of December 31, 1996 and 1995, amounts due
under this financing agreement included in accounts payable were $2,275,000 and
$1,281,000, respectively.
As of December 31, 1995, Technologies had bank notes payable of $1,625,000.
The bank notes payable were under a $2,000,000 revolving line of credit facility
that accrued interest at the bank's prime rate plus 0.5%, or 9.5% as of December
31, 1995. During August 1996, Technologies replaced this facility with a
$2,000,000 promissory note bearing interest at the bank's prime rate plus 1.0%,
which was repaid in full on November 30, 1996. The note was collateralized by
substantially all of NeoMedia's assets and guaranteed by a certain shareholder
and certain affiliated companies.
F - 12
<PAGE>
As of December 31, 1996, the bank had issued a $750,000 letter of credit to
the benefit of the above-mentioned commercial finance company. This letter of
credit was guaranteed by a certain shareholder of NeoMedia. In February, 1997,
NeoMedia pledged a $750,000 certificate of deposit with the bank to
collateralize the letter of credit and the shareholder was released from the
guarantee.
7. NOTES PAYABLE TO RELATED PARTIES
During 1996 and 1995, NeoMedia borrowed and made repayments on various notes
with certain shareholders and affiliates. As of December 31, 1995, notes payable
to related parties consisted of a $277,000 unsecured and subordinated demand
note to a shareholder and a $75,000 unsecured demand note to an affiliate. Both
of these notes bore interest at 9% and were repaid in full during 1996.
Additionally, as of December 31, 1995, NeoMedia had a $450,000 long-term note
payable to a related party. In January, 1996, NeoMedia borrowed $750,000 (which
bore interest at 8% per annum and was payable on demand) from a principal
shareholder, increasing the total notes payable (including a third $10,000 loan
from 1994) to this shareholder to $1,210,000. In October 1996, this shareholder
contributed $738,000 of this note to additional paid-in capital leaving a
balance as of December 31, 1996 of $472,000. In February, 1997, NeoMedia repaid
the note in full.
8. LONG-TERM DEBT
As of December 31, 1996 and 1995, long-term debt consisted of the following:
1996 1995
------ ------
(In thousands)
Note payable to IDSI, non-interest bearing, due with
minimum monthly installments of $16,000
through December 2005 ................................. $1,584 $1,776
Note payable to former shareholder, non-interest
bearing, due with minimum monthly installments
of $12,500 through July 1998 .......................... 237 387
Note payable to shareholder, 8%, due December 2000 ....... 472 450
Capital leases ........................................... 44 82
------ ------
Subtotal .............................................. 2,337 2,695
Less: unamortized discount .............................. (486) (620)
------ ------
Total long-term debt .................................. 1,851 2,075
Less: current portion ................................... (262) (245)
------ ------
Long-term debt, net of current portion ................... $1,589 $1,830
====== ======
The long-term debt payments for each of the next five fiscal years ending
December 31 were as follows:
AMOUNT IN
THOUSANDS
---------
1997 ................................................... $ 366
1998 ................................................... 299
1999 ................................................... 192
2000 ................................................... 192
2001 ................................................... 664
Thereafter .............................................. 624
-----
Total ................................................... $2,337
======
F - 13
<PAGE>
9. INCOME TAXES
For the years ended December 31, 1996 and 1995, the components of the benefit
for income taxes were as follows:
1996 1995
----- -------
(In thousands)
Current .............................................. $(37) $ (31)
Deferred ............................................. 193 (139)
---- ------
Provision (Benefit) for income taxes................. $156 $(170)
==== =====
The significant components of the deferred tax provision in 1996 were as
follows:
Amounts in
thousands
----------
Deferred tax benefit, exclusive of
the components listed below............................. $ (826)
Tax effect of change in the status of Migration........... (391)
Increase in valuation allowance........................... 1,410
------
Total............................................... $ 193
======
As of December 31, 1996 and 1995, the types of temporary differences between
the tax basis of assets and liabilities and their financial reporting amounts
which gave rise to deferred taxes, and their tax effects were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------- --------------------
TEMPORARY TAX TEMPORARY TAX
DIFFERENCE EFFECT DIFFERENCE EFFECT
---------- ------ ---------- ------
(In thousands)
<S> <C> <C> <C> <C>
Accrued employee benefits ................. $ 245 $ 98 $ 68 $ 27
Bad debts ................................. 216 86 311 124
Accrued interest payable .................. 265 106 -- --
Deferred revenue .......................... 234 93 -- --
Capitalized software development costs .... 815 326 -- --
Net operating loss carryforwards .......... 1,644 658 -- --
Other ..................................... (11) (4) (14) (5)
Alternative minimum tax credit carryforward 47 47
------- ----
Total deferred tax assets ................. 1,410 193
Valuation allowance ....................... (1,410) --
------- ----
Net deferred income tax asset ............. $ -- $193
======= ====
</TABLE>
F - 14
<PAGE>
For the years ended December 31, 1996 and 1995, the benefit for income taxes
differed from the amount computed by applying the statutory federal rate of 34%
as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
AMOUNT % AMOUNT %
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Benefit at federal statutory rate ............ $(992) (34)% $(442) (34)%
Migration S-corporation loss allocated
directly to shareholder ................. 321 11 294 23
State income taxes, net of federal tax effects -- -- (23) (2)
Permanent differences ........................ 11 -- 8 1
Change in valuation allowance ................ 826 28 -- --
Other ........................................ (10) (--) (7) (1)
----- --- ----- ---
Provision (Benefit) for income taxes ......... $ 156 5% $(170) (13)%
===== === ===== ===
</TABLE>
As of December 31, 1996, NeoMedia had net operating loss carryforwards
remaining for federal tax purposes of approximately $1,644,000, which may be
used to offset future taxable income or will expire, if unused, in 2011. Should
certain substantial changes (as defined by the federal income tax code), occur
in NeoMedia's ownership, an annual limitation would be imposed on the amount of
loss which could be utilized in any one year. Because realization of NeoMedia's
net operating losses carried forward is uncertain, a valuation allowance has
been established against the related deferred tax assets.
10. TRANSACTIONS WITH RELATED PARTIES
NeoMedia made advances to various related parties including companies
affiliated through common ownership. These advances arose from expenses paid by
NeoMedia on behalf of the affiliated companies and allocations of certain
administrative costs for services provided by NeoMedia. Total administrative
costs allocated to affiliated companies were $27,000 and $42,000 for the years
ended December 31, 1996 and 1995, respectively. As of December 31, 1996 and
1995, the amounts outstanding totalled $24,000 and $48,000, respectively, and
were classified as amounts due from related parties in the accompanying
consolidated balance sheets. During the years ended December 31, 1996 and 1995,
NeoMedia and certain employees leased office and residential facilities from
related parties for rental payments totalling $11,000 and $5,000, respectively.
On January 2, 1996, NeoMedia provided to one of its principal shareholders an
advance of $472,000 payable within 30 days of demand by NeoMedia. This loan bore
interest at 8% payable on a monthly basis. This loan was repaid in full in
February, 1997.
In March, 1996, NeoMedia borrowed $135,000 from a related entity and $36,000
from a principal shareholder, payable within thirty days of demand, bearing
interest at 8% per annum. In June, 1996, NeoMedia borrowed $200,000 from a
principal shareholder, payable within thirty days of demand, bearing interest at
8% per annum. The net proceeds from these financing transactions were used for
general corporate operating purposes. These loans were repaid in full during
1996. In connection with the June, 1996 note, NeoMedia granted a warrant to the
shareholder to purchase up to 260,000 shares of NeoMedia's common stock at an
exercise price of $8.85. This warrant is exercisable for four years commencing
from November 25, 1997. Assuming a risk-free interest rate of 6.25%, an expected
life of three years, an expected volatility of 25.0% and no expected dividends,
the effect of using the fair value method of accounting on net loss for the year
ended December 31, 1996 would have increased net loss to $3,114,000, or $(.73)
per share.
F - 15
<PAGE>
11. LEASES
NeoMedia leases certain office equipment, principally telecommunication
equipment, under leases which are capital in nature. As of December 31, 1996 and
1995, NeoMedia had net assets of $53,000 and $89,000, respectively, under these
capital leases.
NeoMedia leases its office facilities and certain office and computer
equipment under various operating leases. These leases provide for minimum rents
and generally include options to renew for additional periods. For the years
ended December 31, 1996 and 1995, NeoMedia's rent expense was $353,000 and
$325,000, respectively. Beginning December 1, 1996, NeoMedia subleased a portion
of its office facilities until the lease expires.
The aggregate amount of expected lease payments and receipts under operating
leases for each of the next five years ending December 31 was as follows:
PAYMENTS RECEIPTS
-------- ---------
(In thousands)
1997 ............................. $ 415 $137
1998 ............................. 449 173
1999 ............................. 404 179
2000 ............................. 229 183
2001 ............................. 3 --
Thereafter ....................... 2 --
------ ----
Total ............................ $1,502 $672
====== ====
In November, 1996, NeoMedia entered into a lease with a principal shareholder
whereby the shareholder leased to NeoMedia an exhibition booth which cost
$85,435. The lease is for 36 months with monthly payments of $2,858.
12. DEFINED CONTRIBUTION SAVINGS PLAN
NeoMedia maintains a defined contribution 401(k) savings plan covering
substantially all eligible employees meeting certain minimum age and months of
service requirements, as defined. Participants may make elective contributions
up to established limits. All amounts contributed by participants and earnings
on these contributions are fully vested at all times. The plan provides for
matching and discretionary contributions by NeoMedia, although no such
contributions to the plan have been made to date.
13. EMPLOYEE STOCK OPTION PLAN
Effective February 1, 1996, NeoMedia adopted the 1996 Stock Option Plan
making available for grant to employees of NeoMedia options to purchase up to
1,500,000 shares of NeoMedia's common stock. The Stock Option Committee of the
Board of Directors has the authority to determine to whom options will be
granted, the number of options, the related term, and exercise price. The option
exercise price shall be equal to or in excess of the fair market value per share
of NeoMedia's common stock on the date of grant. Options granted during 1996
were granted at an exercise price equal to fair market value on the date of
grant. No options shall be granted subsequent to January 31, 1999 under the
Plan. Options granted can not be exercised during the year following the date of
grant and must be exercised within ten years from the date of grant.
Additionally, in conjunction with the initial public offering, each employee
agreed not to sell any stock obtained by exercising their stock options until
after November 25, 1997. No stock options were exercisable as of December 31,
1996.
F - 16
<PAGE>
NeoMedia's stock options as of December 31, 1996 and changes during the year
ended December 31, 1996 were as follows:
WEIGHTED
AVERAGE NUMBER
EXERCISE OF
PRICE SHARES
-------- ---------
Granted ............................................. $1.72 1,555,603
Reverse stock split .................................. 1.57 (135,850)
Exercise ............................................. -- --
Forfeited ............................................ 1.34 (81,581)
----- ---------
Outstanding as of December 31, 1996................... $1.76 1,338,172
===== =========
Available for grant as of December 31, 1996........... 161,828
=========
Weighted average fair value at grant date............. $ .43
=====
As of December 31, 1996, NeoMedia's stock options outstanding were as
follows:
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
NUMBER CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE
------------------------ ----------- ----------- --------
$.84 1,087,552 9.1 years $ .84
$5.50 to $5.90 250,620 9.8 years $5.74
14. PUBLIC OFFERING OF COMMON STOCK AND WARRANTS
On November 25, 1996, NeoMedia completed an initial public offering ("IPO")
of 1,235,000 shares of common stock at $5.90 per share and 1,700,000 redeemable
warrants, at $.10 per warrant, to purchase shares of common stock, and an
offering by certain selling security holders of an additional 465,000 shares of
NeoMedia's common stock. The selling security holders also were issued 745,938
warrants upon conversion of the convertible notes from NeoMedia. In addition, on
January 16, 1997, NeoMedia completed the sale of an over-allotment of 255,000
shares of common stock and 255,000 redeemable warrants. The redeemable warrants
may be called by NeoMedia at $.05 per warrant at any time after November 25,
1997, provided that the closing average bid price of the common stock equals or
exceeds $8.85 per share for twenty consecutive trading days ending within thirty
days prior to the date notice of redemption is given.
In connection with the offering, NeoMedia agreed to sell to the underwriters,
for nominal consideration, warrants to purchase up to 170,000 shares of common
stock and 170,000 warrants (collectively, the "Underwriters Warrants"). The
Underwriters Warrants are initially exercisable at a price of $8.85 per share of
common stock and warrant for a period of four years after November 25, 1997, and
are restricted from sale, transfer and assignment until November 25, 1997.
F - 17
<PAGE>
15. BRIDGE FINANCING
During July and August 1996, NeoMedia issued, in a private placement,
convertible promissory notes due in September 1997. Each unit consisted of a
$50,000 10% promissory note convertible into 13,750 shares and 13,750 warrants
of NeoMedia's common stock upon consummation of the IPO valued at an average of
$3.64 per share. NeoMedia received $2,697,000 in cash proceeds from this private
placement, net of $278,000 in expenses. These expenses were amortized to
interest expense over the life of the notes. NeoMedia retired $262,500 of these
notes on November 23, 1996. Of the remaining 745,938 shares available for
conversion, 465,000 were sold by the note holders in connection with the IPO.
F - 18
<PAGE>
EXHIBIT INDEX
-------------
SEQUENTIAL EXHIBIT
PAGE NUMBER NUMBER DOCUMENT
56 10.43 Agreement of Lease Between First Union National Bank of
Florida and NeoMedia Technologies, Inc. Dated November
27, 1996
86 10.44 Sublease Agreement Between NeoMedia Technologies, Inc.
and Lancaster Annuity Services Company Dated November 8,
1996
117 10.45 Agreement for Sale of Assets Between Basic Developments
Inc., a Panama Company, and Meja Sistemas C. A., a
Guatemala Company, and NeoMedia Technologies, Inc. Dated
February 12, 1997
145 10.46 Master Lease Between William E. Fritz and NeoMedia
Technologies, Inc. Dated November 6, 1996
156 10.47 Agreement for Wholesale Financing (Security Agreement)
Between IBM Credit Corporation and NeoMedia Technologies,
Inc. Dated February 20, 1997
163 10.48 Collateralized Guaranty Between IBM Credit Corporation
and NeoMedia Migration, Inc. Dated February 20, 1997
170 10.49 Termination of Collateralized Guaranty Between IBM Credit
Corporation, Gen-Tech, Inc. and Dev-Mark, Inc. Dated
February 5, 1997
172 21 Subsidiaries
174 27.1 Article 5 Financial Data Schedule for December 31, 1996
NeoMedia Technologies, Inc.
Exhibit 10.43
Agreement of Lease Between First Union National Bank of Florida
and NeoMedia Technologies, Inc. Dated November 27, 1996
<PAGE>
FIRST UNION
AGREEMENT OF LEASE
Between
FIRST UNION NATIONAL BANK OF FLORIDA
(Landlord)
and
NEOMEDIA TECHNOLOGIES, INC.
(Tenant)
Date: NOVEMBER 27, 1996
<PAGE>
AGREEMENT OF LEASE
TABLE OF CONTENTS
(This Table of Contents is not a part of this Agreement of Lease and is for
convenience of reference only.)
ARTICLE DESCRIPTION PAGE
- - ------- ----------- ----
Article 1.01 Premises 1
Article 2.01 Term 1
Article 3.01 Base Rent 1
Article 4.01 Additional Rent 2
Article 4.02 Statements of Amounts Due and Payment 3
of Additional Rent
Article 4.03 Operating Expense Adjustment 4
Article 4.04 Personal Property Taxes 4
Article 4.05 Renewal 4
Article 4.06 Right of First Refusal 4
Article 5.01 Security Deposit 5
Article 6.01 Use of Premises 5
Article 7.01 Upkeep of Premises 5
Article 7.02 Hazardous Substances 6
Article 8.01 Assignment and Subletting 6
Article 9.01 Fire Insurance 6
Article 10.01 Alterations and Improvements 7
Article 11.01 Tenant's Agreement 7
Article 12.01 Unusual Equipment 7
Article 13.01 Tenant Equipment 8
Article 14.01 Access 8
Article 15.01 Illegal Use 8
Article 16.01 Rules and Regulations 8
Article 17.01 Damage 8
Article 18.01 Personal Property 8
<PAGE>
Article 19.01 Liability & Tenant's Insurance 8
Article 20.01 Services 9
Article 21.01 Bankruptcy 9
Article 22.01 Default 10
Article 23.01 Damage by Fire or Casualty 11
Article 24.01 Condemnation 11
Article 25.01 Tenant Holdover 12
Article 26.01 Possession 12
Article 27.01 Tenant Plans 12
Article 28.01 Offset Statement 12
Article 29.01 Attornment 13
Article 30.01 Failure to Execute Instruments 13
Article 31.01 Counterclaim 13
Article 32.01 Waiver of Jury Trial 13
Article 33.01 Waiver of Rights of Redemption 13
Article 34.01 Taxes on Leasehold 13
Article 35.01 Liens 13
Article 36.01 Pronouns 14
Article 37.01 Notices 14
Article 38.01 Relocation 15
Article 39.01 Tenant Improvements 15
Article 40.01 Parking 15
Article 41.01 Governing Law 16
Article 42.01 Benefit and Burden 16
Article 43.01 Accord and Satisfaction 16
Article 44.01 Captions and Section Numbers 16
Article 45.01 Partial Invalidity 16
Article 46.01 Exhibits 16
Article 47.01 Quiet Enjoyment 17
Article 48.01 Entire Agreement 17
<PAGE>
Article 49.01 Time of Essence 17
Article 50.01 Effective Date 17
Article 51 01 Radon Gas 17
Article 52.01 Brokers 17
Article 53.01 Special Clauses 17
Exhibit "A" Floor Plan 19
Exhibit "A-1" Right of First Refusal Space 20
Exhibit "B" Building Rules and Regulations 21
Exhibit "C" Guaranty (Intentionally omitted)
Exhibit "D" Tenant Acceptance Letter 23
Exhibit "E" Building Standard Materials and Specifications 24
<PAGE>
L E A S E
---------
THIS AGREEMENT made this 27TH day of NOVEMBER, 1996, by and between
NEOMEDIA TECHNOLOGIES, INC., (hereinafter called "Tenant") and FIRST UNION
NATIONAL BANK OF FLORIDA, (hereinafter called "Landlord").
WITNESSETH:
That the Landlord for and in consideration of the covenants and
agreements hereinafter set forth and the rent hereinafter specifically reserved,
does hereby lease, unto said Tenant, the space described as follows:
1.01 PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord certain offices known as DOWNTOWN FT. MYERS and located at 2201
2ND AVENUE, FT. MYERS, FLORIDA (the "BUILDING"), which offices consist of
approximately 10,615 rentable square feet of office space (9,311 useable square
feet), (the "PREMISES") situated on the 6TH Floor, Suite 600 of the Building, as
shown on EXHIBIT "A" incorporated herein by reference. The Premises shall be
measured by Landlord's architect prior to Lease commencement and in accordance
with BOMA standards (American National Standard 2651.1, approved July 31,
1980) and the actual rentable square feet of the Premises determined by
multiplying the actual useable square feet of the Premises by a multiple of
1.14. The Lease and all applicable provisions therein shall be amended to
reflect the actual rentable area of the Premises. Any future space added to the
Premises, if any, shall be measured as described herein prior to adding such
space.
2.01 TERM. The term shall be for THIRTY EIGHT (38) months (or until such
term shall sooner cease and expire as hereinafter provided) commencing upon the
first day after the first to occur of (i) the date which the Tenant occupies the
Premises, or (ii) FIFTEEN (15) days after full execution of this Lease (the
"COMMENCEMENT DATE").
3.01 BASE RENT. As Base Rent for the use and occupancy of the Premises, and
subject to the provisions contained in SECTION 53.01, Tenant shall pay to the
Landlord for the term set forth herein the sum of FOUR HUNDRED THIRTY THREE
THOUSAND SEVEN HUNDRED THIRTEEN AND 70/100 Dollars ($433,713.70), without
deduction, set-off or demand, payable in advance and in monthly installments as
outlined in PARAGRAPH 53.01-1. The first installment of Base Rent shall be due
and payable on the first day of the third (3rd) month following the Commencement
Date, it being understood and agreed that the Base Rent for the first two (2)
months of the Lease Term shall be abated (the "ABATEMENT PERIOD") and the
remaining installments payable in advance on the first day of each and every
month without demand during the said term to FAISON ASSOCIATES, or at such other
place as the Landlord may hereafter designate in writing. Rent checks are to be
made payable to FIRST UNION NATIONAL BANK OF FLORIDA, or such other person, firm
or corporation as the Landlord may hereafter designate in writing. If the term
commences on a day other than the first day of the month, the first payment
shall be prorated on a thirty-day per calendar month basis for the period from
the period from the lease Commencement Date to the first day of the first full
month during the term. All installments of rent are due on the 1st of each month
and considered late after the 5th of that month. IF THE MONTHLY RENTAL PAYMENTS
ARE NOT MADE BY THE FIFTH OF THE MONTH, LANDLORD MAY CHARGE TENANT A FIVE
PERCENT (5%) LATE PAYMENT CHARGE. In addition to the Base Rent and Additional
Rent as described in SECTION 4, Base Rent and Additional Rent collectively
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hereafter referred to as "RENT", Tenant shall and hereby agrees to pay to
Landlord each month a sum equal to any sales tax, tax on Rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed based
upon the privilege of renting the space leased hereunder or upon the amount of
rental collected therefor. Nothing herein shall, however, be taken to require
Tenant to pay any part of any Federal and State taxes on income imposed upon
Landlord.
4.01 ADDITIONAL RENT. In addition to the Base Rent as described in
PARAGRAPH 3.01, Tenant shall pay to Landlord as "ADDITIONAL RENT" "Tenant's
proportionate share" of any increases in "OPERATING EXPENSES" and "TAXES", as
hereinafter defined, above the "EXPENSE BASE". As used herein the term:
(a) "TENANT'S PROPORTIONATE SHARE" shall mean the percentage which the
rentable square feet in the Premises then leased by the Tenant in the Building
bears to the total rentable square feet contained in the Building. For purposes
of this Lease, Tenant's proportionate share shall be 16.5%. Notwithstanding
anything to the contrary contained herein this SECTION 4.01 (A), in the event
(i) after the Premises are measured pursuant to SECTION 1.01 the actual rentable
square feet of the Premises is other than as stated in SECTION 1.01, or (ii) the
Tenant expands the Premises within the Building at any time during the Term or
any Renewal Term thereof, or (iii) the rentable area of the Premises changes for
any other reason, then in such event(s), the Tenant's proportionate share shall
be adjusted and the Lease amended to reflect the new Tenant's proportionate
share, it being intended that the Tenant's proportionate share always reflects
the relationship of the leased Premises to the total rentable square feet
contained in the Building.
(b) "OPERATING EXPENSES" shall mean all expenses, costs and
disbursements, of every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the maintenance, refurbishing,
redecorating or operation of the Building, Land and any future improvements
constructed thereon (hereinafter referred to as the "PROJECT") computed on the
accrual basis, but shall not include the cost of individual tenant improvements,
leasing commissions or legal fees associated with leasing or disputes with
tenants of the Project. By way of explanation and clarification, but not by way
of limitation, these Operating Expenses will include the following:
(i) Wages and salaries of all employees to the extent they are
engaged in operation and maintenance of the Project,
employer's social security taxes unemployment taxes or
insurance, and any other taxes which may be levied on such
wages and salaries, the cost of disability and
hospitalization insurance; pension or retirement benefits,
and any other fringe benefits for such employees.
(ii) All supplies, materials, equipment and vehicles used in
operation and/or maintenance of the Project.
(iii) Cost of all utilities, including water, sewer, electricity,
gas and fuel oil used in the Project and not charged
directly to another tenant.
(iv) Cost of management, rent for space used for the management
office, cost of ground leases, association fees, janitorial
services, accounting and legal services (not in connection
with tenant disputes or such other matters arising out of
Landlord's alleged negligence or wrongful acts), trash and
garbage removal, pest
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control servicing, maintenance, repair, and replacement of
all systems and equipment including, but not limited to,
elevators, plumbing, heating, air conditioning,
ventilating, lighting, electrical, security and fire
alarms, fire pumps, fire extinguisher and hose cabinets,
mail chutes, rent for space used as a mail room, guard
service, painting, window cleaning, landscaping and
gardening.
(v) Amortization (including reasonable finance charges) of the
cost of capital improvements or investment items which are
for the sole purpose of, (i) reducing (or minimizing
increases of) Operating Costs or, (ii) improving the
security of the Project or, (iii) are or may be required by
Governmental agencies, including but not limited, to
replacement of air conditioning equipment due to freon and
chlorofluoracarbons, improvements due to Americans with
Disabilities Act of 1990 ("ADA"), EPA Green Lights and
other such mandated programs which may occur rom time to
time, provided however, in the event the Building is
required to have fire sprinkler systems installed, then in
such event the cost of such installation shall be borne by
the Landlord and may not be amortized and included in
Operating Expenses as otherwise provided herein. All such
costs shall be amortized on a straight-line basis
reasonable life of the capital investment item(s),
determined in accordance with generally accepted accounting
principles and in no event to extend beyond the reasonable
life of the Project.
(c) "TAXES" shall mean all impositions, taxes, assessments (special
or otherwise), water and sewer charges and rents, and other governmental liens
or charges of any and every kind, nature and sort whatsoever, ordinary and
extraordinary, foreseen and unforeseen, and substitute therefor, including all
taxes whatsoever (except only those taxes of the following categories: any
inheritance, estate, transfer or gift taxes imposed upon Landlord or any income
taxes specifically payable by Landlord as a separate tax paying entity without
regard to Landlord's income source as arising from or out of the Project
attributable in any manner to the Project, receivable therefrom or any part
thereof, or any use thereof, or any facility located therein or thereon or used
in conjunction therewith or any charge or other payment required to be paid to
any governmental authority, whether or not any of the foregoing shall be
designated "real estate tax", "sales tax", "rental tax", "excise tax", "business
tax", or designated in any other manner.
(d) "EXPENSE BASE" shall mean that amount of the Base Rent which is
attributable to Operating Expenses and Taxes incurred by the Landlord for the
operation, maintenance and service of the Project. The Expense Base is stated as
an amount per rentable square foot. For the purposes of this Lease, the Tenant's
Expense Base is $5.63 per rentable square foot of Leased area.
(e) Notwithstanding anything else to the contrary contained herein
this PARAGRAPH 4.01, for the purposes of calculating the Tenant's share of
increases in Operating Expenses, there shall be a limit on the amount of which
"Controllable 0perating Expenses" may increase from year to year during the
Lease Term. "CONTROLLABLE OPERATING EXPENSES" are hereinafter defined as all
Operating Expenses EXCEPT Taxes, Insurance, Utilities, and amortization of
capital improvements or investment items as defined in PARAGRAPH 4.01 (B)(V).
Said increase shall be limited to not more than six (6%) percent in the
aggregate of all such Controllable Operating Expenses, provided however that
such in intended to be
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cumulative over the Lease Term.
4.02 STATEMENTS OF AMOUNTS DUE AND PAYMENT OF ADDITIONAL RENT.
Landlord agrees to maintain accounting books and records reflecting Operating
Expenses of the Building in accordance with generally accepted accounting
principles. Landlord shall notify Tenant within sixty (60) days prior to the end
of the first calendar year of the Lease Term, and each calendar year thereafter
during the Term, or any Renewal Term hereof, of the amount which Landlord
estimates (as evidenced by budgets prepared by or on behalf of Landlord) will be
the amount of Tenant's proportionate share of any increase in Operating Expenses
and Taxes over the Expense Base for the next calendar year of the Term, or any
Renewal Term hereof. Beginning on the 1st day of January of each year thereafter
during the Term, Tenant shall pay such sum as Additional Rent in advance to
Landlord in equal monthly installments, during the balance of said calendar
year, on the first day of each remaining month in said calendar year. Within one
hundred twenty (120) days following the end of each calendar year during the
Term or any Renewal Term hereof, Landlord shall submit to Tenant a statement
showing the actual amount of increases in Operating Expenses and Taxes for the
past calendar year compared to the Expense Base, the additional amount thereof
actually paid during that year by Tenant and the amount of the resulting balance
due thereon, or overpayment thereof, as the case may be. Additionally within
thirty (30) days after receipt by Tenant of said statement, Tenant shall have
the right to inspect Landlord's books and records, at Landlord's office, during
normal business hours, after four (4) business days prior written notice,
showing the Operating Expenses and Taxes for the Project for the calendar year
covered by said statement. Said statement shall become final and conclusive
unless Landlord receives written objections with respect thereto within said
thirty (30) day period. Any balance shown to be due pursuant to said statement
shall be paid by Tenant to Landlord within thirty (30) days following Tenant's
receipt thereof. Any overpayment shall be immediately credited against Tenant's
obligation to pay expected Additional Rent in connection with anticipated
increases in Operating Expenses and Taxes, or if by reason of any termination of
the Lease no such future obligation exists, refunded to Tenant. Anything herein
to the contrary notwithstanding, Tenant shall not delay or withhold payment of
any balance shown to be due pursuant to the statement rendered by Landlord to
Tenant, pursuant to the terms hereof, because of any objection that Tenant may
raise with respect thereto and Landlord shall immediately credit any overpayment
found to be owing to Tenant against Tenant's proportionate share of increases in
operating Expenses and Taxes for the then current calendar year (and future
calendar years, if necessary) upon the resolution of said objection or, if at
the time of the resolution of said objection of the Lease Term has expired,
immediately refund to Tenant any overpayment found to be owing to Tenant. The
provisions of this PARAGRAPH 4.02 shall survive the expiration or termination of
this Lease.
4.03 OPERATING EXPENSE ADJUSTMENT. In determining the Tenant's
proportionate share of increases in Operating Expenses and Taxes for the purpose
of this Section 4, if less than 95% of the Building shall have been occupied by
tenants and fully used by them, at any time during the year, Operating Expenses
and Taxes shall be adjusted to an amount equal to the Operating Expense and Tax
that would normally be expected to be incurred, had such occupancy been 95% and
had full utilization been made during the entire period.
4.04 PERSONAL PROPERTY TAXES. Tenant agrees to pay, before
delinquency, any and all taxes levied or assessed and which become payable
during the term upon Tenant's equipment, furniture, fixtures and other personal
property located in the Premises.
4.05 RENEWAL. Tenant shall have the right to renew this Lease for
TWO (2) additional SIX (6) MONTH term(s). Should Tenant wish to renew, the
Tenant shall provide Landlord with one hundred eighty (180) days written notice
prior to termination of this Lease term. Base Rent for each renewal term shall
be in accordance with the provisions of PARAGRAPH 53.01-2.
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4.06 RIGHT OF FIRST REFUSAL. Throughout the initial Term of this
Lease, the Tenant shall have the right of first refusal (the "RFR") to lease
additional space, when and if such space is made available to lease by the
Landlord to third parties, on the fourth floor of the Building as shown on
EXHIBIT A-1 (the "RFR SPACE"). If the Landlord receives a bonafide offer from a
third party to lease the RFR Space, on terms and conditions acceptable to the
Landlord, then in such event, Landlord shall present Tenant with the terms and
conditions by which Landlord is prepared to lease the RFR Space to said third
party. The Tenant shall, within five (5) days after receipt of the aforesaid
terms and conditions from Landlord, notify the Landlord in writing of the
Tenant's desire to lease the RFR Space. In the event the Tenant elects to lease
the RFR Space, then in such event the Tenant shall do so under such terms and
conditions presented to Tenant and this Lease shall be so amended as to
incorporate the RFR Space and terms and conditions pertaining to same.
Notwithstanding the foregoing, in the event the lease term for the RFR Space
exceeds the remaining unexpired initial term of this Lease, then in such event
and as a condition to Tenant's RFR provided herein this PARAGRAPH 4.06, the
Lease term of this Lease shall be extended to a period coterminous with the term
of the RFR Space. In the event Tenant fails to notify Landlord of its intentions
within the five (5) day period as herein provided or declines to lease the RFR
Space, then in either event, Tenant's rights under this RFR shall expire and be
of no further force or effect and Landlord shall be permitted to lease the RFR
Space to third parties without any obligation to the Tenant.
5.01 SECURITY DEPOSIT. Tenant shall pay the Landlord upon execution
of this Lease, the sum of ELEVEN THOUSAND NINE HUNDRED FORTY ONE and 88/100
Dollars ($11,941.88) as security for the faithful performance and observance by
Tenant of the terms, provisions and conditions of this Lease; it is agreed that,
in the event Tenant defaults in respect of any of the terms, provisions and
conditions of this Lease, including, but not limited to, the payment of Rent,
Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any Rent or any other sum as
to which Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this Lease, including, but not limited to, any
damages or deficiency in the re-letting of the Premises, whether such damage or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. Tenant shall remain liable for any amount that such sum shall be
insufficient to pay. In the event Landlord applies any portion of the deposit to
remedy such default or to repair damages to the Premises caused by the Tenant,
Tenant shall pay to Landlord, within fifteen (15) days, after written demand for
such payment by Landlord, all monies necessary to restore the deposit up to the
original amount. In the event that Tenant shall fully and faithfully comply with
all of the terms, provisions, covenants and conditions of this Lease, the
security shall be returned to Tenant after the date fixed at the end of this
Lease and after delivery of entire possession of the Premises to Landlord. In
the event of a sale of the Project, of which the premises form a part, Landlord
shall have the right to transfer the security to the vendee, and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security and Tenant agrees to look to the new Landlord solely for the return of
said security. It is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber the monies deposited herein as,
security and that neither Landlord nor its assigns shall be bound by any such
assignment or encumbrance. Landlord shall not be required to keep the security
in a segregated account and the security may be commingled with other funds of
Landlord, and in no event shall Tenant be entitled to any interest on the
security.
6.01 USE OF PREMISES. The Tenant shall at all times use and occupy
the Premises for COMPUTER SALES, SERVICE, SOFTWARE CONSULTING, RESEARCH,
TRAINING AND RELATED GENERAL OFFICE USE and for no other purpose whatsoever.
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7.01 UPKEEP OF PREMISES. The Tenant agrees that it will keep the
Premises and the fixtures therein in good order and condition and will, at the
expiration or other termination of the term hereof, surrender and deliver up the
same in like good order and condition as the same now is or shall be at the
commencement of the term hereof, ordinary wear and tear, and damage by the
elements, fire, and other unavoidable casualty excepted, unless caused by
negligence of Tenant or their agents or employees. All damage caused by Tenant's
negligence, or that of his agents, servants, employees or visitors, shall be
repaired promptly by Tenant at his sole cost and expense. In the event that the
Tenant fails to comply with the foregoing provisions the Landlord shall have the
option to enter the Premises and make all necessary repairs at Tenant's cost and
expense, the same to be considered as Additional Rent and added to and be
payable with the next monthly installments of Rent.
7.02 HAZARDOUS SUBSTANCES. The term "HAZARDOUS SUBSTANCES", as used
in this Lease, shall include, without limitation, flammable, explosives,
radioactive materials, asbestos, polychlorinated biphenyls (PCBs), chemicals
known to cause cancer or reproductive toxicity, pollutants, contaminants,
hazardous wastes, toxic substances or related materials, petroleum and petroleum
products, and substances declared to be hazardous or toxic under any law or
regulation now or hereafter enacted or promulgated by any governmental authority
(the "Authorities"). Tenant shall not cause or permit to occur; (i) Any
violation of any federal, state, or local law, ordinance, or regulation now or
hereafter enacted, (the "ENVIRONMENTAL LAWS") related to environmental
conditions on, under, or about the Premises, or arising from Tenant's use or
occupancy of the Premises, including, but not limited to, soil and ground water
conditions; or (ii) The use, generation, release, manufacture, refining,
production, processing, storage, or disposal of any Hazardous Substance on,
under, or about the Premises or the Project, or the transportation to or from
the Premises, or the Project, of any Hazardous Substance. Tenant shall
indemnify, defend, and hold harmless Owner, and their respective officers,
directors, heirs, beneficiaries, shareholders, partners, agents, assignees and
employees from all fines, suits, procedures, claims, and actions of every kind,
and all costs associated therewith (including attorneys' and consultants' fees)
arising out of or in any way connected with any deposit, spill, discharge, or
other release of Hazardous Substances that occurs during the term of this Lease,
at or from the Premises, or the Project, or which arises at any time from
Tenant's use or occupancy of the Premises, or the Project, or from Tenant's
failure to provide all information, make all submissions, and take all steps
required by all Authorities under the Environmental Laws. Tenant's obligations
and liabilities under this PARAGRAPH 7.02 shall survive the expiration of this
Lease.
8.01 ASSIGNMENT AND SUBLETTING. The Tenant covenants and agrees not
to encumber or assign this Lease or sublet all or any part of the Premises
without the prior written consent of Landlord. If Landlord consents to an
assignment or subletting, the assignee or sublessee shall first be obligated to
assume, in writing, all of the obligations of Tenant under this Lease and Tenant
shall, for the full term of this Lease, continue to be jointly and severally
liable with such assignee or sublessee for the payment of the Rent and the
performance of all obligations required by Tenant under this Lease. In no event
shall Tenant assign or sublet the Premises for any terms, conditions and
covenants other than those contained herein. In no event shall this Lease be
assigned or be assignable by operation of law or by voluntary or involuntary
bankruptcy proceedings or otherwise, and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings. In no event shall the Landlord's
allowance of an assignment or sublease be deemed to permit a subsequent
assignment of sublease. The Assignee must meet the financial ability necessary
to take Tenant's place, with such financial ability to be determined in
Landlord's sole discretion. The Tenant shall pay Landlord all costs and expenses
associated with incurring, maintaining and servicing any assignment or sublease.
9.01 FIRE INSURANCE. Landlord shall, at its expense, keep the
building of which the
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Premises forms a part (but not the leasehold improvements, personal property or
trade fixtures located in the Premises), insured against loss by fire or
casualty with extended coverage in an amount determined by the Landlord, and
said policy shall include a standard waiver of subrogation clause against
Tenant. The Tenant will not do or permit anything to be done in the Premises or
the Project of which they form a part or bring or keep anything therein which
shall in any way increase the rate of fire or other insurance in said building,
or on the property kept therein, or obstruct, or interfere with the rights of
other tenants, or in any way injure or annoy them, or those having business with
them, or conflict with them, or conflict with the fire laws or regulations, or
with any insurance policy upon said building or any part thereof, or with any
statutes, rules or regulations enacted or established by the appropriate
governmental authority. In the event the cost of premiums on said fire and
extended insurance increases due to the hazardous nature of the use and
occupancy by Tenant of the Premises, then the entire increase in insurance cost
shall be paid by Tenant as additional rent in a lump sum and on receipt of
invoice from Landlord.
10.01 ALTERATIONS AND IMPROVEMENTS. Tenant shall not cut, drill into,
disfigure, deface or injure any part of the Premises; nor obstruct or permit any
obstruction, alteration, addition, improvement, decoration or installation in
the Premises without first obtaining the written permission of the Landlord. All
alterations, additions, improvements, decoration or installations, including,
but not limited to, partitions, railings, electrical and telephone outlets, air
conditioning ducts or equipment (except movable furniture and fixtures put in at
the expense of Tenant and removable without defacing or injuring the building or
the Premises) shall become the property of the Landlord at the termination of
the Term. Landlord, however, reserves the option to require Tenant, upon demand
in writing, to remove all fixtures and additions, improvements, decorations or
installations (including those not removable without defacing or injuring the
leased Premises) and to restore the Premises to the same condition as when
originally leased to Tenant, reasonable wear and tear excepted. Tenant agrees to
restore the Premises immediately upon the receipt of the said demand in writing
at his own cost and expense and agrees in case of his failure to do so, Landlord
may do so and collect the cost thereof from Tenant as hereinafter provided. In
order to promote an aesthetically attractive, uniform appearance of said
building from the exterior, the Landlord shall furnish a standard building blind
to be used on all exterior windows (regardless of interior treatment) of the
Premises. Tenant shall not place anything or allow anything to be placed near
the glass of any door, partition, wall or window which may be unsightly from
outside the Premises. Landlord grants Tenant limited authorization to install
low voltage wiring for communication and automation purposes. Any other wiring
would require Landlord's approval. The Tenant Improvements approved by Landlord
and outlined in PARAGRAPH 39.01 are excluded from this clause.
11.01 TENANT'S AGREEMENT. Tenant further agrees that no sign,
advertisement or notice shall be inscribed, painted or affixed on any part of
the outside or inside of the Premises or any part of the Project, except on the
directories and doors of offices, and then only in such size, color and style as
the Landlord shall approve. Landlord shall have the right to prescribe the
weight, and method of installation and position of safes, or other heavy
fixtures, or equipment and Tenant will not install in the Premises any fixtures,
equipment or machinery that will place a load upon any floor exceeding the floor
load per square foot area which such floor was designed to carry. All damage
done to the building by taking in or removing any other article of Tenant's
furniture or equipment, or due to its being in the Premises, shall be Tenant. No
freight furniture or other bulky matter of any description will be received into
the building or carried in the elevators, except as approved by the Landlord,
which shall not be unreasonably withheld or delayed. All moving of furniture,
material and equipment shall be under the direct control and supervision of the
Landlord, who shall however, not be responsible for any damage to or charges for
moving same. Tenant agrees promptly to remove from the public area adjacent to
said building any of Tenant's
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merchandise there delivered or deposited. Any damages shall be considered as
Additional Rent and payable with the next monthly installment of Rent.
12.01 UNUSUAL EQUIPMENT. The Tenant will not install or maintain any
electrically operated equipment or other machinery except standard office
machines without first obtaining the written consent of the Landlord, who may
condition such consent upon the payment by the Tenant of Additional Rent as
compensation for excess consumption of water and/or electricity occasioned by
the operation of said equipment or machinery. The Tenant shall not place weight
bearing items upon any floor or portion of any floor of the Premises exceeding
whichever of the following is the lesser: (i) the floor load per square foot
area which such floor was designed to carry, or (ii) the floor load per square
foot area prescribed by law or applicable regulations. The Landlord reserves the
right to prescribe the weight and position of all safes, heavy files and
equipment which must be placed so as to distribute the weight. Business machines
and mechanical equipment permitted to be placed in, or upon the Premises shall
be placed and maintained by Tenant at its expense in settings sufficient in the
Landlord's judgment to absorb and prevent vibration, noise and annoyance.
13.01 TENANT EQUIPMENT. Maintenance and repair of equipment such as
kitchen fixtures, light fixture, separate air conditioning equipment, or any
other types of special equipment, whether installed by Tenant or by Landlord on
behalf of Tenant, shall be the sole responsibility of Tenant and Landlord shall
have no obligation in connection therewith.
14.01 ACCESS. Tenant further agrees that it will allow the Landlord,
its agent or employees, to enter the Premises at all reasonable times by prior
appointment or upon due notice during normal business hours, or in the event of
an emergency, at any time, without prior notice, to examine, inspect or to
protect the same or prevent damage or injury to the same, or to make such
alterations and repairs to the Premises as the Landlord may deem necessary; or
to exhibit the same to prospective tenants during the last three (3) months of
the term of this Lease.
15.01 ILLEGAL USE. The Tenant will not use or permit the Premises or
any part of the Project thereof to be used for any disorderly, unlawful or extra
hazardous purpose nor for any other purpose then herein before specified; and
will not manufacture any commodity therein, without the prior written consent of
the Landlord.
16.01 RULES AND REGULATIONS. The Tenant covenants that the rules and
regulations attached hereto as EXHIBIT "B", and such other and further rules and
regulations as the Landlord may make and which in the Landlord's judgement are
needful for the general well-being, safety, care and cleanliness of the
Premises and the building of which they are a part together with their
appurtenances, shall be faithfully kept, observed and performed by the Tenant,
and by its agents, servants, employees and guests and failure to comply with the
Rules and Regulations shall be considered a default in accordance with PARAGRAPH
22.01.
17.01 DAMAGE. All injury to the Premises or the Project of which they
are a part, caused by moving the property of Tenant into or out of the said
Building and all breakage done by Tenant, or the agents, servants, employees and
visitors of Tenant, shall be repaired by the Tenant, at the expense of the
Tenant. In the event that the Tenant shall fail to do so, then the Landlord
shall have the right to make such necessary repairs, alterations and
replacements structural, non-structural or otherwise) and any charge or cost so
incurred by the Landlord shall be paid by the Tenant with the right on the part
of the Landlord to elect, in its discretion, to regard the same as Additional
Rent, in which event such cost or charge shall become Additional Rent payable
with the installment of Rent next becoming due or thereafter falling due under
the terms of this Lease. This provision shall be construed as an additional
remedy granted to the Landlord and not in limitation of any other rights and
remedies which the
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Landlord has or may have in said circumstances.
18.01 PERSONAL PROPERTY. All personal property of the Tenant in the
Premises or in the Building of which the Premises is a part shall be at the sole
risk of the Tenant. The Landlord shall not be liable for any accident to or
damage to property of Tenant resulting from the use or operation of elevators or
of the heating, cooling, electrical or plumbing apparatus. Landlord shall not,
in any event, be liable for damages to property resulting from water, steam or
other causes. Tenant hereby expressly releases and agrees to hold Landlord
harmless from any liability incurred or claimed by reason of damage to Tenant's
property. Landlord shall not be liable in damages, nor shall this Lease be
affected, for conditions arising or resulting, and which may affect the building
of which the Premises is a part, due to construction on contiguous premises,
with the exception of any negligence attributable to Landlord.
19.01 LIABILITY & TENANT'S INSURANCE. The Landlord assumes no
liability or responsibility whatsoever with respect to the conduct and operation
of the business to be conducted in the Premises. The Landlord shall not be
liable for any accident to or injury to any person or persons or property in or
about the Premises or the Project which are caused by the conduct and operation
of said business or by virtue of equipment or property of the Tenant in said
Premises. The Tenant agrees to hold the Landlord harmless against all such
claims.
(a) Tenant shall, at Tenant's sole expense, obtain and keep in
force during the Term and any extension or renewal hereof: (i) fire and extended
coverage insurance with vandalism and malicious mischief endorsements and a
sprinkler leakage endorsement (where applicable), on all of its personal
property, including removable trade fixtures, located in the Premises, and on
all leasehold improvements and any future additions and improvements made by
Tenant; and (ii) comprehensive general liability insurance, including
contractual liability coverage, insuring Landlord (as an additional insured) and
Tenant against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.
(b) Said insurance shall be with insurance companies approved by
Landlord. Such companies shall be responsible insurance carriers authorized to
issue the relevant insurance, authorized to do business in Florida and at least
A-rated in the most current edition of BEST'S INSURANCE REPORTS and shall have
minimum limits of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) for any
loss of or damage to property from any one accident, and ONE MILLION AND NO/100
DOLLARS ($1,000,000.00) for death of or injury to any one person from any one
accident. The limits of said insurance shall not, however, limit the liability
of the Tenant hereunder. The policies cannot contain provisions which deny
coverage because the loss is due to the fault of Landlord or Tenant. If Tenant
shall fail to procure and maintain said insurance, Landlord may, but shall not
be required to, procure and maintain same, but at the expense of Tenant. Tenant
shall deliver to Landlord, prior to occupancy of the Premises, copies of
policies of liability insurance required herein, or certificates evidencing the
existence and amounts of such insurance, with loss payable clauses satisfactory
to Landlord. No policy shall be cancelable or subject to reduction of coverage
except after thirty (30) days prior written notice to Landlord. Notwithstanding
anything herein to the contrary, Landlord shall have the right to review the
Tenant's insurance no more frequently than once every year and to require Tenant
to alter its insurance coverage to cover the effects of inflation and to include
or eliminate certain provisions in the Tenant's insurance policy which reflect
the then-current industry standards for this type of insurance coverage.
20.01 SERVICES. The Landlord shall use all reasonable efforts to
furnish electricity, water, lavatory supplies, fluorescent tube replacements,
and automatically operated elevator service during normal business hours, and
normal and usual cleaning services and supplies. Landlord further agrees to
furnish heat from a central heating plant and air conditioning by
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means of a central air conditioning system during the appropriate seasons of the
year, between the hours of 7:00 a.m. and 6:0O p.m. on MONDAY THROUGH FRIDAY AND
SATURDAYS between the hours of 8:00 am and 1:30 p.m. (exclusive of holidays),
provided, however, that the Landlord shall not be liable for failure to furnish,
or for suspension or delays in furnishing, any of such services caused by
breakdown, maintenance or repair work or strike, riot, civil commotion, or any
cause or reason whatever beyond the reasonable control of the Landlord. After
operating hours Building reverts to energy saving HVAC temperatures. Landlord
shall also furnish heating, ventilating and air conditioning at such other times
as are not provided for herein, provided Tenant gives written request to
Landlord before noon of the business day preceding extra usage. Tenant shall
bear the cost of such additional service at rates determined by Landlord, which
may change from time to time. The current rate for HVAC is $20.00 per hour.
21.01 BANKRUPTCY. If the Tenant shall make an assignment of its assets
for the benefit of creditors, of if the Tenant shall file a voluntary petition
in bankruptcy, or if an involuntary petition in bankruptcy or for receivership
is instituted against the Tenant land the same be not dismissed within thirty
(30) days of the filing thereof, or if the Tenant be adjudged bankrupt, then and
in any of said events this Lease shall immediately cease and terminate at the
option of the Landlord with the same force and effect as though the date of said
event as the day herein fixed for expiration of the term of this Lease.
22.01 DEFAULT. If Tenant defaults in the prompt payment of Rent and
such default shall continue for seven (7) business days after the same shall be
due and payable; or in the performance or observance of any other provision of
this Lease, including the Rules and Regulations, and such other default shall
continue for fifteen (15) days after written notice thereof shall have been
given to Tenant; or if the leasehold interest of Tenant be levied upon under
execution or attached by process of law; or if Tenant vacates or abandons the
Premises; then and in any such event Landlord, if it so elects forthwith, or at
any time thereafter while such default continues, either may terminate Tenant's
right to possession without terminating this Lease, or may terminate this Lease.
22.02 Upon termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Tenant's right to possession without
termination of the Lease, the Tenant shall surrender possession and vacate the
Premises immediately and deliver possession thereof to the Landlord.
22.03 Tenant shall be deemed to have vacated or abandoned the Premises
if Rent is not currently paid or if Tenant is absent from the Premises for a
period of fifteen (15) days. If the Tenant vacates or abandons the Premises or
otherwise entitles the Landlord so to elect, and if the Landlord elects to
terminate the Tenant's right to possession only, without terminating the Lease,
the Landlord may, at the Landlord's option, enter into the Premises, remove the
Tenant's signs and other evidences of tenancy, and take and hold possession
thereof without such entry and possession terminating the Lease or releasing the
Tenant, in whole or in part, from the Tenant's obligation to pay the Rent
hereunder for the full term. Upon and after entry into possession without
termination of the Lease, the Landlord may relet the Premises or any part
thereof for the account of the Tenant to any person, firm or corporation other
than the Tenant for such Rent, for such time, and upon such terms and the
Landlord in the Landlord's sole discretion shall determine so long as said terms
are commercially reasonable. In any such case, the Landlord may make repairs in
or to the Premises, and redecorate the same to the extent deemed by the Landlord
necessary or desirable, and the Tenant shall, upon demand, pay the cost thereof
together with the Landlord's expenses of the reletting. If the consideration
collected by the Landlord upon such reletting for the Tenant's account is not
sufficient to pay the full amount of the unpaid Rent reserved in this Lease,
together with the costs of repairs, alterations, additions, redecorating, and
the Landlord's expenses, the Tenant shall pay to the
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Landlord the amount of each deficiency upon demand. Tenant agrees that the
Landlord shall not be liable for any damages resulting to the Tenant or the
Tenant's property caused, directly or indirectly, by the Landlord's actions in
the course of reletting or retaking possession of the premises, whether caused
by the negligence of the Landlord or otherwise.
22.04 Landlord is hereby granted a security interest in the personal
property of the Tenant which is located in the Premises to secure the full and
faithful performance of this Lease, and the Landlord may perfect and enforce
this security interest in the manner prescribed by law, provided however,
Landlord shall subordinate Landlord's security interest to any third-party
financing Tenant obtains on Tenant's personal property and, if requested by
Tenant, Landlord agrees to execute such reasonable subordination agreement
requested by Tenant's lender confirming such subordination.
22.05 If any voluntary or involuntary petition or similar pleading
under any section or sections of any bankruptcy act shall be filed by or against
Tenant, or any voluntary or involuntary proceedings in any court shall be
instituted to declare Tenant insolvent or unable to pay Tenant's debts, or if
Tenant makes an assignment for the benefit of its creditors, or a trustee or
receiver is appointed for Tenant or for the major part of Tenant's property,
then and in such event Landlord may, if Landlord so elects, with or without
notice of such election and with or without entry or other action by Landlord,
forthwith terminate this Lease and notwithstanding any other provisions of this
Lease, Landlord shall forthwith upon such termination be entitled to recover
damages in an amount equal to the then present value of the remaining Rents as
specified in SECTION 3 AND 4 of this Lease for the residue of the stated term
hereof, less the fair rental income value of the Premises expected to be
received by Landlord for the residue of the stated term.
22.06 Tenant shall pay all Landlord's costs, charges and expenses,
including the fees of counsel, agents and others retained by Landlord, incurred
in enforcing Tenant's obligation hereunder or incurred by Landlord in any
litigation, negotiation, bankruptcy or insolvency proceeding, transaction or
appeal, including those in which Tenant causes Landlord, without Landlord's
fault, to become involved or concerned. Tenant shall be entitled to fees, costs
and expenses in the event it prevails in an action regarding this Lease. If
Tenant violates any of the terms and provisions of this Lease, or defaults in
any of its obligations hereunder, other than the payment of Rent or other sums
payable hereunder, such violation may be restrained or such obligation enforced
by injunction.
22.07 Tenant agrees that it will promptly pay said Rent at the times
above stated; that, if any part of the Rent remains due and unpaid for seven (7)
business days after the same shall become due and payable, Landlord shall have
the option of declaring the balance of the entire rental term of this Lease to
be immediately due and payable, and Landlord may then proceed to collect all of
the unpaid Rent called for by this Lease by distress or otherwise.
22.08 All rights and remedies of Landlord herein enumerated shall be
cumulative and none shall exclude any other right or remedy allowed by law.
Venue for any legal action instituted under this Lease shall be in LEE COUNTY,
FLORIDA.
23.01 DAMAGE BY FIRE OR CASUALTY. In the event of damage or
destruction of the Project or Premises by fire or any other casualty, this Lease
shall not be terminated, but the Project or the Premises may be promptly and
fully repaired and restored as the case may be by the Landlord at its own cost
and expense, provided however that the cost of such repairs and restoration
shall be limited to the amount of insurance proceeds received by the Landlord
for such damage or destruction. Due allowance, however, shall be given for
reasonable time required for adjustment and settlement of insurance claims, and
for such other delays as may result from government restrictions, and controls
on construction, if any, and for strikes,
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national emergencies and other conditions beyond the control of the Landlord. It
is agreed that in any of the aforesaid events, this Lease shall continue in full
force and effect, but if the condition is such so as to make the entire Premises
untenantable, then the Rent which the Tenant is obligated to pay hereunder shall
abate as of the date of the occurrence until the Premises have been fully and
completely restored by the Landlord. Any unpaid or prepaid Rent for the month in
which said condition occurs shall be pro-rated. If the Premises are partially
damaged or destroyed, then during the period that Tenant is deprived of the use
of the damaged portion of said Premises, Tenant shall be required to pay Rent
covering only that part of the Premises that it is able to occupy, based on that
portion of the total Rent which the amount of square foot area remaining that
can be occupied bears to the total square foot area of all the Premises covered
by this Lease. In the event the Premises are substantially or totally destroyed
by fire or other casualty so as to be entirely untenantable and it shall require
more than one hundred twenty (120) days for the Landlord to complete restoration
of same, then either party hereto, upon ten (10) days written notice to the
other party may terminate this Lease, in which case the Rent shall be
apportioned and paid to the date of said fire or other casualty. No compensation
or claim or diminution of Rent will be allowed or paid, by Landlord, except to
the extent of any insurance proceeds which may be paid, by reason of
inconvenience, annoyance, or injury to business, arising from the necessity of
repairing the Premises or the portion of the building of which they are a part,
however the necessity may occur.
24.01 CONDEMNATION. Tenant agrees if the said Premises, or any part
thereof, shall be taken or condemned for public or quasi-public use or purpose
by any competent authority, Tenant shall have no claim against the Landlord and
shall not have any claim or right to any portion of the amount that may be
awarded as damages or paid as a result of any such condemnation; and all right
of Tenant to damages therefor, if any, are hereby assigned by the Tenant to the
Landlord. If all or a substantial part of the Premises shall be so condemned or
taken, the term of this Lease shall cease and terminate from the date of such
governmental taking or condemnation, and the Tenant shall have no claim against
the Landlord for the value of any unexpired term of this Lease. If any part of
the building or Project, other than the Premises, shall be so condemned or
taken, Landlord may, at its sole option, terminate this Lease upon sixty (60)
days written notice to Tenant of such termination. In no event shall the
Landlord be liable to the Tenant for any business interruption, diminution in
use of for the value of any unexpired term of this Lease.
25.01 TENANT HOLDOVER. Tenant agrees that if Tenant does not surrender
to Landlord said Premises at the end of the term of this Lease, or upon any
cancellation of the Term of this Lease, without prior written consent of
Landlord, such holdover tenancy shall be a tenancy at sufferance, and Tenant
shall pay to Landlord all damages that Landlord may suffer on account of
Tenant's failure to surrender possession of said Premises, and will indemnify
Landlord on account of delay of Landlord in delivering possession of said
Premises to another tenant. Unless Tenant's failure to surrender the Premises is
consented to in writing by the Landlord, the Rent during any holdover period
shall be double the then current Rent as provided by this Lease for the period
immediately preceding the expiration of the Term. The acceptance of such Rent
shall not be deemed to be consent to such continued occupancy nor shall it be
deemed a waiver of any rights of the Landlord as set forth herein, at law or in
equity.
26.01 POSSESSION. If Landlord shall be unable to give possession of
the Premises on the Commencement Date by reason of the holding over or retention
of possession of any Tenant or occupancy, or for any other reason, Landlord
shall not be subject to any liability for the failure to give possession on said
date. Under such circumstances the Rent reserved and convenanted to be paid
herein shall commence on the date which the Tenant is given possession of the
Premises by the Landlord. No such failure to give possession on the Commencement
Date shall in any other respect affect the validity of this Lease or the
obligations of Tenant
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hereunder, nor shall same be construed in any wise to extend the Term of this
Lease.
27.01 TENANT PLANS. The Landlord and Tenant shall agree upon a space
plan, for that portion of the Premises as shown on EXHIBIT A as the area of
construction, which said space plan shall indicate the general layout of the
Premises, selection of building standard materials and other requirements of the
Tenant. Landlord shall thereafter prepare and furnish to Tenant, plans for its
partitioning, mechanical, electric, telephone and all other requirements (the
"WORKING DRAWINGS") and in accordance with Building Standard Materials and
Specifications as described in EXHIBIT "E" attached hereto, WITHIN THIRTY (30)
DAYS after agreement on the space plan. Within five (5) business days after
Landlord's submission of Working Drawings, the Tenant shall approve same in
writing. In the event Tenant fails to (i) comply with either of the aforesaid by
the date stated or within the time specified, or (ii) in the event Working
Drawings specify any non-Building Standard Materials, or (iii) any work to be
performed by Tenant's contractors causes delays in completing the Premises for
Tenant's occupancy, or (iv) the Tenant in any other way causes any delay in
completing the Premises, such delay shall not in any manner affect the
Commencement Date of this Lease or the Tenant's liability for the payment of
Rent from such Commencement Date.
28.01 OFFSET STATEMENT. At anytime during the Term or any Renewal Term
of this Lease and within ten (10) days after Landlord's request, Tenant shall
execute in recordable form and deliver a declaration to any person designated by
Landlord (a) ratifying this Lease (b) stating the commencement and termination
dates of this Lease; and (c) certifying (i) that this Lease is in full force and
effect and has not been assigned, modified, supplemented or amended (except by
such writing as shall be stated), (ii) that all conditions under this Lease to
be performed by Landlord have been satisfied (stating exceptions, if any), (iii)
no defenses or offsets against the enforcement of this Lease by Landlord exist
(or, if any, stating those claimed), (iv) advance rent, if any, paid by Tenant,
(v) the date to which Rent has been paid, (vi) the amount of security deposited
with Landlord, and such other information as Landlord reasonably requires.
Persons receiving such statements shall be entitled to rely upon them.
29.01 ATTORNMENT. Tenant shall, in the event of a sale or assignment
of Landlord's interest in the Premises or the Project or any part thereof, or if
the Premises or the Project or any part thereof, comes into the hands of a
mortgagee, ground lessor or any other person, attorn to the purchaser or such
mortgagee or other person and recognize the same as Landlord hereunder. At
Landlord's request, Tenant shall execute, within ten (10) days, any attornment
agreement required to be executed, containing such provisions as are required.
30.01 FAILURE TO EXECUTE Instruments. Tenant's failure to execute
instruments or certificates provided for in this Lease within ten (10) days
after the mailing by Landlord of a written request for their execution shall be
a default under this Lease.
31.01 COUNTERCLAIM. If Landlord commences any proceedings for
non-payment of Rent, minimum rent, percentage rent or Additional Rent, Tenant
will not interpose any counterclaim of any nature or description in such
proceedings. This shall not, however, be construed as a waiver of Tenant's right
to assert such claims in a separate action brought by Tenant. The covenants to
pay Rent and other amounts hereunder are independent covenants, and Tenant shall
have no right to hold back, offset, or fail to pay any such amounts for default
by Landlord or any other reason whatsoever.
32.01 WAIVER OF JURY TRIAL. The parties hereto shall and they hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matters whatsoever arising
out of or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use or occupancy of the Premises,
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and/or claim of injury or damage.
33.01 WAIVER OF RIGHTS OF REDEMPTION. To the extent permitted by law,
Tenant waives any and all rights of redemption granted by or under any present
or future laws if Tenant is evicted or dispossessed for any cause, or if
Landlord obtains possession of the Premises due to Tenant's default hereunder of
otherwise.
34.01 TAXES ON LEASEHOLD. Tenant shall be responsible for and shall
pay before delinquent all municipal, county, federal, or state taxes coming due
during or after the terms of this Lease against any leasehold interest or
personal property of any kind owned or placed in, or about the Premises by
Tenant.
35.01 LIENS. Tenant will not knowingly permit or suffer any lien
attributable to Tenant or its agents or employees to attach to the Premises or
the Project and nothing contained herein shall be deemed to imply any agreement
of Landlord to subject Landlord's interest or estate to any mechanics' lien or
any other lien. If any mechanics' lien is filed against the Premises or the
Project as a result of additions, alterations repairs, installations or
improvements made or claimed to have been made by Tenant or anyone holding any
part of the Premises through or under Tenant, or any other work or act of any of
the foregoing, Tenant shall discharge the same within ten (10) days from the
filing thereof. If Tenant fails to so discharge by payment, bond or court order
any such mechanics' lien, Landlord, at its option, in addition to all other
rights or remedies herein provided, may bond said lien or claim (or pay off said
lien or claim if it cannot be bonded) for the account of Tenant without
inquiring into the validity thereof, and all sums so advanced by Landlord shall
be paid by Tenant to Landlord as Additional Rent on demand.
36.01 PRONOUNS. Feminine or neuter pronouns shall be substituted for
those of the masculine form, and the plural shall be substituted for the
singular number in any place or places herein in which the context may require
such substitution or substitutions. The Landlord herein for convenience has been
referred to in neuter form.
37.01 NOTICES. All notices required or desired to be given hereunder
by either party to the other shall be given by certified or registered mail
postage prepaid, return receipt requested. Notice to the respective parties
shall be addressed as follows:
Landlord: FIRST UNION NATIONAL BANK OF FLORIDA
C/O FAISON ASSOCIATES
12800 UNIVERSITY DRIVE, SUITE 420
FT. MYERS, FLORIDA 33907
(941) 437-0555 FAX (941) 437-2760
w/copy to: FIRST UNION NATIONAL BANK OF FLORIDA
CORPORATE REAL ESTATE
ATTENTION: PROPERTY MANAGER
225 WATER STREET, 4TH FLOOR
JACKSONVILLE, FL 31202
(904) 361-3273 FAX (904) 361-3030
Tenant: NEOMEDIA TECHNOLOGIES, INC.
2201 2ND AVENUE, SUITE 600
FT. MYERS, FLORIDA 33901
ATTN.: CHUCK JENSEN
Either party may, by written notice, designate a new address to which such
notices shall be
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directed.
38.01 RELOCATION. (Intentionally omitted)
39.01 TENANT IMPROVEMENTS. The Premises are being provided by the
Landlord in their current as-is condition together with, but not necessarily
limited to, all existing demising and interior partitions, doors, frames and
hardware, ceilings, electrical fixtures and distribution wiring, HVAC
distribution systems and controls, sprinkler systems, fire alarm systems and
controls exit lighting, interior finishes, built-in millwork, and any and all
other improvements located therein. The Landlord shall provide the Tenant with
all necessary Working Drawings, permits, demolition, general, mechanical,
electrical and plumbing construction and interior finishes (the "TENANT
IMPROVEMENTS") to construct, modify, alter or otherwise improve and prepare that
portion of the Premises shown on EXHIBIT A as the area of construction in
accordance with the final Working Drawings as described in PARAGRAPH 27.01,
provided however the Landlord's obligation for the cost of said Tenant
Improvements shall not exceed SIXTY THREE THOUSAND SIX HUNDRED NINETY AND 00/100
dollars ($63,690.00) (the "TENANT IMPROVEMENT ALLOWANCE"). The cost of the
Tenant Improvements shall be determined by the Landlord after mutual agreement
by the Landlord and the Tenant of the Working Drawings and prior to the
commencement of any work or construction by the Landlord. In the event the cost
of the Tenant Improvements exceed the Landlord's obligation as herein described,
or in the event the actual cost to construct the Tenant Improvements exceed the
Landlord's obligation due to changes requested by the Tenant to the final
Working Drawings, then, in such event, the Tenant shall be responsible for the
additional cost in excess of the Landlord's obligation and shall reimburse the
Landlord for such excess immediately upon completion of the Tenant Improvements.
Any excess cost due from the Tenant shall be considered as Additional Rent and
shall be due and payable upon the first installment of Rent and subject to all
provisions, terms and conditions of Rent and Additional Rent as herein provided.
In the event the cost of Tenant Improvements exceeds the Landlord's obligation
and the Tenant disputes the Landlord's cost estimate of the Tenant Improvements,
or refuses to pay the excess cost, or requires the Landlord to redesign, modify,
or otherwise change the final Working Drawings in an effort to reduce cost, or
requests the Landlord to obtain additional cost estimates of the Tenant
Improvements, the Landlord may do so, however, such redesigning, modifications
or changes shall be considered a delay to the Landlord as provided in SECTION
27.01 and the Commencement Date of the Term of this Lease shall not be delayed
by such action. Notwithstanding anything to the contrary contained herein this
PARAGRAPH 39.01, in the event the cost of the Tenant Improvements exceeds NINETY
THOUSAND AND 00/100 DOLLARS ($90,000.00), the Landlord shall increase the Tenant
Improvement Allowance up to a maximum increase of TEN THOUSAND AND 00/100
DOLLARS ($10,000.00) and such increase amount shall be amortized over the term
of this Lease at an annual rate of 9.5% and the monthly amortized amount shall
be added to the monthly Rent amounts stipulated in PARAGRAPH 53.01-1, however in
no event shall the Landlord's total contribution towards the cost of Tenant
Improvements exceed SEVENTY THREE THOUSAND SIX HUNDRED NINETY AND 00/100 DOLLARS
($73,690.00)
40.01 PARKING. Parking shall be provided on the surface parking lot(s)
contiguous to the Building. Tenant shall be entitled to TWENTY-TWO (22) parking
spaces on the surface parking lot(s) in common with other tenants of the Project
at no charge. Additionally, from and after February 1, 1997, Tenant shall have
the option, but not the obligation, to request from Landlord additional parking
spaces (the "ADDITIONAL SPACES") be provided for Tenant's use. Tenant's option
for the Additional Spaces as herein provided is subject to, (i) Tenant's option
for Additional Spaces shall be limited to a maximum of EIGHTEEN (18) spaces,
(ii) Tenant may request all, or any part of the Additional Spaces, by providing
Landlord with not less than FORTY-FIVE (45) days advance notice of the number of
Additional Spaces to be reserved by Tenant and the effective date of such
reservation, which such reservation shall
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commence upon the effective date and continue throughout the remaining term of
this Lease, (iii) Tenant shall pay Landlord monthly, in advance, from and after
the effective reservation date for Additional Spaces, FIFTEEN AND 00/100 DOLLARS
($15.00) for each Additional Space reserved, plus applicable sales tax. Said
payments shall for all purposes of this Lease, be considered Additional Rent and
subject to all terms, conditions and covenants herein provided in this Lease,
(iv) Until such time as Tenant's reservation of Additional Spaces reaches the
maximum herein provided, Tenant shall have the ongoing right throughout the term
of this Lease to increase the number of spaces reserved until such maximum is
reached by providing Landlord with FORTY-FIVE (45) days advance written notice
of such increase and effective date of same. The Tenants use of parking as
herein provided through its employees, agents and visitors shall not exceed the
restrictions herein provided. Any violation thereof shall, at the option of
Landlord, constitute a default under the terms of this Lease. Tenant further
covenants and agrees to not assign, sublease or otherwise permit the use of the
parking provided herein by anyone other than employees of Tenant, it's
officers and directors and any violation thereof shall constitute a default
hereunder. The Landlord assumes no liability or responsibility whatsoever with
respect to the Tenant's use of parking and Landlord shall not be liable for any
theft, accident or injury, to any person, persons or property in or about the
parking lot(s) from any cause and Tenant agrees to hold the Landlord, it's
officers, directors, employees, assignees and agents harmless from and against
all such claims.
41.01 GOVERNING LAW. This Lease shall be construed under the laws of
the State of Florida.
42.01 BENEFIT AND BURDEN. Except as otherwise expressly set forth in
this Lease, the covenants, conditions, agreements, terms and provisions herein
contained shall be binding upon, and shall inure to be benefit of, the parties
hereto and their respective personal representatives, successors and assigns.
Nor rights, however, shall inure to the benefit of any assignee or sublessee of
Tenant unless the assignment or sublease has been approved by Landlord in
writing as provided in PARAGRAPH 8 above.
43.01 ACCORD AND SATISFACTION. Landlord is entitled to accept,
receive, and cash or deposit any payment made by Tenant for any reason or
purpose or in any amount whatsoever, and apply the same at Landlord's option to
any obligation of Tenant and the same shall not constitute payment of any amount
owed except that to which Landlord has applied the same. No endorsement or
statement or any check or letter of Tenant shall be deemed an accord and
satisfaction or otherwise recognized for any purpose whatsoever. The acceptance
of any such check or payment shall be without prejudice to Landlord's right to
recover any and all amounts owed by Tenant hereunder and Landlord's right to
pursue any other available remedy. Payment of any amounts by Tenant shall not
waive any other cause of action which Tenant may have.
44.01 CAPTIONS AND SECTION NUMBERS. This Lease shall be construed
without reference to titles of paragraphs which are inserted only for
convenience of reference.
45.01 PARTIAL INVALIDITY. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby and each provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.
46.01 EXHIBITS. Exhibits made a part of this Lease and incorporated
here by reference include the following:
A - Floor Plan
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A-1 - Right of First Refusal Space
B - Rules and Regulations
C - Guaranty (Intentionally omitted)
D - Tenant Acceptance Letter
E - Building Standard Materials and Specifications
47.01 QUIET ENJOYMENT. As long as Tenant fully complies with the
terms, conditions and covenants of this Lease, Landlord agrees that Tenant shall
and may peaceably have, hold and enjoy the Premises without hindrance or
molestation by Landlord.
48.01 ENTIRE AGREEMENT. There are no representations, covenants,
warranties, promises, agreements, conditions or undertakings, oral or written,
between Landlord and Tenant other than herein set forth. Except as herein
otherwise provided, no subsequent alteration, amendment, change or addition to
this Lease shall be binding upon Landlord or Tenant unless in writing and signed
by them.
49.01 TIME OF ESSENCE. It is understood and agreed between the parties
hereto that time is of the essence of all the terms, provisions, covenants and
conditions of this Lease.
50.01 EFFECTIVE DATE. Submission of this instrument for examination
does not constitute an offer, right of first refusal, reservation of or option
for the Premises or any other space or premises in, on or about the building or
Project. This instrument becomes effective as a Lease upon execution and
delivery by both Landlord and Tenant.
51.01 RADON GAS. Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed Federal and State guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
52.01 BROKERS. Tenant and Landlord each warrant that it has not dealt
with any broker other than FAISON ASSOCIATES AND SHAFFER & ASSOCIATES, INC. in
connection with the Premises or the negotiation of this Lease. Only commissions
due to FAISON ASSOCIATES AND SHAFFER & ASSOCIATES, INC. shall be paid by the
Landlord in connection with this Lease. Tenant and Landlord each agree to
indemnify and save harmless the other from and against all loss, costs, damages,
claims, proceedings, demands, liabilities or expenses, including without
limitation reasonable attorneys' fees and litigation costs, incurred by the
other for any claim by any other broker with whom such party has dealt regarding
this Lease.
53.01 SPECIAL CLAUSES.
1. RENTALS:
MONTHS RATE/RSF MONTHLY TOTAL CUM TOTAL
------ -------- ------- ----- ---------
1-2 $0.00 $0.00 $0.00 $0.00
3-4 $13.50 $4,822.20 $9,644.40 $9,644.40
5-12 $13.50 $11,941.88 $95,535.04 $105,179.44
13-24 $13.90 $12,295.71 $147,548.52 $252,727.96
25-36 $14.30 $12,649.54 $151,794.48 $404,522.44
37-38 $16.50 $44,595.63 $ 29,191.26 $433,713.70
* Plus applicable taxes as may be imposed on rents.
-17-
<PAGE>
RENTAL RATES DO NOT INCLUDE APPLICABLE OPERATING EXPENSE PASS
THROUGH EXPENSES OVER THE TERM OF THE LEASE.
2. RENT FOR RENEWAL TERMS: The monthly Base Rent for each
Renewal term, as provided in PARAGRAPH 4.05, shall be the same
monthly Base Rent as the monthly Base Rent during the
thirty-eighth month of the Lease term as shown in PARAGRAPH
53.01-1.
IN WITNESS WHEREOF, this Lease is executed as of the date first written above.
AS TO THE LANDLORD:
WITNESS: FIRST UNION BANK OF FLORIDA
/s/ MARETTA L. RADFORD By:/s/ ILLEGIBLE
- - ----------------------- -----------------------
/s/ ILLEGIBLE As: SVP
- - -----------------------
AS TO THE TENANT:
WITNESS: NEOMEDIA TECHNOLOGIES, INC.
/s/ DAVID CARLETON HALL By: /s/ CHARLES T. JENSEN
- - ----------------------- ----------------------
/s/ STEVEN ACOSTA As: VP, TREASURER, C.F.O.
- - ----------------------- ----------------------
Where Tenant is a corporation, this Lease shall be signed by a President or Vice
President and Secretary or Assistant Secretary of Tenant. Any other signatories
shall require a certified corporate resolution.
-18-
<PAGE>
EXHIBIT "A"
FLOOR PLAN
Exhibit A presents a diagram of the sixth floor of the First Union
building. This diagram notes which space is "as-is premises" totaling 4,286
square feet and which space is "area of construction" totaling 6,329 square
feet.
-19-
<PAGE>
EXHIBIT "A-1"
RIGHT OF FIRST REFUSAL SPACE
Exhibit A-1 presents a diagram of the fourth floor of the First Union
building. This diagram notes which space is "right of first refusal space"
totaling 5,597 square feet.
-20-
<PAGE>
EXHIBIT "B"
BUILDING RULES AND REGULATIONS
1. The sidewalks, entries, passages, court corridors, stairways and
elevators shall not be obstructed by any of the Tenants, their employees or
agents, or used by them for purposes other than ingress and egress to and from
their respective suites.
2. All safes or other heavy articles shall be carried up or into the
Premises only at such times and in such manner as shall be prescribed by the
Landlord and the Landlord shall in all cases have the right to specify that
property weight and position of any such safe or other heavy article. Any damage
done to the Building by taking in or removing any safe or from overloading any
floor in any way shall be paid by the Tenant. Defacing or injuring in any way
any part of the Building by the Tenant, his agents or employees, shall be paid
for by the Tenant.
3. Tenant will refer all contractors, contractors' representatives and
installation technicians rendering any service on or to the Premises for Tenant
to Landlord for Landlord's approval and supervision before performance of any
contractual service. This provision shall apply to all work performed in the
Building, including installation of telephones, telegraph equipment, electrical
devices and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceiling, equipment or any other physical portion of the
Building.
4. No sign, advertisement or notice shall be inscribed, appointed or
affixed on any part of the inside or outside of the said Building unless of such
color, size, and style and in such place upon or in said building as shall first
be designated by Landlord; there shall be no obligation or duty on Landlord to
allow any sign, advertisement or notice to be inscribed, painted or affixed on
any part of the inside or outside of said Building, except as specifically set
forth in the Lease of Tenant. Signs on doors will be painted for the Tenant by a
sign writer approved by Landlord, the cost of the painting to be paid by the
Tenant. A directory in a conspicuous place, with the names of the Tenants, will
be provided by the Landlord; any necessary revision in this will be made by
Landlord within a reasonable time after notice from the Tenant of the error or
change making the revision necessary. No furniture shall be placed in front of
the Building or in any lobby or corridor without written consent of Landlord.
Landlord shall have the right to remove all other signs and furniture, without
notice to Tenant at the expense of Tenant.
5. Tenant shall have the nonexclusive use in common with the Landlord,
other tenants, their guests and invitees, of the uncovered automobile parking
areas, driveways and footways, subject to reasonable rules and regulations for
the user thereof as prescribed from time to time by Landlord. Landlord shall
have the right to designate parking areas for the use of the Building tenants
and their employees, and the tenants and their employees shall not park in
parking areas not so designated. Tenant agrees that upon written notice from
Landlord, it will furnish to Landlord, within thirty (30) days from receipt of
such notice, the state automobile license numbers assigned to the automobiles of
the Tenant and its employees.
6. No Tenant shall do or permit anything to be done in said Premises, or
bring to keep anything therein, which will in any way increase the rate of fire
insurance on said Building, or on property kept therein, or obstruct or
interfere with the rights of other Tenants, or in any way injure or or annoy
them, or conflict with the laws relating to fire, or with any regulations of
the fire department, or with any insurance policy upon said Building or any
part thereof, or conflict with any rules or ordinances of any governing bodies.
7. The janitor of the Building may at all times keep a pass key to suite
entry doors,
-21-
<PAGE>
EXHIBIT "B" (CONTINUED)
and he and other employees of the Landlord shall at all times be allowed
admittance to said leased Premises.
8. No additional locks shall be placed upon any public entry doors without
the written consent of the Landlord. All necessary keys shall be furnished by
the Landlord, and the same shall be surrendered upon the termination of this
Lease, and the Tenant shall then give the Landlord or his agents explanation of
the combination of all locks upon the doors of vaults.
9. No windows or other openings that reflect or admit light into the
corridors or passageways, or to any other place in said Building, shall be
covered or obstructed by any of the Tenants.
10. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse, or the defacing or injury of any part of the
Building, shall be borne by the person who shall occasion it.
11. No person shall disturb the occupants of the Building by the use of any
musical instruments, the making of unseemly noises, of any unreasonable use. No
dogs or other animals or pets of any kind will be allowed in the Building.
12. No bicycles or similar vehicles will be allowed in the Building.
13. Nothing shall be thrown out the windows of the Building or down the
stairways or other passages.
14. Tenant shall not be permitted to use or to keep in the Building any
kerosene, camphene, burning fluid or other flammable materials.
15. If any Tenant desires telegraphic, telephonic or other electric
connections, Landlord or its agents will direct the electricians as to where and
how the wires may be introduced, and without such directions no boring or
cutting for wires will be permitted.
16. If Tenant desires shades or awnings, they must be of such shape, color,
materials and make as shall be prescribed by Landlord and any outside awning
proposed may be prohibited by Landlord. Landlord or its agents shall have the
right to enter the Premises to examine the same or to make such repairs,
alterations or additions as Landlord shall deem necessary for the safety,
preservation or improvement of the Building, and during the three (3) month
period prior to termination of the Lease, the Landlord or its agents may show
said Premises and may place on the windows or doors thereof, or upon the
bulletin board a notice "For Rent".
17. No portion of the Building shall be used for the purpose of lodging
rooms or for any immoral or unlawful purposes.
18. All glass, locks and trimmings in or about the doors and windows and
all electric fixtures belonging to the Building shall be kept whole, and
whenever broken by anyone shall be immediately replaced or repaired and put in
order by Tenant under the direction and to the satisfaction of Landlord, and on
removal shall be left whole and in good repair.
19. Tenant shall not install or authorize the installation of any vending
machines or food preparation devices without Landlord's written approval.
-22-
<PAGE>
EXHIBIT "D"
TENANT ACCEPTANCE LETTER
This declaration is hereby attached to and made a part of the lease dated _____
___________ 19___ entered into by and between First Union National Bank of
Florida, as Landlord and NeoMedia Technologies, Inc., as Tenant.
The undersigned, as Tenant, hereby confirms as of the _____ day of
____________, 19____, the following:
1. Tenant has accepted possession of the Premises on _________19 _____ and
is currently occupying the same.
2. The Commencement Date and Expiration Date, as each is defined in the
Lease, are as follows:
/bullet/ Commencement: _____________________
/bullet/ Expiration Date: _____________________
3. The obligation to commence the payment of rent commenced or will
commence on _____________ 19____.
4. All alterations and improvements to be performed by Landlord have been
completed in accordance with the provisions of the Lease.
5. As of the date hereof, Landlord has fulfilled all of its obligations
under the Lease.
6. The Lease is in full force and effect and has not been modified,
altered, or amended, except pursuant to any instruments described above.
7. There are no offsets or credits against Base Rent or Additional Rent,
nor has any Base Rent or Additional Rent been prepaid except a provided
pursuant to the terms of the Lease.
8. Tenant has no notice of any prior assignment, hypothecation, or pledge
of the Lease or any rents due under the Lease.
AS TO LANDLORD:
WITNESS: FIRST UNION NATIONAL BANK OF FLORIDA
______________________ BY: ________________________________
______________________ AS:
AS TO TENANT:
WITNESS: NEOMEDIA TECHNOLOGIES, INC.
______________________ BY: ________________________________
______________________ AS:
-23-
<PAGE>
EXHIBIT "E"
BUILDING STANDARD MATERIALS AND SPECIFICATIONS
I. Building Standard Materials and Specifications
The following materials, specifications and guidelines shall be used
by the Landlord for the purposes of maintaining uniformity within the
Building, providing cost effective materials and finishes and for
selection of finish materials by the Tenant.
1. DEMISING PARTITIONS - (party walls) One-hour fire rated partition
to deck, taped and spackled ready for paint.
2. INTERIOR WALLS - 2 1/2" metal studs, 24" o.c. with 1/2" drywall
both sides, to ceiling, taped and spackled, ready for paint.
3. ENTRY DOORS - Existing doors and hardware or equivalent.
4. INTERIOR DOORS - Existing doors and hardware or equivalent.
Guideline of one (1) interior door for each 250 square feet of
useable area.
5. CEILING ASSEMBLY - Existing ceiling system to remain or new
acoustical panel tile 2'0" x 4'0" with white exposed metal grid.
6. LIGHTING - Existing light FIXTURES to remain and be relocated as
required by space plan. When new ceilings and/or light fixtures
are required, fixtures to be recessed 2'0" x 4'0" fluorescent
lighting per specifications below. Guideline of one (1) fixture
per 100 square feet of useable area.
a. All fluorescent fixtures shall be energy efficient using
Octron F032/41K, F025/41K or F017/41K or Landlord's approved
equal. Where U-shaped lamps are used, lamps shall be Octron
FBO31/41K or Landlord's approved equal.
7. FLOORING - Building standard twenty-six (26) ounce direct glue
down carpeting in one style and one color provided throughout
Tenant area plus vinyl base molding trim. Vinyl tile in special
purpose areas.
8. WALL SURFACE - Two (2) coats of flat latex water base paint
selected from building standard colors. Maximum of two (2) colors
per Tenant suite as required for building standard partitions.
9. ELECTRICAL - Electrical distribution as per code and space plan.
Existing to be reused where possible. Guideline of one duplex
receptacle per each 100 square feet of useable area.
10. TELEPHONE- Per space plan. Guideline of one(l) telephone outlet
per 250 square feet of useable area.
11. SIGNAGE - One (1) building standard Tenant identification sign
installed on corridor wall next to Tenant entry door, and one (1)
building standard Tenant I.D. sign on Master Directory in the
main lobby of Building.
-24-
<PAGE>
EXHIBIT "E" (CONTINUED)
12. HEATING, VENTILATING AND AIR CONDITIONING - Existing Building air
conditioning system and equipment to be used providing a minimum
of one (1) ton of cooling capacity per 250 square feet of useable
area. Existing system distribution duct work, grilles and
diffusers, vav boxes and controls to be reused, relocated and
modified as required for space plan.
13. WINDOW COVERING - Building standard blinds on all exterior
windows.
14. SPACE PLANNING - Landlord will provide basic space plan and one
major revision if necessary, conforming to the standard work
described in section.
15. WORKING DRAWINGS - Will be provided in accordance with the space
plan approved by Tenant and Landlord. Drawings and specifications
will be completed within prescribed city requirements for
construction permits and completion of the premises for
Certificate of Occupancy. Additions for changes to plans after
approval by Landlord and Tenant will be handled by written orders
at a cost of $100 per change plus the cost of the change.
16. DEMOLITION- All demolition, removal, hauling and clean-up
necessary to prepare the Premises for the construction of the
Tenant Improvements.
17. SPECIAL SYSTEMS/LIFE HEALTH SAFETY - Existing sprinkler systems,
fire alarm systems and equipment, exit lighting, fire
extinguishers and other special systems to be reused, relocated
and/or modified per space plan and code requirements.
II. General:
1. In accordance with the provisions of SECTION 27.01 AND 39.01, all
work and materials described herein shall be provided by the
Landlord, the cost of which shall be paid by the Landlord from
the Tenant Allowance described in SECTION 39.01.
2. All Tenant work shall be installed in accordance with the terms
of this Lease, all governing codes, laws, regulations and
Landlord's design construction, and labor standards.
III. Specific Exclusions
1. All furnishings, decorating, and trade fixtures.
2. All storage shelving and other millwork.
3. Computer flooring, special systems and equipment, structural
changes to Building, vaults, special enclosures and glass
partitions and doors.
4. Security systems and wiring.
5. Special hardware and automatic door openers.
6. Tenant's equipment and office furniture, etc.
7. Special plumbing, HVAC, electrical work required for the
installation of Tenant's equipment unless otherwise noted
specifically herein.
8. Recessed and/or other special lighting fixtures.
-25-
NeoMedia Technologies, Inc.
Exhibit 10.44
Sublease Agreement Between NeoMedia Technologies, Inc. and
Lancaster Annuity Services Company Dated November 8, 1996
<PAGE>
SUBLEASE AGREEMENT
This Sublease, dated this 8th day of November 1996 is made between NeoMedia
Technologies, Inc. (formerly DevTech Associates, Inc.) ("Sublessor") and
Lancaster Annuity Services Company and Mr. Terry Spirk (collectively,
"Sublessee").
R E C I T A L S:
Sublessor is the lessee under a Lease dated August 29, 1995 (the "Master
Lease") which is attached hereto as Exhibit "A" wherein MGI Properties, a
Massachusetts Trust ("Lessor") leased to Sublessor the real property located in
the City of Naperville, County of DuPage, State of Illinois described as 280
Shuman Boulevard, Suite 100 ("Master Premises"). The Master Lease has not been
amended by any agreements.
Sublessee desires to sublease a part or all of the Master Premises.
Sublessor desires to sublease a part or all of the Master Premises to Sublessee.
NOW, THEREFORE, on the terms and conditions provided in this Sublease, the
parties agree as follows:
1. PREMISES.
Sublessor hereby subleases to Sublessee and Sublessee hereby subleases from
Sublessor, on the terms and conditions set forth in this Sublease and the Master
Lease the following portions of the Master Premises:
Beginning December 1, 1996 and ending February 28, 1997, Sublessee shall
sublease that portion of the Master Premises which is outlined on Exhibit "B"
and is approximately 5,035 square feet;
Beginning March 1, 1997 and ending June 30, 1997 Sublessee shall sublease
that portion of the Master Premises which is outlined on Exhibit "C" and is
approximately 6,187 square feet;
Beginning July 1, 1997 and ending December 31, 2000 or the sooner
termination of this Sublease, Sublessee shall sublease the entire Master
Premises which is outlined on Exhibit "D".
The part or all of the Master Premises subleased to Sublessor at any time
shall be referred to as the "Premises. " The Premises are subleased to Sublessee
in AS IS condition and Sublessor makes no agreement to alter or improve the
Premises.
<PAGE>
2. TERM.
(a) The Term of this Sublease shall commence on December 1, 1996
("Commencement Date"), or when Lessor consents to this Sublease, whichever shall
last occur, and end on December 31, 2000 ("Termination Date"), unless otherwise
sooner terminated in accordance with the provisions of this Sublease. In the
event the Term commences on a date other than the Commencement Date, Sublessor
and Sublessee shall execute a memorandum setting forth the actual date of
commencement of the Term. Possession of the Premises ("Possession") shall be
delivered to Sublessee on the commencement of the Term. If for any reason
Sublessor does not deliver Possession to Sublessee on the commencement of the
Term, Sublessor shall not be subject to any liability for such failure, the
Termination Date shall not be extended by the delay, and the validity of this
Sublease shall not be impaired, but rent shall abate until delivery of
Possession. Notwithstanding the foregoing, if Sublessor has not delivered
Possession to Sublessee within thirty (30) days after the Commencement Date,
then at any time thereafter and before delivery of Possession, Sublessee may
give written notice to Sublessor of Sublessee's intent to cancel this Sublease.
Said notice shall set forth an effective date for such cancellation which shall
be at least ten (10) days after delivery of said notice to Sublessor. If
Sublessor delivers Possession to Sublessee on or before such effective date,
this Sublease shall remain in full force and effect. If Sublessor fails to
deliver Possession to Sublessee on or before such effective date, this Sublease
shall be canceled, in which case all consideration previously paid by Sublessee
to Sublessor on account of this Sublease shall be returned to Sublessee, this
Sublease shall thereafter be of no further force or effect, and Sublessor shall
have no further liability to Sublessee on account of such delay or cancellation.
If Sublessor permits Sublessee to take Possession prior to the commencement of
the Term, such early Possession shall not advance the Termination Date and
shall be subject to the provisions of this Sublease, including without
limitation the payment of rent.
(b) At any time on or after June 30, 1997, Sublessee may elect to terminate
this Sublease upon written notice to Sublessor; provided, however, that a
condition to Sublessee's right to elect to terminate this Sublease is that the
Lessor shall consent to the termination on terms agreeable to Sublessor of the
Master Lease simultaneous with the termination of this Sublease.
3. RENT.
(a) "Base Rent". Sublessee shall pay to Sublessor as Base Rent, without
deduction, set off, notice, or demand, at 6054 Timberwood Circle, #240, Ft.
Myers, Florida 33908 or at such other place as Sublessor shall designate from
time to time by notice to Sublessee, the Base Rent specified below, in advance
on the first day of each month of the Term.
-2-
<PAGE>
TIME PERIOD MONTHLY RENT
----------- ------------
12/01/96 TO 02/28/97: $ 7,552.50 per month
03/01/97 to 06/30/97: $ 9,280.50 per month
07/01/97 to 11/30/97: $13,986.00 per month
12/01/97 to 11/30/98: $14,404.58 per month
12/01/98 to 11/30/99: $14,840.70 per month
12/01/99 to 12/31/00: $15,283.29 per month
Sublessee shall pay to Sublessor upon execution of this Sublease the sum of
Seven Thousand Five Hundred Fifty Two and 50/100 Dollars ($7,552.50) as Base
Rent for the month of December.
(b) "Additional Rent". Sublessee and Sublessor agree that the Sublessee
shall not be responsible for the payment to Lessor of the Additional Rent
provided in the Master Lease. Sublessor shall pay any Additional Rent required
by the Master Lease.
4. UTILITIES.
Except as provided herein, Sublessee shall be solely responsible for the
payment of all services to the Premises which are provided in the Master Lease
to be paid by Sublessor and shall be solely responsible for timely payment for
electrical service to the Premises received directly from the utility company.
Prior to July 1, 1997, Sublessee and Sublessor shall prorate all billings for
services and utilities based on the square footage of the Master Premises
occupied by each, except that any party which requests after hour services shall
be solely responsible for payment of the cost of such services.
5. INSURANCE.
During the entire term of this Sublease, Sublessee, at its sole costs and
expense, agrees to purchase and keep in full force and effect during the term
hereof, the insurance coverage required by the Master Lease. Casualty and
extended coverage policies shall contain a clause pursuant to which the
insurance carriers waive all rights of subrogation against the Sublessor and
Lessor, and their agents and employees with respect to losses payable under said
policies. Sublessor and Lessor shall be named as additional co-insureds on all
insurance policies. Evidence of such insurance shall be delivered to Sublessor
upon demand and shall provide that coverage may not be changed or canceled
without thirty (30) days written notice to Sublessor and Lessor. If Sublessee
should fail to secure and maintain such insurance, Sublessor shall have the
right to do so and to add the cost thereof to the rent due hereunder.
-3-
<PAGE>
6. SECURITY DEPOSIT.
Sublessee shall deposit with Sublessor upon execution of this Sublease the
sum of Seven Thousand Five Hundred Fifty-Two and 50/100 Dollars ($7,552.50) as
security for Sublessee's faithful performance of Sublessee's obligations
hereunder ("Security Deposit"). The amount of the Security Deposit shall be
increased to Nine Thousand Two Hundred Eighty and 50/100 Dollars ($9,280.50) on
or before March 1, 1997 and shall be further increased to Thirteen Thousand Nine
Hundred Eighty Six and 00/100 Dollars ($13,986.00) on or before July 1, 1997. If
Sublessee fails to pay rent or other charges when due under this Sublease, or
fails to perform any of its other obligations hereunder, Sublessor may use or
apply all or any portion of the Security Deposit for the payment of any rent or
other amount then due hereunder and unpaid, for the payment of any other sum for
which Sublessor may become obligated by reason of Sublessee's default or breach,
or for any loss or damage sustained by Sublessor as a result of Sublessee's
default or breach. If Sublessor so uses any portion of the Security Deposit,
Sublessee shall, with ten (10) days after written demand by Sublessor, restore
the Security Deposit to the full amount originally deposited, and Sublessee's
failure to do so shall constitute a default under this Sublease. Sublessor shall
not be required to keep the Security Deposit separate from its general accounts,
and shall have no obligation or liability for payment of interest on the
Security Deposit. In the event Sublessor assigns its interest in this Sublease,
Sublessor shall deliver to its assignee so much of the Security Deposit as is
then held by Sublessor. Within ten (10) days after the Term has expired, or
Sublessee has vacated the Premises, or any final adjustment pursuant to
Subsection 3(b) hereof has been made, whichever shall last occur, and provided
Sublessee is not then in default of any of its obligations hereunder, the
Security Deposit, or so much thereof as had not theretofore been applied by
Sublessor, shall be returned to Sublessee or to the last assignee, if any, of
Sublessee's interest hereunder.
7. USE OF PREMISES.
The Premises shall be used and occupied only for general business offices
and related purposes and for no other use or purpose.
8. ALTERATIONS.
The Sublessee shall not make any alterations, improvements or additions to
the Premises without the prior written consent of Sublessor and Lessor.
Sublessor hereby consents to Sublessee, at its own expense, (i) installing a
double lock on the rear door of the Premises where indicated on Exhibit B and
(ii) installing a door to the Premises at the location indicated on Exhibit B.
Sublessor shall cooperate with Sublessee in obtaining Lessor's consent to such
construction. All construction drawings shall be subject to Sublessor's
approval. All construction shall be performed in accordance with the provisions
of the Master Lease.
-4-
<PAGE>
9. WARRANTY BY SUBLESSOR.
Sublessor warrants and represents to Sublessee as follows:
(a) The Master Lease has not been amended or modified, except as expressly
set forth herein;
(b) Sublessor is not now, and as of the commencement of the Term hereof
will not be, in default or breach of any of the provisions of the Master Lease;
(c) Sublessor has no knowledge of any claim by Lessor that Sublessor is in
default or breach of any of the provisions of the Master Lease; and
SUBLESSOR MAKES NO OTHER REPRESENTATIONS OR WARRANTIES TO SUBLESSEE, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY REPRESENTATIONS OR WARRANTIES AS TO
THE CONDITION OR REPAIR OF THE PREMISES.
10. ASSIGNMENT AND SUBLETTING.
Sublessee shall not assign this Sublease or further sublet any part of the
Premises without the prior written consent of Sublessor and Lessor. Sublessee
shall give notice and all documents required under the Master Lease to Sublessor
at least forty-five (45) days prior to the intended commencement date of any
proposed sublease. Notwithstanding the consent of the Lessor and Sublessor to
sublease a part of the Premises, in no event shall any sublease of the Premises
exceed thirty-three (33%) of the Premises.
11. FURNITURE.
(a) Sublessor agrees to lease the wooden furniture listed on Exhibit "E"
attached hereto (the "Wood Furniture") to Sublessee at no additional rent or
fee for the term of the Lease. Sublessor makes no representations or warranties
with respect to the Wood Furniture, including but not limited to, any
representations or warranties as to the condition or repair of the Wood
Furniture. Upon the expiration of this Sublease without any breach or default on
the part of Sublessee or on termination of this Sublease pursuant to Section
2(b), Sublessee may elect to purchase the Wood Furniture for consideration of
$1.00. Upon payment of $1.00 to Sublessor, Sublessor shall transfer all right,
title and interest in and to the Wood Furniture to Sublessee in AS IS condition
without representation or warranty. At Sublessor's request, Sublessee shall sign
a UCC Financing Statement to be filed by Lessor to record its ownership interest
in the Wood Furniture.
-5-
<PAGE>
(b) On or before March 1, 1997, Sublessor and Sublessee shall agree upon
and Sublessor shall sublease to Sublessee certain metal furniture to be
identified by the parties which shall be listed on Exhibit "F" to be attached
hereto (the "Metal Furniture") under the terms and conditions of that certain
Lease dated June 29, 1995 between Sublessor, as lessee, and The First National
Bank of Chicago, as lessor, which is attached hereto as Exhibit "G" (the "Metal
Furniture Lease"). Sublessor hereby consents to and Sublessee shall have a
license to use the metal furniture located in the Premises from December 1, 1996
through February 28, 1997. In consideration for such license, Sublessee shall
pay to Sublessor on or before the first day of each month during which Sublessor
shall use the such metal furniture, an amount equal to (i) the monthly rent due
under the terms of the Metal Furniture Lease multiplied by (ii) a fraction the
numerator of which is the square footage of the Premises during such month and
the denominator of which is the square footage of the Master Premises. The
provisions of this Section 11(b) shall be null and void if The First National
Bank of Chicago agrees to cancel the Metal Furniture Lease and enter into a
lease with Sublessee for the Metal Furniture. In that event, Sublessor shall
consent to termination of the Metal Furniture Lease and the execution of a lease
between The First National Bank of Chicago and Sublessee for the Metal
Furniture. Upon execution of the lease, Sublessor shall have no further
liability or obligation with respect to the Metal Furniture or the Metal
Furniture Lease.
12. DEFAULT.
If Sublessee shall at any time be in default in the payment of rent herein
reserved and Sublessee shall fail to remedy such default within five (5) days or
if Sublessee shall at any time be in default in the performance of any of the
other covenants, terms, conditions, or provisions of this Sublease and Sublessee
shall fail to remedy such default within fifteen (15) days after written notice
thereof from Sublessor or if Sublessee shall make an assignment for the benefit
of creditors or if a receiver of any property of Sublessee in or upon the
Premises be appointed in any action, suit, or proceeding by or against Sublessee
and the decree of order not set aside, vacated, or stayed within sixty (60) days
of entry thereof or if the interest of Sublessee in the Premises shall be sold
under execution or other legal process or if Sublessee shall file a petition in
bankruptcy or a petition shall be filed against Sublessee in bankruptcy and not
set aside, vacated or stayed within thirty (30) days after entry, it shall be
lawful for Sublessor to enter upon the Premises and again have, repossess, and
enjoy Premises as if this Sublease had not been made, and thereupon this
Sublease and everything herein contained on the part of the Sublessor to be done
and performed shall cease and determine, without prejudice, however, to the
right of Sublessor to recover from Sublessee all rent due up to the time of such
entry or any other rights of Sublessor. In the case of any default and re-entry
by Sublessor, Sublessor may relet the Premises for the remainder of the term of
this Sublease thereof for the highest rent obtainable by Sublessor and may
recover from Sublessee any deficiency between the amount so obtained less
Sublessor's costs and expenses including attorneys' fees in connection with such
entry and reletting and the Base Rent and Additional Rent to be paid under this
Sublease. Sublessee shall indemnify and hold harmless Sublessor for all damages,
liabilities, interest,
-6-
<PAGE>
penalties, costs and expenses, including attorneys' fees and expenses, incurred
by Sublessor as a result of any default by Sublessee hereunder.
13. INDEMNIFICATION.
Sublessee shall indemnify, defend and hold harmless Sublessor from any and
all suits, actions, proceedings, damages, liabilities, costs and expenses as a
result of or arising out of Sublessee's occupancy of the Premises.
14. OTHER PROVISIONS OF SUBLEASE.
All applicable terms and conditions of the Master Lease are incorporated
into and made a part of this Sublease as if Sublessor were the lessor
thereunder, Sublessee the lessee thereunder, and the Premises the Master
Premises, except that Sublessee shall have no rights under the provisions of
Rider No. 1 to the Master Lease. Sublessee assumes and agrees to perform the
lessee's obligations under the Master Lease during the Tenn to the extent that
such obligations are applicable to the Premises, except that the obligation to
pay rent to Lessor under the Master Lease shall be considered performed by
Sublessee to the extent and in the amount rent is paid to Sublessor in
accordance with Section 3 of the Sublease. Sublessee shall not commit or suffer
any act or omission that will violate any of the provisions of the Master Lease.
Sublessor shall exercise due diligence in attempting to cause Lessor to perform
its obligations under the Master Lease for the benefit of Sublessee. If the
Master Lease terminates, this Sublease shall terminate and the parties shall be
relieved of any further liability or obligation under this Sublease, provided,
however, that if the Master Lease terminates as a result of a default or breach
by Sublessor or Sublessee under this Sublease and/or the Master Lease, then the
defaulting party shall be liable to the nondefaulting party for all damages
suffered as a result of such termination, including, but not limited to,
attorneys' fees and expenses. Notwithstanding the foregoing, if the Master Lease
gives Sublessor any right to terminate the Master Lease in the event of the
partial or total damage, destruction, or condemnation of the Master Premises or
the building or project of which the Master Premises are a part, the exercise of
such right by Sublessor shall not constitute a default or breach hereunder.
15. ATTORNEYS' FEES.
If Sublessor, Sublessee, or Lessor shall commence an action against the
other arising out of or in connection with the Sublease, the prevailing party
shall be entitled to recover its costs of suit and reasonable attorney's fees.
16. INTEREST.
If not paid when due, any installments of Base Rent shall bear interest as
provided in the Master Lease from the date such payment is due to the payment
date.
-7-
<PAGE>
17. AGENCY DISCLOSURE.
Sublessor and Sublessee each warrant that they have dealt with no other
real estate broker in connection with this transaction except: SUBURBAN REAL
ESTATE SERVICES, INC., ("Broker") who represents NeoMedia Technologies, Inc. and
Commercial Group, R.E. ("Cooperating Broker") who represents Lancaster Annuity
Services Company.
18. COMMISSION.
Upon execution of this Sublease, and consent thereto by Lessor, Sublessor
shall pay Broker a real estate brokerage commission in accordance with
Sublessor's contract with Broker for the subleasing of the Premises. Sublessor
shall have no responsibility to pay Cooperating Broker any commission
whatsoever.
19. NOTICES.
All notices and demands which may or are to be required or permitted to be
given by either party on the other hereunder shall be in writing. All notices
and demands by the Sublessor to Sublessee shall be sent by United States Mail,
postage prepaid, addressed to the Sublessee at the address hereinbelow, or to
such other place as Sublessee may from time to time designate in a notice to the
Sublessor. All notices and demands by the Sublessee to Sublessor shall be sent
by United States Mail, postage prepaid, addressed to the Sublessor at the
address set forth below, and to such other person or place as the Sublessor may
from time to time designate in a notice to the Sublessee.
To Sublessor: NeoMedia Technologies, Inc.
6054 Timberwood Circle, #240
Ft. Myers, Florida 33908
To Sublessee: 280 Shuman Boulevard
Suite 100
Naperville, IL 60563
20. SEVERABILITY.
The invalidity of any provision of this Sublease shall not impair or
otherwise adversely affect the validity of any other provision.
21. GOVERNING LAW.
This Sublease shall be governed by, and construed in accordance with the
laws of the State of Illinois applicable to contracts made and performed in that
State.
-8-
<PAGE>
22. CONSENT BY LESSOR.
THIS SUBLEASE SHALL BE OF NO FORCE OR EFFECT UNLESS CONSENTED TO BY LESSOR.
Sublessor: Sublessee:
NEOMEDIA TECHNOLOGIES, INC., LANCASTER ANNUITY SERVICES
formerly DevTech Associates, Inc. COMPANY
By /s/ CHARLES W. FRITZ By /s/ TERRY SPIRK
---------------------- -----------------------
Title President Title CEO
---------------------- -----------------------
Date 11/9/96 Date 11/8/96
---------------------- -----------------------
/s/ TERRY SPIRK
-----------------------------
Terry Spirk
Date
------------------------
-9-
<PAGE>
LESSOR'S CONSENT TO SUBLEASE
The undersigned ("Lessor"), lessor under the Master Lease, hereby consents to
the foregoing Sublease without waiver of any restriction in the Master Lease
concerning further assignment or subletting. Lessor certifies that, as of the
date of Lessor's execution hereof, Sublessor is not in default or breach of any
of the provisions of the Master Lease, and that the Master Lease has not been
amended or modified except as expressly set forth in the foregoing Sublease.
Date November 26, 1996
-----------------------
Lessor MGI Properties, a Massachusetts Trust
By /s/ ILLEGIBLE
-----------------------
Title Exec. Vice President
-----------------------
-10-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT "A" Page 1 of 3
SOURCE: EXISTING PROJECT COMPARISION REPORT
PROCUREMENT: FUTURE PRODUCT SUMMARY
QUANTITIES QUANTITIES
CATEGORY PRODUCT NUMBER DESCRIPTION EXISTING FUTURE REQ'D EXTRA
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONNECTORS 801043-P-[7-7]-Q PANEL CONNECTOR, STRAIGHT 43H 43 46 3 0
801069-P-[7-7]-Q PANEL CONNECTOR, STRAIGHT 69H 44 8 0 3
801082-P-[7-7]-Q PANEL CONNECTOR, STRAIGHT 82H 6 6 0 0
801143-P-[7-7]-Q /ILLEGIBLE/4 DEGREE "ELL" CONNECTOR 43H 8 8 0 0
801165-P-[7-7]-Q /ILLEGIBLE/4 DEGREE "ELL" CONNECTOR 69H 5 5 0 0
801182-P-[7-7]-Q /ILLEGIBLE/4 DEGREE "ELL" CONNECTOR 82H 3 2 0 1
801242-P-[7-7]-Q 3-WAY "TEE" CONNECTOR 43H 7 3 0 4
801289-P-[7-7]-Q 3-WAY "TEE" CONNECTOR 69H 1 1 0 0
801282-P-[7-7]-Q 3-WAY "TEE" CONNECTOR 82H 0 1 1 0
801445-P-[7-7]-Q PANEL END COVER 43H 10 14 0 5
801440-P-[7-7]-Q PANEL END COVER 69H 2 2 0 0
801482-P-[7-7]-Q PANEL END COVER 82H 1 0 0 1
801582-Q PANEL MOUNT WALL KIT 32H 1 0 0 1
801602-Q VARIABLE HEIGHT PANEL END COVER, 2 PANELS 5 4 0 1
801603-Q VARIABLE HEIGHT PANEL END COVER, 3 PANELS 1 1 0 0
ELECTRICAL 871601-Q DUPLEX RECEPTACLE CIRCUIT 1 25 24 0 1
871604-Q DUPLEX RECEPTACLE CIRCUIT 4 24 24 0 0
DATA DATA AND COMMUNICATIONS OUTLET 25 24 0 1
PANELS 894324-P-[7-7]-Q ACOUSTICAL PANEL 42H,24W,2D 2 0 0 2
894330-P-[7-7]-Q ACOUSTICAL PANEL 42H,30W,2D 5 4 0 1
894338-P-[7-7]-Q ACOUSTICAL PANEL 42H,36W,2D 29 32 3 0
894342-P-[7-7]-Q ACOUSTICAL PANEL 42H,42W,2D 37 34 0 3
894348-P-[7-7]-Q ACOUSTICAL PANEL 42H,43W,2D 1 0 0 1
896930-P-[7-7]-Q ACOUSTICAL PANEL 69H,30W,2D 2 0 0 2
896936-P-[7-7]-Q ACOUSTICAL PANEL 69H,36W,2D 8 6 0 0
896942-P-[7-7]-Q ACOUSTICAL PANEL 69H,42W,2D 7 5 0 1
858290-P-[7-7]-Q ACOUSTICAL PANEL 82H,30W,2D 1 0 0 1
858236-P-[7-7]-Q ACOUSTICAL PANEL 82H,36W,2D 9 4 1 0
858242-P-[7-7]-Q ACOUSTICAL PANEL 82H,42W,2D 3 4 1 0
894248-P-[7-7]-Q ACOUSTICAL PANEL 82H,46W,2D 3 0 0 3
PEDESTALS 149238-Q PEDESTAL, HANGING, BOX/FILE 19H,22-7/80,15W 26 24 0 1
STORAGE 860130-Q STORAGE CABINET W/DOORS AND LOCK, 30W,14W,14-1/4H,10H 2 0 0 2
860136-Q STORAGE CABINET W/DOORS AND LOCK, 38W,14W,14-1/4H,10H 8 9 0 0
WORK
SURFACES 8224OOA-Q-Q WORKSURFACE, RADIAL EDGE, CORNER, 30W,14-1/4D,10H 24 24 0 0
822436A-Q-Q WORKSURFACE, RADIAL EDGE 36W,24D,1-1/2H 26 29 0 0
822460A-Q-Q WORKSURFACE, RADIAL EDGE 60W,24D,1-1/2H 3 2 0 1
822472A-Q-Q WORKSURFACE, RADIAL EDGE 72W,24D,1-1/4H 3 9 0 0
WORKSURF
SUPPO 631520-Q SUPPORT LEG 25-1/2H,24D 48 48 0 0
831828-Q FULL END PANEL, LEFT 28-1/2H,24D 15 13 0 2
831928-Q FULL END PANEL, RIGHT 29-1/2H,24D 15 13 0 2
SEATING 8001-AD-84G EXECUTIVE, HIGHBACK, W/ARMS 25-3/4W,
2/ILLEGIBLE/-1/4D,41-1/4H 1 0 0 1
8008-AD-84G GUEST CHAIR, SLED BASE W/ARMS 1 1 0 0
8015-AD-84G EXECUTIVE CHAIR, PNEUMATIC, W/ARMS, 25-3/4W,27-1/2D,
36-1/2H 24 24 0 0
8106G-AD-84G EXECUTIVE CHAIR, GLIDES, W/ARMS, 27-1/2H,253/4D,36-1/2 2 0 0 2
6115-AD-84G EXECUTIVE CHAIR, PNEUMATIC, W/ARMS, 27-1/2W,25-3/4D,
36-1/2H 16 14 0 2
CONNECTORS 2WAY45 2 WAY CONNECTOR 46H 0 6 0 0
2WAY68 2 WAY CONNECTOR 68H 1 0 0 1
3WAY45 3 WAY CONNECTOR 45H 3 1 0 2
4WAY45 4 WAY CONNECTOR 45H 2 2 0 0
</TABLE>
PAGE 1
<PAGE>
EXHIBIT "A" Page 2 of 3
SOURCE: EXISTING PROJECT COMPARISION REPORT
PROCUREMENT: FUTURE PRODUCT SUMMARY
<TABLE>
<CAPTION>
QUANTITIES QUANTITIES
CATEGORY PRODUCT NUMBER DESCRIPTION EXISTING FUTURE REQ'D EXTRA
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONNECTORS END46 END CONNECTOR 2-1/4W,2-1/4D,46H 22 19 0 0
END36 END CONNECTOR 68H 1 0 0 1
ELECTRICAL DUP.EX DUPLEX OUTLET 20 6 0 14
PANELS PAN3044 (WOOD) PANEL, 30W,44H 2 2 0 0
PAN4524 PANEL, 24W,45H,2-1/4D 1 1 0 0
PAN4530 PANEL, 30W,45H,2-1/4D 9 9 0 0
PAN4542 PANEL, 42W,45H,2-1/4D 33 30 0 3
PAN4844 (WOOD) PANEL, 48W,44H 1 1 0 0
PAN8630 PANEL, 30W,66H,2-1/4D 1 0 0 1
PAN8644 (WOOD) PANEL, 66W,44H 1 1 0 0
PAN8648 PANEL, 46W,68H,2-1/4D 1 0 0 1
PEDESTALS BBB (WOOD) PEDESTAL, BOX/BOX/BOX 1 1 0 0
BBBH (WOOD) PEDESTAL, BOX/BOX/BOX MACHINE HEIGHT 1 1 0 0
BBF (WOOD) PEDESTAL, BBF 5 1 0 4
FF PEDESTAL, FF 29 25 0 4
STORAGE TRANS66 (WOOD) TRANSACTION COUNTER 66W, 10-1/4D,1-1/4H 1 4 0 0
WORKSURF WORK3024 WORKSURFACE 30W,24D,1-1/2H 16 12 0 4
WORK4224 WORKSURFACE 42W,24D,1-1/2H 17 13 0 4
WORK4242C WORKSURFACE, CORNER 42W,42D,1-1/2H 16 12 0 4
WORK4824 (WOOD) WORKSURFACE 48W,24D,1-1/2H 1 1 0 0
WORK6630 (WOOD) WORKSURFACE 66W,30D,1-1/2H 1 1 0 0
WORK7224 WORKSURFACE 32W,24D,1-1/2H 1 1 0 0
WORK7730R WORKSURFACE, ROUNDED END 72W,30D,1-1/2H 1 1 0 0
WORKSURF ENDP24 END PANEL 24W,28H,2D 28 24 0 4
SUPPO SUPTCOL SUPORT COLUMN 1 1 0 0
SEATING LOUNGE-BURGUNDY LOUNGE CHAIR 33-1/2W,29D,30H 3 3 0 0
LEATHER
SEC-BURGUNDY SECRETARIAL CHAIR 3 0 0 5
TABLES TAB4821 COFFEE TABLE 45W,21D,18H 1 1 0 0
</TABLE>
<PAGE>
EXHIBIT "A" Page 3 of 3
Cubicle pieces currently stored at Jackson Storage, Naperville:
8 6 foot workspaces
1 5 foot workspaces
3 middle joining pieces
17 panels that have a #623810 listed on the edge
8 ea. 36x60
7 ea. 42x42
2 ea. 48x60
2 5x5 partitions
1 chair 6015/6115 ?
11 2 drawer files for Kimball
1 large box of miscellaneous hardware
4 wood pencil drawers - do not know if these go with the Kimball or Hon
<PAGE>
Sublease Agreement
Exhibit B
Exhibit B presents a diagram of the approximate 5,035 square feet to be sublet
and the approximate 4,289 square feet to be retained by NeoMedia.
<PAGE>
Sublease Agreement
Exhibit C
Exhibit C presents a diagram of the approximate 6,187 square feet to be sublet
and the approximate 3,137 square feet to be retained by NeoMedia.
<PAGE>
Sublease Agreement
Exhibit D
Exhibit D presents a diagram of the approximate 9,324 square feet to be sublet.
<PAGE>
Exhibit E
Wood Furniture Leased
ROOM # QUANTITY DESCRIPTION
------ -------- -----------
101 3 Red Leather Chairs
101 1 Glass-Top Table
101 1 Receptionists Wood Desk
101 1 Wood Credenza
102 1 Executive Wood Desk
102 1 Executive Swivel Chair
102 2 Executive Chairs
102 1 Wood Credenza
102 1 Wood File Cabinet
103 1 Wood Desk
103 2 Chairs
103 1 Wood Credenza
103 1 Wood File Cabinet
104 1 Wood Desk
104 2 Chairs
104 1 Wood Credenza
104 1 Wood File Cabinet
106 1 Wood File Cabinet
107 1 Wood Credenza
107 1 Wood File Cabinet
110 1 Wood Desk
110 1 Chairs
110 1 Wood Credenza
110 1 Wood File Cabinet
113 3 Metal Shelves
113 1 Wood Desk
123 1 Conference Table
<PAGE>
EXHIBIT "F"
To be agreed by Sublessor and Sublessee.
<PAGE>
Exhibit "G"
MASTER LEASE
------------
This Master Lease Agreement("Master Lease")dated June 29, 1995 between NBD Bank
("Lessor"), of 211 S. Wheaton Avenue, Wheaton, Illinois 60187 and DevTech
Associates, Inc. ('Lessee').
Lessee wants from time to time to lease from Lessor personal property to be
described in one or more Schedules of leased equipment. Lessor is willing to
lease such personal property to Lessee at the rent, for the term and upon the
conditions stated. Any present and future Schedules executed by Lessor and
Lessee which are identified as being a part of this Master Lease, shall be
deemed to incorporate by reference all the terms and conditions of this Master
Lease except as provided in any such Schedule. In the event of a conflict
between this Master Lease and any Schedule, the provisions of such Schedule
shall control.
1. EQUIPMENT LEASED AND TERM. This Master Lease shall cover such
personal property as is described in any Schedule executed by or
pursuant to the authority of Lessee, accepted by Lessor in writing and
identified as a part of this Master Lease (which personal property with
all replacement parts, additions, repairs accessions and accessories
incorporated in and/or affixed to the personal property is referred to
as the "Equipment"). Lessor leases to Lessee and Lessee hires and takes
from Lessor, upon and subject to the covenants and conditions of this
Master Lease, the Equipment described in any Schedule. The term and
rental of the Master Lease with respect to any item of Equipment shall
be for the period as set forth in the Schedule (the "Initial Lease
Term").
2. RENT. The aggregate rent payable with respect to each item of
Equipment shall be in the amount shown with respect to such item on the
Schedule. Lessee shall pay to Lessor the aggregate rental for each item
of Equipment for the full period and term for which the Equipment is
leased, such rental to be payable at such times and in such amounts for
each item of Equipment as shown in the applicable Schedule.
3. PURCHASE AND ACCEPTANCE. Lessee requests Lessor to acquire all
scheduled Equipment pursuant to an assignment of Lessee's purchase
order(s) for the Equipment. Delivery of each item of Equipment shall
be deemed complete upon the acceptance date ("Acceptance Date") stated
in the Schedule for each item of Equipment. Lessor shall not be liable
for loss or damage or for the delay or failure of any supplier of the
Equipment ("Seller") to fill or deliver the order for any item of
Equipment. THE LESSEE REPRESENTS THAT LESSEE HAS SELECTED BOTH THE
EQUIPMENT LISTED IN ANY SCHEDULE AND THE EQUIPMENT SELLER BEFORE
HAVING REQUESTED LESSOR TO ACQUIRE SAME FOR LEASING TO LESSEE.
4. NON-CANCELABLE LEASE. THIS MASTER LEASE IS NON-CANCELABLE. When
Lessee signs and delivers a certificate of Acceptance for the
Equipment, its obligations to pay all rent for the Initial Lease Term
and other amounts when due for the Equipment and otherwise to perform
as required under this Master 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 to 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
5. DISCLAIMER OF WARRANTIES BY LESSOR; RIGHTS OF LESSEE. LESSOR MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING
THE CONDITIONS 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 MASTER
LEASE AND/OR 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.
6. 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 Master 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 Master Lease.
1
<PAGE>
7. TITLE: LOCATION OF THE EQUIPMENT; EQUIPMENT IS PERSONAL PROPERTY;
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 in the applicable Schedule and shall not be
removed without the [prior written consent of Lessor, provided,
however, in no event shall Lessor be required to consent to the removal
of any item of Equipment to a location outside of the continental
United States. Lessee further covenants and agrees that the Equipment
is, and will at all times be and remains, personal property. At each
scheduled termination date, or upon Lessee's default, Lessee, at its
own expense, shall assemble and deliver the Equipment to Lessor at the
location designated by Lessor, in good order and repair, ordinary wear
and tear excepted. Lessee shall give Lessor 90 days written notice
prior to each scheduled termination date, that it is returning the
Equipment.
8. NO ASSIGNMENT BY LESSEE: ASSIGNMENT BY LESSOR. THIS MASTER LEASE
SHALL NOT BE ASSIGNED BY LESSEE, NOR SHALL ANY OF THE EQUIPMENT BE
SUBLEASED BY LESSEE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.
Lessor may at any time sell or assign to any bank, or financial
institution, or any person, firm, or corporation all or part of its
right, title and interest in and to this Master Lease and in and to
each item of Equipment and monies to become due to the Lessor, and
Lessor may grant security interests in the Equipment, subject to the
Lessee's rights as set forth in this Master Lease, and in such events,
all the provisions of this Master 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 Master Lease and assigned by Lessor shall
be paid directly to assignee, upon written notice of such assignment to
Lessee. 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 rights shall not be subject to any defense,
counterclaim or setoff which the Lessee may have or assert against the
Lessor. Lessee agrees that it will not assert any such defenses,
setoffs, counterclaims and claims against the assignee.
9. CASUALTY AND LIABILITY INSURANCE, RISK OF LOSS, DAMAGE OR
DESTRUCTION. Lessee shall keep all Equipment insured against loss by
fire, theft and all other hazards (comprehensive coverage) in such
amounts as Lessor requires (but not less than the casualty value (the
"Casualty Value") for such item indicated in the Casualty Table
attached to the applicable Schedule). Such insurance shall be with
insurers and in form, amount and coverage satisfactory to Lessor.
Lessee appoints Lessor Lessee's attorney in fact top endorse any loss
payments or returned premium check and to make any claim under such
insurance. Lessee shall also insure the Lesssor 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 and against
risks customarily insured against by the Lessee for equipment owned by
it. All 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 thirty days written notice to Lessor
at the address set forth under its name below and (b) that the interest
of Lessor shall not be invalidated by any act of Lessee. The policies
of insurance or any endorsement certificates shall be delivered to
Lessor within 30 days after any scheduled Acceptance Date. In the event
of loss, destruction or theft of, or damage to, any of the Equipment,
Lessee will immediately notify Lessor. Upon Lessor's and any assignee's
written consent, Lessee may act as a self-insurer in amounts acceptable
to Lessor and any assignee.
If Lessee defaults in obtaining any insurance to be provided, Lessor
may, but is not required to 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. At Lessor's sole option,
such amounts together with interest may be added to the lease balance
to be paid by Lessee as additional monthly rent. NOTWITHSTANDING THE
PROVISIONS OF THIS PARAGRAPH, LESSEE WILL HOLD LESSOR HARMLESS AGAINST
ANY SUCH CLAIM OR LIABILITY (INCLUDING ATTORNEY'S FEES, COSTS AND
EXPENSES FOR ANY DEFENSE) ARISING OUT OF THE OWNERSHIP, USE OR
OPERATION OF THE EQUIPMENT DURING THE PERIOD OF THIS MASTER LEASE AND
UNTIL THE EQUIPMENT IS RETURNED TO AND ACCEPTED BY THE LESSOR.
Lessee assumes and shall bear all risks of loss of, damage to or
destruction of each item of Equipment, whether partial or complete.
Except as provided in this Section 9, no such event shall relieve the
Lessee of its obligation to pay the full rental payable for such item.
If any item of Equipment is damaged (but not beyond economical repair),
Lessee must promptly notify Lessor and, within 60 days of such damage,
shall repair the item at its own expense and restore it to the same
state and condition as required under this Master Lease. Lessee shall
then be entitled to receive from Lessor or any assignee, any insurance
proceeds received in connection with such damage.
If any item of Equipment is destroyed, damaged beyond economical
repair, lost or stolen, or taken by governmental action for a stated
period extending beyond the Initial Lease Term for such item (an "Event
of Loss"), Lessee must promptly notify Lesssor and any assignee and pay
to Lessor or the assignee, as the case my be, on the next rent payment
date following the Event of Loss the Casualty Value of the item of
Equipment. Upon such payment and provided no Event of Default as
defined in Section 12 has occurred, Lessee's obligation to pay rent for
such item of
2
<PAGE>
Equipment will cease and Lessee will be entitled to receive any
insurance proceeds or other recovery received by the Lessor or assignee
in connection with the Event of Loss.
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.
Lessee will at all times during the initial Lease Term of each Schedule
maintain in force a maintenance agreement covering each item of
Equipment with the manufacturer of the Equipment or such other party as
is acceptable to Lessor. Lessor, or Lessor's assignee, shall have the
right but not the obligation to inspect the Equipment during Lessee's
normal business hours.
11. LIENS AND TAXES. Lessee at its expense shall keep the Equipment
free and clear of all levies, liens and encumbrances. Lessee shall
declare and pay all charges and taxes (local, state and federal) which
may now or hereafter be imposed or levied upon the Master Lease,
rental, operation, leasing, sale, ownership, possession or use of the
Equipment excluding all taxes based upon income or gross receipts of
Lessor. Upon the request of Lessor, Lessee shall provide evidence of
such payment.
12. DEFAULT. Any of the following shall constitute an event of default
("Event of Default") by Lessee: (a) Lessee fails to pay when due any
scheduled rent or other amount required by this Master Lease; (b)
Lessee breaches any covenant of this Master Lease or fails to promptly
perform any of its terms or conditions, including but not limited to
return of the leased Equipment at the expiration of any scheduled 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,
furnishing, fixtures, or other equipment or inventory; (g) any
representation, warranty, or signature made by Lessee in this Master
Lease or related document is incorrect, fraudulent or breached; (h)
Lessee defaults under the terms of any agreement or instrument relating
to any lease or debt for borrowed money such that the Lessor
accelerates the rent or the creditor declares the debt due before its
maturity; or (i) Lessee or any guarantor gives Lessor reasonable cause
to be insecure about Lessee's or guarantors willingness or ability to
perform the obligations under this Master Lease. Lessee covenants and
agrees to give Lessor prompt notice upon the occurrence of an event of
default, and the Lessee's failure to give such notice shall constitute
a further event of default.
13. LESSOR'S REMEDIES UPON DEFAULT BY LESSEE. Upon the occurrence of an
event of default, Lessor without further notice may (i) recover from
Lessee the Casualty Value of the Equipment together with any unpaid
rent and (ii) regardless of whether such amounts are paid, take
possession of any item or items or Equipment with or without process of
law and at Lessor's option sell or lease at public auction or by
private sale or otherwise dispose of such item or items of Equipment
free and clear of any rights of Lessee an without any duty to account
to Lessee except as expressly provided in this Section 13.
If Lessee shall have paid the Casualty Value and unpaid rent referred
to above and all other amounts owing under this Master Lease and any
items of Equipment have been taken from Lessee, the proceeds of any
reletting or sale (less all costs and expenses including attorneys'
fees) shall be paid to reimburse the Lessee for the Casualty Value up
to the amount previously paid. Any surplus remaining after such payment
will be retained by the Lessor.
In addition, Lessor may exercise any other right or remedy available to
Lessor at law or in equity including rights of setoff. Regardless of
any sale or lease of the Equipment or any payment of the Casualty
Value, Lessee will remain liable to Lessor for all damages as provided
by law and for all costs and expenses incurred by Lessor including
court costs and attorneys' fees. No remedy under this Master Lease is
intended to be exclusive, but each remedy shall be cumulative and in
addition to any other remedy available at law or in equity.
14. RENEWAL. If the Equipment is not delivered to Lessor at any
scheduled termination date in accordance with paragraph 7, then the
Initial Lease Term shall renew on a month to month basis upon the same
terms and conditions, subject to the right of Lessor or Lessee to
terminate the renewed term on 30 days written notice, in which event,
the Equipment shall immediately be returned to Lessor.
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 with a minimum late charge
being $10.00. This late charge shall be reassessed in each subsequent
month that the rental or other payment remains unpaid.
16. FINANCING STATEMENTS. The Lessor is authorized to file a financing
statement in accordance with the Uniform Commercial Code signed by
Lessee or by Lessor, as Lessee's attorney in fact.
3
<PAGE>
17. JURISDICTION; VENUE; SEVERABILITY. 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.
18. WARRANTIES BY LESSEE. Lessee warrants and represents the; (a) the
Equipment is being leased for business purposes; (b) all signatures are
genuine; (c) the person signing the Master 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; (e) the execution and performance of
this Master Lease, each Schedule and related documents and the
performance of the obligations they impose, do not violate any law and
do not conflict with any agreement by which Lessee is bound, and that
no consent or approval of any governmental authority or any third party
is required in connection with the execution or delivery of this Master
Lease, any Schedule or related documents, and that this Master Lease,
each Schedule and related documents are valid and binding agreements,
enforceable in accordance with their terms and; (f) there are no
actions, suits or proceedings pending, or to the knowledge of the
Lessee threatened, before any court, administrative agency, arbitrator
or governmental body which will, if determined adversely to the Lessee,
materially adversely affect its ability to perform its obligations
under this Master Lease or any related agreement to which it is a
party. If Lessee is other than a natural person, it further represents
that (a) it is duly organized, existing and in good standing pursuant
to the laws under which it is organized; and (b) the execution and
delivery of this Master Lease and the performance of the obligations it
imposes are within its power and have been duly authorized by all
necessay action of its governing body and do not contravene the terms
of its articles of incorporation or organization, its bylaws, or any
partnership, operating or other agreement governing its affairs.
19. IDEMNITY BY LESSEE. Lessee agrees to indemnify and hold Lessor or
any assignee harmless from any and all claims, actions, proceeding,
expenses, damages and liabilities, including attorneys' fees, arising
out of or in any manner pertaining to the Equipment or this Master
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.
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 Internal Revenue
Code of 1986, as from time to time amended, (the "Code") to an owner of
personal property.
In addition, notwithstanding any other provision of this Master 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, 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.
The indemnities given and liabilities assumed by the Lessee pursuant to
this Section 19 shall continue in full force and effect notwithstanding
the expiration or other termination of this Master Lease.
20. NOTICES. Notice from one party to another relating to this Master
Lease shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex
number or telecopier number set forth under its name below by any of
the following means: (a) hand delivery, (b) registered or certified
mail, postage prepaid, with return receipt requested, (c) first class
or express mail, postage prepaid, (d) overnight courier service or (e)
telecopy, telex or other facsimile transmission with request for
assurance of receipt in a manner typical with respect to communication
of that type. Notice made in accordance with this section shall be
deemed delivered upon receipt if delivered by hand or wire
transmission, 3 business days after mailing if mailed by first class,
registered or certified mail or one business day after mailing or
deposit with in overnight courier service.
21. 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.
22. 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.
4
<PAGE>
23. PERFORMANCE BY LESSOR. If the Lessee fails to duly and promptly
perform any of its obligations under the Master Lease, Lessor may, at
its option, perform such act or make such payment which the Lessor
deems necessary. All sums so paid or incurred by Lessor including
attorneys' fees shall be immediately due and payable by Lessee, without
demand, and shall bear interest at the lesser of one and one-half
percent (1-1/2%) per month or the highest rate permissible by law. The
performance of any act or payment by Lessor shall not constitute a
waiver or release of any obligation or default on the part of Lessee.
24. ENTIRE AGREEMENT. This Master Lease and subsequent Schedules
constitute the entire agreement of the parties in connection with the
Equipment. Neither party relies on any other statement, 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. No delay on the part of Lessor in the exercise of any right
or remedy shall operate as a waiver. No single or partial exercise by
Lessor of any right or remedy shall preclude any other future exercise
of it or the exercise of any other right or remedy. No waiver or
indulgence by Lessor of any default shall be effective unless in
writing and signed by Lessor, nor shall a waiver on one occasion be
construed as a bar to or waiver of that right on any future occasion.
26. FINANCIAL REPORTS. Upon request by Lessor, Lessee will promptly
furnish to Lessor for the most recent quarterly period, a balance sheet
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.
27. WAVER 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 Master 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 it 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 MASTER LEASE AGREEMENT SHALL THE UNDERSIGNED (AND IF MORE
NOT BE BINDING ON LESSOR UNTIL IT THAN ONE, JOINTLY AND SEVERALLY)
HAS BEEN EXECUTED BY AGREE TO ALL OF THE TERMS AND
AN OFFICER OR LESSOR. CONDITIONS ABOVE WHICH ARE
PART OF THIS MASTER LEASE
AGREEMENT
Accepted by
NBD BANK DevTech Associates, Inc.
By /s/ WILLIAM D. GUNAME By /s/ BRYON D. KARGER
---------------------- ----------------------
Title AVP Title Finance Manager
---------------------- ----------------------
Date 7/3/95 By
---------------------- ----------------------
Title
----------------------
Date 6/30/95
----------------------
Address For Notices: Address For Notices:
39555 Orchard Hill Place Drive 1280 Iroquois Drive
Suite 340 Suite 300
Novi, Michigan 49375 Naperville, Illinois 60563
Fax No.: (810) 349-3893 Fax No.: (708) 355-2944
5
<PAGE>
SCHEDULE 3
This Schedule date June 29, 1995 incorporates the Master Lease dated
June 29, 1995
between NBD BANK as Lessor,
and DEVTECH ASSOCIATES, INC. as Lessee.
LESSEE: DEVTECH ASSOCIATES, INC. Lessor: NBD BANK
280 Shuman Boulevard 211 S. Wheaton Avenue
Suite 100 Wheaton, IL 60187
Naperville, Il 60563
Tax I.D. No. 36-3680347
Location of Equipment: same as above
MODEL/
QUANTITY FEATURE DESCRIPTION SERIAL NUMBER
- - -------- ------- ----------- -------------
See Exhibit A
Rent Payment Due Date: The 29th day of each month in advance.
Initial Lease Term: The Lease Term for each leased item commences on the
Acceptance Date and continues for 36 months.
RENT: $1,693.92.
(If at First Rent Payment Due Date is after the Acceptance Date, the
first Rent payment shall be the total of (i) the first installment of
rent as specified above, plus (ii) an amount equal to 1/30th of that
Rent, multiplied by the number of days from and including the
Acceptance Date for a leased item but excluding the First Rent Payment
Due Date.)
Rent is computed by multiplying the Equipment cost x .03189. In the event the
Equipment cost varies from $53.117.50. Rent will be adjusted accordingly.
MASTER LEASE: This Schedule is issued pursuant to the Master Lease identified on
Page 1. All of the terms and conditions of the Master Lease are incorporated
herein and made a part hereof as if such terms and conditions were set forth in
this Schedule. By the execution and delivery of this Schedule, the parties
reaffirm all of the terms and conditions of the Master Lease except as modified.
NBD BANK DEVTECH ASSOCIATES, INC.
By: /s/ WILLIAM D. GUMANE By: /s/ BRYON D. KARGER
----------------------- ----------------------
Name: William D. Gumane Name: Bryon D. Karger
----------------------- ----------------------
Title: AVP Title: Finance Manager
----------------------- ----------------------
Date: 12/29/95 Date: 12/22/95
----------------------- ----------------------
THIS SCHEDULE HAS 2 COUNTERPARTS. THIS IS COUNTERPART NO. 2. A SECURITY
INTEREST MAY BE CREATED ONLY IN COUNTERPART NO. 1.
<PAGE>
SCHEDULE 3
CERTIFICATE OF ACCEPTANCE
This Schedule dated 12/29/95 incorporates the Master Lease dated June 29, 1995
between NBD BANK, as Lessor,
and DEVTECH ASSOCIATES, INC. as Lessee
1. EQUIPMENT
Lessee certifies that the equipment described in this Schedule, has been
delivered to the location indicated below, inspected by Lessee, found to be
in good order and are accepted on the Acceptance Date as set forth below:
LOCATION OF EQUIPMENT:
DEVTECH ASSOCIATES, INC.
280 Shuman Boulevard
Suite 100
Naperville, IL 60563
2. Acceptance Date: 12/22,1995.
DEVTECH ASSOCIATES, INC.
By: /s/ BRYAN D. KARGER
---------------
Name: Bryan D. Karger
Title: Finance Manager
Date: 12/22/95
THIS SCHEDULE HAS 2 COUNTERPARTS. THIS IS COUNTERPART NO. 2. A SECURITY INTEREST
MAY BE CREATED ONLY IN COUNTERPART NO. 1.
<PAGE>
SCHEDULE 3
CASUALTY VALUE TABLE
This Schedule dated 12/29/95 incorporates the Master Lease Dated June 29, 1995
between NBD BANK, as Lessor,
and DEVTECH ASSOCIATES, INC. as Lessee
The Casualty Value of a leased item of Equipment is equal to the original cost
multiplied by the Casualty Value Percentage opposite the monthly rental period
in which the Event of Loss occurs.
MONTHLY RENTAL CASUALTY VALUE MONTHLY RENTAL CASUALTY VALUE
PERIOD PERCENTAGE PERIOD PERCENTAGE
- - -------------- -------------- -------------- --------------
1 and Prior 100.9 19 53.2
2 96.8 20 50.5
3 94.4 21 47.7
4 92.0 22 44.9
5 89.5 23 42.0
6 87.1 24 39.2
7 84.6 25 36.3
8 82.1 26 33.4
9 79.6 27 30.5
10 77.0 28 27.6
11 74.5 29 24.6
12 71.9 30 21.6
13 69.3 31 18.6
14 66.7 32 15.6
15 64.0 33 12.5
16 61.3 34 9.4
17 58.7 35 6.3
18 55.9 36 3.2
<PAGE>
SCHEDULE 3
PURCHASE OPTION RIDER
This Schedule dated 12/29/95 incorporates the Master Lease Dated June 29, 1995
between NBD BANK, as Lessor,
and DEVTECH ASSOCIATES, INC. as Lessee
LESSEE'S OPTIONS UPON EXPIRATION OF THE LEASE TERM:
Provided the Lease has not been earlier terminated and Lessee is not in
default, Lessee shall elect, by written notice delivered to Lessor not less than
one hundred twenty (120) days prior to expiration of the Lease Term, to purchase
all, but not less than all, of the Equipment then subject to the Lease (Check
applicable option):
[ ] A. At a purchase price equal to the Fair Market Value (as defined
below) of said Equipment upon expiration of the Lease Term.
[ ] B. At a purchase price equal to the then Fair Market Value (as
defined below) which purchase price shall not be less than
_____% of the original equipment cost nor more than ____% of the
original equipment cost.
[X] C. At a purchase price of $1.00.
[ ] D. At a purchase price equal to ____% of the cost of the Equipment.
The Fair Market Value of the Equipment shall be determined on the basis
of, and shall be equal in amount to the value which would obtain, assuming the
Equipment had not been installed and was in good repair, condition and working
order, ordinary wear and tear resulting from proper use expected, in an arm's
length transaction between an informed and willing buyer under no compulsion to
buy and an informed and willing seller under no compulsion to sell and, in such
determination, cost of removal from the location of removal from the location of
current use shall not be a deduction from such value. If Lessor and Lessee do
not agree on the Fair Market Value within ten (10) days after receipt by Lessor
of notice that Lessee is exercising its option to purchase the Equipment, such
Fair Market Value shall be determined by an independent source considered
reliable and knowledgeable as to values for such Equipment by Lessor in its
reasonable judgment. The expenses and fees shall be borne by Lessee.
If Lessee elects to purchase the Equipment, the purchase price shall be
payable on or within 10 days of the expiration of the Initial Lease Term. Upon
payment of the purchase price, Lessor shall, upon request of Lessee, execute and
deliver to Lessee, or to Lessee's assignee or nominee, a Bill of Sale without
representations or warranties, express or implied, except that such Equipment is
free and clear of all claims, liens, security interests and other encumbrances
by or in favor of a person claiming by, through or under Lessor for such
Equipment, other than liens and claims which Lessee assumed or is obligated to
discharge under the terms of the Lease. Lessee agrees to pay or cause to be paid
all sales and/or use taxes payable in connection with such sales, and any unpaid
property taxes theretofore assessed or levied against said Equipment. Purchase
of the Equipment is on an AS IS, WHERE IS, WITH ALL FAULTS BASIS.
Accepted this 29th day of December, 1995.
NBD BANK DEVTECH ASSOCIATES, INC.
By: /s/ ILLEGIBLE By: /s/ BRYAN D. KARGER
------------------ -------------------
Its: AVP Its: Finance Manager
------------------ -------------------
<PAGE>
SCHEDULE 3
PURCHASE AGREEMENT ASSIGNMENT RIDER
This Schedule dated 12/29/95 incorporates the Master Lease Dated June 29, 1995
between NBD BANK, as Lessor,
and DEVTECH ASSOCIATES, INC. as Lessee
DEVTECH ASSOCIATES, INC. (the "Assignor") has entered into Purchase
Agreement Number(s) __________ dated _____________, ("Purchase Agreement(s)")
with DATASCAN TECHNOLOGIES (the "Supplier"), relating to the items of equipment
described in this Schedule or Exhibit A (the "Equipment"), the Assignor has
agreed to sell its rights, title and interest in and to the Equipment to the
Lessor and the Lessor shall purchase the Equipment and lease the same to the
Assignor, pursuant to the Master Lease.
NOW, THEREFORE, in consideration of the mutual promises below, and the
execution and delivery of the Master Lease and this Schedule, the parties agree
as follows:
1. The Assignor sells, assigns, transfers and sets over to the Lessor,
its successors and assigns, all of its right, title and interest in and to the
Equipment and in and to the Purchase Agreement(s), including, without
limitation, (a) the right to purchase the Equipment pursuant to the Purchase
Agreement(s), the right to take title to the Equipment or any portion thereof,
and the right, but not the obligation, to be named the purchaser in each bill of
sale to be delivered by the Supplier(s) for the Equipment or any portion
thereof, (b) the right to assort all claims for damages arising as a result of
any default by the Supplier(s) under the Purchase Agreement(s), including
without limitation all warranty and indemnity provisions contained in the
Purchase Agreement(s), and (c) any and all rights of the Assignor to compel
performance of the terms of the Purchase Agreement(s).
2. It is agreed that, notwithstanding this assignment: (a) the Assignor
shall at all times remain liable to the Supplier(s) under the Purchase
Agreement(s) to perform all of the duties and obligations of the buyer to the
same extent as if this assignment had not been executed; (b) exercise by the
Lessor of any of the rights assigned shall not release the Assignor from any of
its duties or obligations to the Supplier(s) under the Purchase Agreement(s)
except to the extent that such exercise by the Lessor shall constitute
performance of such duties and obligations; and (c) the Lessor shall not have
any obligation or liability to perform any of the obligations or duties of the
Assignor under the Purchase Agreement(s), to make any payment (other than to pay
the purchase price for the Equipment to the extent and upon the terms and
conditions set forth in the Master Lease), to make any inquiry as to the
sufficiency of any payment, to present or file any claim or to take any other
action to collect or enforce any claim for any payment assigned.
3. The Assignor represents and warrants that the Purchase Agreement(s)
is (are) in full force and effect and is (are) enforceable in accordance with
its (their) terms; that the Assignor is not in default, and that the Assignor
has not assigned or pledged, and covenants that it will not assign or pledge, so
long as this assignment shall remain in effect, the whole or any part of the
rights assigned to anyone other than the Lessor. The Assignor shall not amend,
modify, terminate or waive, nor consent to any amendment, modification,
termination or waiver of any of the provisions of the Purchase Agreement(s).
4. The Assignor agrees to indemnify and hold the Lessor, and its
assigns, directors, officers and agents, harmless from and against any and all
losses, claims, liabilities and expenses (including legal expenses and court
costs) which arise out of or relate to this Assignment, the Purchase
Agreement(s) or the manufacture, purchase, acceptance, rejection, ownership and
delivery and sale of the Equipment (including claims for patent, trademark, or
copyright infringement).
5. In the event that lessor, at the request of Assignor, makes payment
to the Supplier(s) under said purchase order(s) prior to the Acceptance Date of
this Schedule, Assignor shall pay on the first day of each month to the
Acceptance Date rent to Lessor at the rate of (1) 9.75% per annum or (2) a rate
of interest equal to the Prime Rate (as defined below) at such time plus______
percentage points from the date of each prepayment until the Acceptance Date.
The Prime Rate shall be the rate announced from time to time by NBD Bank as
its prime rate, which rate may not necessarily be the lowest rate charged by NBD
Bank to any of its customers. In the event that a Certificate of Acceptance has
not been executed and delivered by the Assignor with respect to any loan of
Equipment on or before OCTOBER 15, 1995, unless the Lessor has otherwise agreed
in writing: (a) this Assignment shall terminate provided, however, that the
Assignor's obligation to indemnify and hold the Lessor harmless shall servive
any such termination and (b) the Assignor shall reimburse the Lessor for any and
all payments made by the Lessor to the Supplier(s) on account of such item of
Equipment, together with interest at the above rate from the date of each such
payment.
<PAGE>
SCHEDULE 3
PURCHASE AGREEMENT ASSIGNMENT RIDER
This Schedule dated 12/29/95 incorporates the Master Lease dated June 29, 1995
between NBD BANK as Lessor,
and DEVTECH ASSOCIATES, INC. as Leasee
Page 2
LESSOR ASSIGNOR
NBD BANK DEVTECH ASSOCIATES, INC.
By: /s/ ILLEGIBLE By: /s/ BRYAN D. KARGER
----------------- -------------------
Its: AVP Its: Finance Manager
----------------- -------------------
Date: 9/21/95 Date: 9/20/95
--------------- -------------------
<PAGE>
BILL OF SALE
Seller, DataScan Technologies, a Florida general partnership, having
it's principal place of business at 184 Shuman Boulevard, Suite 350, in
Naperville, Illinois ("DataScan"), in consideration of the payment of Forty
Thousand and No/100 Dollars ($40,000) does hereby sell, assign, transfer and set
over to DevTech Associates, Inc., an Illinois corporation, having it's principal
place of business at 1280 Iroquois Drive, Suite 300, in Naperville, Illinois
("DevTech") all of the furniture and related personal property set forth on
Exhibit A attached to and made a part of this Bill of Sale (the "Furniture").
Any and all applicable taxes attributable to the purchase of the Furniture shall
be paid by and shall remain the sole and complete responsibility of DevTech.
DataScan hereby represents and warrants to DevTech that: DataScan is
the absolute and outright owner of the Furniture; the Furniture is free and
clear of all liens, charges, mortgages, pledges, claims and encumbrances;
DataScan has the full right, power and authority to sell the Furniture and to
make this Bill of Sale' and DataScan will indemnify and hold DevTech harmless
from and against any and all claims of any kind or nature which are inconsistent
with these representations and warranties.
In witness whereof, DataScan has caused this bill of sale to be signed
and sealed in its name by its duly authorized representative this 21st day of
September, 1995.
DataScan Technologies, a Florida
general partnership
By: /s/ ILLEGIBLE
-------------------------
Its: President/General Partner
-------------------------
NeoMedia Technologies, Inc.
Exhibit 10.45
Agreement for Sale of Assets Between Basic Developments, Inc.,
a Panama Company, and Meja Sistemas C. A., a Guatemala Company,
and NeoMedia Technologies, Inc. Dated February 12, 1997
<PAGE>
AGREEMENT FOR THE SALE OF ASSETS
THIS AGREEMENT is executed as of February 12, 1997, by and among BASIC
DEVELOPMENTS, INC., a Panama company and Meja Sistemas C.A., a Guatemala company
(collectively the "Company") and NEOMEDIA MIGRATION, INC., a Delaware
corporation ("Purchaser").
CIRCUMSTANCES
A. The Company develops, licenses and distributes computer software for the
migration of software known as the migration tools (the "Software Tools").
B. Purchaser desires to acquire all of the assets of the business from the
Company which relates to the Software Tools.
THEREFORE, in consideration of the mutual agreements, covenants and
provisions contained herein, Purchaser and the Company hereby mutually agree to
the terms and conditions which follow.
ARTICLE I
SALE OF ASSETS
1.1 ASSETS. Subject to the terms and conditions of this Agreement,
Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to sell, assign, transfer, convey and deliver to Purchaser, all right,
title and interest in and to the Software Tools and all assets used or useful in
connection with the Software Tools, free and clear of all liens, claims,
security interests and encumbrances whatsoever of third parties, including, but
not
<PAGE>
limited to, the following: (a) all of the Company's intangible rights and
properties which are used in or related to the Software Tools, including, but
not limited to, all trademarks and service marks, trademark and service mark
registrations and trademark and service mark applications, trade names, assumed
names, service names, copyrights, copyright registrations, patents and patent
applications, patent, copyright and trademark licenses, franchises and all other
licenses and trade secrets (collectively "Intellectual Property"), including,
but not limited to the Intellectual Property set forth in Schedule 1.1(a); (b)
computer programs and software, including but not limited to software routines,
tools, source code, build procedures, and scripts, and related documentation,
inventions, discoveries and improvements, shop rights and know-how owned or used
by the Company as part of the Software Tools and all licenses or agreement with
respect to Intellectual Property, computer programs or software which are part
of the Software Tools, including, but not limited to the software set forth on
Schedule 1.1(b); (c) all of good will, sales leads, prospects lists, mailing
lists, advertising and promotional material of the Company used in connection
with the sale, licensing or other distribution or maintenance of the Software
Tools, and administrative and accounting information with respect to Assumed
Contracts, as defined in Section 1.2 and books and records with respect to any
of the Software Tools; and (d) all of the Equipment set forth in Schedule
1.1(d). The assets to be conveyed hereunder are referred to collectively as the
"Assets."
1.2 ASSUMED CONTRACTS. The Company shall assign and Purchaser shall assume
all right, title and interest in and to and all obligations under those certain
contracts and agreements (the "Assumed Contracts") listed on Schedule 1.2,
including, but not limited to the work in process in connection with the
Software Tools (the "Work in Process"). Purchaser shall assume
2
<PAGE>
all Work in Process of the Company as of the Closing Date. Purchaser does not
assume or undertake any obligations or liabilities of the Company except as
listed on Schedule 1.2.
1.3 SALE AND EFFECTIVE Date. The sale of the Assets and the other
transactions referred to in this Agreement are collectively referred to as the
Sale. The Effective Date of the Sale shall be as of January 1, 1997, regardless
of the date of this Agreement.
ARTICLE II
CLOSING
2.1 CLOSING PROCEDURES. Simultaneously with the execution of this
Agreement, the parties shall close the Sale (the "Closing"). To close the Sale,
the parties will execute, deliver and exchange the bills of sale, assignment and
assumption agreements, certificates and other documents necessary in the
reasonable opinion of counsel for each party to transfer the Assets from the
Company to Purchaser (the "Closing Documents"). The date of the Closing is
referred to herein as the "Closing Date". As soon as possible, but in any event
prior to the first anniversary of the Closing Date, the Company shall register
the Software Tools and Intellectual Property in Panama or Guatemala or both
countries, as required, and transfer such registrations and the Assets, in
accordance with the laws of Panama, Guatemala or both countries, as required, to
the Purchaser, to the satisfaction of Purchaser and its counsel.
3
<PAGE>
ARTICLE III
PURCHASE PRICE
3.1 PURCHASE PRICE. Purchaser shall pay to the Company, as consideration
for the purchase of the Assets, the purchase prices as provided below
(collectively the "Purchase Price"). The parties have agreed that the Purchase
Price for the Equipment payable to the Company is SEVENTEEN THOUSAND AND N0/100
U.S. DOLLARS ($17,000.00). The Purchase Price for the remaining Assets shall be
TWO HUNDRED TWENTY THOUSAND AND N0/100 U.S. DOLLARS ($220,000.00)
3.1.1 The Company acknowledges that the Purchaser has paid to the
Company the amount of SEVENTEEN THOUSAND AND NO/1OO U.S. DOLLARS as the
Purchase Price for the Equipment.
3.1.2 The Purchase Price for the remaining Assets shall be paid as
follows:
3.1.2.1 One Hundred Twenty Thousand and No/100 U.S. Dollars
($120,000) at the date on which this Agreement and all Closing
Documents have been signed and delivered by all necessary parties (the
"Closing Payment"); and
3.1.2.2 One Hundred Thousand and No/100 U.S. Dollars on the first
anniversary of the date of the Closing Payment; provided however that
this payment shall be conditioned upon and shall not be due and payable
until the Software Tools and Intellectual Property is registered and
the registrations transferred to Purchaser, to the satisfaction of
Purchaser and its counsel.
The Purchase Price shall include all taxes due on the sale of the Assets,
including, but not limited to VAT taxes.
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<PAGE>
ARTICLE IV
COVENANTS, REPRESENTATIONS AND
WARRANTIES OF COMPANY
As of the Closing Date the Company shall make the following covenants,
representations and warranties to Purchaser:
4.1 LEGAL STATUS. Basic Developments, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of Panama and
qualified or registered to do business in Guatemala. Meja Sistemas \C.A. is a
company duly organized, validly existing and in good standing under the laws of
Guatemala. The Company has the corporate power to own and lease its property and
to carry on its business as and where such property is now owned or leased or
such business is conducted. Meja Sistemas C.A. is the only subsidiary of Basic
Developments, Inc. and Meja Sistemas C.A. has no subsidiaries nor will any be in
existence on the Closing Date. Basic Developments, Inc. is the sole stockholder
of Meja Sistemas C.A. and Jorge Figueroa is the sole stockholder of Basic
Developments, Inc.
4.2 AUTHORIZATION, ETC. The Company has full corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The Board
of Directors and shareholders of the Company have taken all actions required by
law, the Company's charter documents, its By-Laws or otherwise to authorize the
execution and delivery of this Agreement and the consummation of the Sale. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company.
4.3 NO VIOLATION OF STATUTE OR CONTRACT. Except as set forth on Schedule
4.3, neither the execution and delivery of this Agreement, nor the Sale will (i)
conflict with or result in a
5
<PAGE>
breach or violation of any of the terms, conditions or provisions of, or
constitute a default under, (A) the Articles of Incorporation or By-Laws of the
Company, or (B) any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Software Tools, or any of its
properties, assets, licenses or permits, or (ii) violate, conflict with, result
in a breach of any provisions of, constitute a default under, result in the
termination of, required consent under, accelerate the performance required by,
or result in the creation of any lien, security interest, charge or other
encumbrance upon any of the Assets under any of the terms, conditions or
provisions of any license, lease, agreement or other instrument or obligation to
which the Company is a party, or by which the Assets, Assumed Contracts or Work
in Process may be bound or affected.
4.4 DEPOSITS. Schedule 4.4 sets forth a description of the deposits made by
the Company or which the Company is holding as of the Closing Date which will be
assigned to Purchaser, together with a description of the nature of such
deposits.
4.5 TITLE TO ASSETS. The Company has good and marketable title to all of
the Assets, including, but not limited to the Intellectual Property and Software
Tools owned by the Company, free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of mortgages, liens, pledges,
charges, encumbrances, equities, claims, easements, rights of way, covenants,
conditions, or restrictions, except as disclosed in this Agreement and the
Schedules. Upon execution and delivery of the Closing Documents, the Company
will effectively transfer good and marketable title to all of the Assets to
Purchaser.
6
<PAGE>
4.6 INTELLECTUAL PROPERTY.
4.6.1 DESCRIPTION. Schedule 4.6 sets forth a complete description of all
trademarks and service marks, trademark and service mark registrations and
trademark and service mark applications, trade names, assumed names, service
names, copyrights, copyright registrations, patents and patent applications,
patent, copyright and trademark licenses, franchises and all other licenses,
trade secrets, computer programs and software, source code, build procedures,
algorithms, and related documentation, inventions, discoveries and improvements,
shop rights and know-how owned or used by the Company in the conduct of its
business (collectively "Intellectual Property" which includes the "Software
Tools"). Except as noted on Schedule 4.6, the Company owns, or is licensed or
otherwise has the exclusive right to use, all Intellectual Property used in or
necessary for the conduct of its business as currently conducted.
4.6.2 NO INFRINGEMENT BY THE COMPANY. Except as set forth in Schedule 4.6,
no claim has been asserted by any person with respect to the ownership, use,
transfer, license or other disposition of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement with respect thereto, and the Company does not know of any valid basis
for any such claim; and to the best of the Company's knowledge after reasonable
inquiry, the use of Intellectual Property by the Company, the development, use,
license or distribution of any software program or process, tool, aid or
routines by the Company does not and after the Closing Date is not reasonably
expected to, infringe on the rights of any person, if used, distributed,
licensed or sold in the same manner as used by the Company prior to the Closing
Date.
7
<PAGE>
4.6.3 NO INFRINGEMENT BY OTHER PARTIES. No third party is known or
believed by the Company to be infringing on any Intellectual Property.
4.6.4 PROCEDURES FOR COPYRIGHT PROTECTION. Schedule 4.6 sets forth the form
and placement of the proprietary legends and copyright notices displayed in or
on the Software Tools. To the best of the Company's knowledge, in no instance
has the eligibility of the Software Tools for protection under applicable
copyright law been forfeited to the public domain by omission of any required
notice or any other action.
4.6.5 PROCEDURES FOR TRADE SECRET PROTECTION. The Company has instituted
and followed certain safeguards to protect its trade secrets. Insofar as the
Company knows, there has been no material violation of such safeguards by any
person or entity. The source code and system documentation relating to the
Software Tools:
4.6.5.1 have at all times been maintained in confidence and
4.6.5.2 have been disclosed by the Company only to employees and
consultants having "a need to know" the contents thereof in connection with
the performance of their duties to the Company.
4.6.6 PERSONNEL AGREEMENTS. All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated in the
conception and development of the Software Tools, related technical
documentation (the "Technical Documentation"), or Intellectual Property on
behalf of the Company either
4.6.6.1 have been party to a "work-for-hire" arrangement or agreement
with the Company, in accordance with applicable federal and state law,
8
<PAGE>
that has accorded the Company full, effective, exclusive, and original
ownership of all tangible and intangible property thereby arising, or
4.6.6.2 have executed appropriate instruments of assignment in favor
of the Company as assignee that have conveyed to the Company full,
effective, and exclusive ownership of all tangible and intangible property
thereby arising.
4.6.7 ADEQUACY OF TECHNICAL DOCUMENTATION. The Technical Documentation for
the Software Tools includes the source code, system documentation, statements of
principles of operation, and schematics for all Software Tools, as well as any
pertinent commentary or explanation that may be necessary to render such
materials understandable and usable by a trained computer programmer. The
Technical Documentation also includes any program (including compilers),
"workbenches," tools, and higher level (or "proprietary") language necessary
for the development, maintenance, and implementation of the Software Tools.
4.6.8 THIRD-PARTY COMPONENTS IN SOFTWARE PRODUCTS. Schedule 4.6 sets forth
and identifies any Software Tools, Technical Documentation or other Intellectual
Property which is licensed by Company ("Licensed Material"). The Company has
validly and effectively obtained the right and license to use, copy, modify, and
distribute any Licensed Material.
4.6.9 THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE. The Company
has not granted, transferred, or assigned any right or interest in the Software
Tools, the Technical Documentation or the Intellectual Property to any person or
entity, except
9
<PAGE>
pursuant to the agreements listed in Schedule 1.2. Except as set forth in
Schedule 1.2, all such agreements constitute only end-user agreements, each
of which grants the end-user thereunder solely the nonexclusive right and
license to use one or more identified Software Tools and related user
documentation, for internal purposes only, on a single central processing
unit (CPU), on a single network or under the terms of a site license. There
are no contracts, agreements, licenses, and other commitments and
arrangements in effect with respect to the marketing, distribution,
licensing, or promotion of the Software Tools, the Technical Documentation
or the Intellectual Property by any independent salesperson, distributor,
sublicensor, or other remarketer or sales organization.
4.7 MATERIAL CONTRACTS. The Assumed Contracts include any contracts,
commitments, agreement, licenses or arrangements necessary for the distribution
of the Software Tools and the operation of the Company's business in connection
with the Software Tools. Purchaser shall have no obligation or liability under
or assume any responsibility, by operation of law or otherwise, for any
agreement other than the Assumed Contracts.
4.8 CLAIMS AND LITIGATION. There is no litigation, proceeding, demand,
action or claim either pending or, to the best knowledge of the Company,
threatened now or at any time in the last five (5) years against the Company
before any court or governmental or other regulatory or administrative agency or
commission, with respect to the Software Tools or the ownership of or right to
use, copy, develop, modify or distribute the Software Tools.
4.9 FULL DISCLOSURE. No representation, warranty or covenant in this
Agreement, nor any statements, financial statements, certificates, schedules or
exhibits furnished to Purchaser
10
<PAGE>
pursuant hereto, or in connection with the Sale, contains any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements contained therein in the light of the circumstances under which they
were or are to be made, not misleading. The Company does not have any
information which leads it to believe that there is any impending material
adverse change in the business of the Company.
ARTICLE V
COVENANTS, REPRESENTATIONS AND
WARRANTIES OF PURCHASER
As of the Closing Date, Purchaser shall make the following covenants,
representations and warranties to the Company:
5.1 LEGAL STATUS. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
has the corporate power to own and lease its property and to carry on its
business as and where such property is now owned or leased or such business is
conducted on the Closing Date hereof.
5.2 AUTHORIZATION, ETC. Purchaser has full corporate power and authority to
enter into this Agreement and to perform its obligations hereunder. The Board of
Directors of Purchaser has taken all actions required by law, its Articles of
Incorporation, its By-Laws or otherwise to be taken by it to authorize the
execution and delivery of this Agreement and the consummation of the Sale and,
no other corporate proceedings on the part of Purchaser are necessary to
authorize this Agreement and the Sale. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes a valid and binding
agreement of each of Purchaser.
11
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATION TO CLOSE
The obligation of Purchaser to consummate the Sale is subject to the
satisfaction, or waiver in writing by Purchaser, on or prior to the Closing
Date, of each of the following conditions:
6.1 CORPORATE ACTION. All corporate and other actions necessary to
authorize this Agreement and to consummate the Sale shall have been duly taken
on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though all such representations and
warranties had been made as of such date.
6.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and
agreements of the Company to be performed or complied with pursuant to this
Agreement shall have been duly performed and complied with in all material
respects. All Closing Documents in proper form for the transfer of the Assets
have been executed and delivered by the Company to Purchaser.
6.4 BULK SALE. The Company shall have complied with all applicable
provisions of any bulk sale or comparable laws or regulations of Panama or
Guatemala and any laws in connection with taxes.
12
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO THE COMPANY'S
OBLIGATION TO CLOSE
The obligations of the Company to consummate this Agreement as provided
hereunder are subject to the satisfaction, or waiver in writing by the Company,
on or prior to the Closing Date, of each of the following conditions:
7.1 CORPORATE ACTION. All corporate and other actions necessary to
authorize the consummation of the Sale by Purchaser shall have been duly taken
prior to the Closing Date.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser set forth in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though all such
representations and warranties had been made as of such date.
7.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and
agreements of Purchaser to be performed or complied with pursuant to this
Agreement shall have been duly performed and complied with in all material
respects or duly waived by the Company.
ARTICLE VIII
OPERATION OF THE COMPANY
During the period from May 1, 1996 to the Closing Date, except as otherwise
disclosed to Purchaser in writing, the Company represents and warrants that it
has carried on its business in, and only in, the usual, regular and ordinary
course in substantially the same manner as previously conducted and, to the
extent consistent with such business, has used all reasonable
13
<PAGE>
efforts to preserve intact its present business organization, keep available the
services of its present officers and employees, and preserve its relationships
with customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired in all material
respects at the Closing Date. The Company has not sold, assigned, transferred,
licensed or otherwise disposed of any Intellectual Property.
ARTICLE IX
POST-CLOSING COVENANTS OF THE COMPANY
9.1 NONCOMPETITION AGREEMENT. For a period of three years from the Closing
Date, neither the Company nor its shareholders shall own directly or indirectly
any interest in, or shall be a director, officer or employee of, any
corporation, partnership, firm, association or business organization (other than
any entity the equity securities of which are listed on a national securities
exchange or quoted in the National Association of Securities Dealers Automated
Quotation System where less than 1% of the voting power of any such entity is
owned by any of such persons directly or indirectly) which develops, distributes
or licenses computer software or other computer products or is a competitor,
potential competitor, supplier or customer of the business of the Company with
respect to Software Tools.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made by the parties hereto as to any
fact or condition existing on or before the Closing Date of this Agreement, in
any Schedule hereto, or in any
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<PAGE>
certificate delivered pursuant hereto, shall survive the closing of the Sale and
remain in fall force and effect for the period of twenty-four (24) months
following the Closing Date.
ARTICLE XI
INDEMNIFICATION
11.1 THE COMPANY INDEMNIFICATION. The Company and all shareholders of
the Company will indemnify and hold Purchaser and the shareholders of Purchaser
harmless from and against all Losses, as hereinafter defined, arising out of or
resulting from the following:
11.1.1 Any misrepresentation or breach of any warranty or covenant
or the failure of any representation or warranty of the Company contained
herein, in any Schedule hereto or in any statement, certificate or other
document delivered pursuant hereto;
11.1.2 Any material lialbilities or obligations of any kind or
nature whatsoever, whether accrued, absolute, contingent, or otherwise,
known or unknown, arising out of or in connection with the conduct of the
Company's business or the ownership, use, license, distribution or
modification of the Software Tools or the ownership or use of any of the
Assets prior to the Closing Date or arising with respect to any actions or
failure to act of the Company prior to the Closing Date.
For purposes of this Article XI, Losses shall mean all damages, losses,
liabilities, costs, expenses, assessments, taxes, penalties, fines, claims,
demands, actions, suits and proceedings, including, but not limited to, any
losses or costs related to the violation of any law, and including, in each such
instance, the reasonable attorneys', accountants' and other professionals'
15
<PAGE>
fees, costs and expenses of investigation and defense, and disbursements
incurred therewith, after offset by any related insurance proceeds or other
recovery, and with offset for any reduction of taxes realized on account of such
Losses.
11.2 PURCHASER INDEMNIFICATION. Purchaser will indemnify and hold the
Company harmless from and against all Losses arising out of or resulting from
any misrepresentation or breach of any warranty or covenant or the failure of
any representation or warranty of Purchaser contained herein, in any Schedule
hereto or in any statement, certificate or other document delivered pursuant
hereto after offset by any related insurance proceeds or other recovery, and
with offset for any reduction of taxes realized on account of such Losses.
11.3 NOTICE OF CLAIM. Promptly after service of notice of any written claim
or process on a party hereto by any third person in any matter in respect of
which indemnity may be sought from the other party hereto, the party so served
shall promptly notify the indemnifying party of the receipt thereof. The
indemnifying party shall have the right to participate in, or assume, at its own
expense, the defense of any such claim or process of settlement thereof. After
notice from the indemnifying party of its election so to assume the defense
thereof, the indemnified party shall not be liable to such indemnifying party
for any legal or other expense in connection with such defense. As long as the
indemnifying party is defending such claims diligently, the indemnified party
shall not settle, compromise or pay any claim without the consent of the
indemnifying party. Such defense shall be conducted expeditiously (but with due
regard for obtaining the most favorable outcome reasonably likely under the
circumstances, taking into account costs and expenditures) and the party to be
indemnified shall be advised of all significant developments. If the
indemnifying party shall fail to assume the defense of the indemnified
16
<PAGE>
party within a reasonable time (not to exceed 15 days after notice of a claim)
or to diligently conduct such defense thereafter, then the indemnified party
shall have the right to assume the defense, and compromise or settle the claim,
at the risk and expense of the indemnifying party.
11.4 OFFSETS. To the extent that the Company or shareholders of the Company
are liable to Purchaser for any Losses, Purchaser shall have the right to
set-off such amounts against the Purchase Price or any other amount owing to the
Company.
ARTICLE XII
MODIFICATION OR AMENDMENT
12.1 MODIFICATION. This Agreement may be amended, modified and supplemented
only by written agreement of the parties hereto.
ARTICLE XIII
CONFIDENTIALITY
Each party will treat as confidential any information concerning the other
party or this Sale that has been or is disclosed, together with all notes,
memoranda, analyses or other writings prepared using or referring to any
confidential information (the "Confidential Material"). To the extent practical,
Confidential Material shall be marked "Proprietary" or "Confidential". However,
each party acknowledges that it may obtain confidential information in oral
discussions, from inspections or otherwise that can not be marked as
"Proprietary" or "Confidential." The failure to mark any information as
"Proprietary" or "Confidential" shall not mean that the information is not
Confidential Material. Confidential Material will not include information which
(i) is generally available to the public; (ii) was known by a party on a
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<PAGE>
nonconfidential basis at the time of disclosure; or (iv) was independently
developed by a party before receiving the Confidential Material and such party
has evidence of the development of the information. After the Closing Date,
Confidential Information will not include any information concerning the Company
delivered by the Company to the Purchaser.
ARTICLE XIV
MISCELLANEOUS
14.1 Any notice, request, consent, waiver or other communication required or
permitted to be given hereunder shall be effective only if in writing and shall
be deemed sufficiently given only if delivered in person or sent by telegram,
cable or by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company Meja Sistemas C.A.
Basic Developments, Inc.
12 Calle 1-25 zona 10
Edificio Geminis 10
Torre Norte Oficina 1401
Guatemala, C.A. 01010
If to Purchaser: NeoMedia Migration, Inc.
2201 Second Street, Suite 600
Fort Myers, Florida 33901
Attention: Kevin Leininger
Copy to: Kathleen A. Finefrock
Schwartz & Freeman
19th Floor
401 North Michigan Avenue
Chicago, Illinois 60611
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<PAGE>
or to such other person or address as either such party may have specified in a
notice duly given. Such notice or communication shall be deemed to have been
given as of the date so delivered, telegraphed, cabled, telefaxed or mailed.
14.2 Each of the parties hereto shall pay all costs incurred by it incident
to the preparation, execution and delivery of this Agreement and the performance
of its obligations hereunder, whether or not the Sale shall be consummated.
14.3 This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by any party without the prior written consent of
all of the other parties.
14.4 This Agreement (including the Exhibits and Schedules) and constitute
the entire agreement and understanding of the parties relating to the subject
matter hereof and supersede all prior and contemporaneous agreements and
understandings, representations and warranties, whether oral or written,
relating to the subject matter hereof.
14.5 No delay or failure on the part of any party in exercising any rights
hereunder, and no partial or single exercise thereof, will constitute a waiver
of such rights or of any other rights hereunder.
14.6 This Agreement shall be construed and interpreted in accordance with
the laws of the State of Florida, United States of America.
14.7 The unenforceability or invalidity of any Article or Section or
provision of this Agreement shall not affect the enforceability or validity of
the balance of this Agreement.
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14.8 The headings of the Articles and Sections contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning,
interpretation, enforceability or validity of this Agreement.
14.9 This Agreement may be executed in any number of counterparts, each of
which so executed will be deemed to be an original, but all of which together
will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PURCHASER: COMPANY:
NEOMEDIA MIGRATION, INC. BASIC DEVELOPMENTS, INC.
a Delaware corporation a Panama company,
By: /s/ CHARLES W. FRITZ By: /s/ JORGE FIGUEROA
---------------------- -----------------------
SOLE SHAREHOLDER OF Meja Sistemas C.A.
BASIC DEVELOPMENTS, INC.: a Guatemala company
/s/ JORGE FIGUEROA By: /s/ JORGE FIGUEROA
- - ------------------------- -----------------------
Jorge Figueroa
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<PAGE>
SCHEDULE 1.l(a) AND (b)
ASSETS
INTELLECTUAL PROPERTY AND SOFTWARE TOOLS
The following constitutes the Assets described in Sections 1. 1 (a) and (b):
OWNED SOFTWARE:
Name: ABsolut for Informix
Description: Application Builder Solution for Informix 6.0
Name: ABsolut for Oracle
Description: Application Builder Solution for Oracle 7.0 & Forms 3.0
Name: Forms conversion for Oracle Forms 4.5
Description: Automatic Form converter from Forms 3.0 to Forms 4.5
Name: PACEport for Informix
Description: PACE application for Reverse Engineering PACE Meta Data into
ABsolut (ABsolut for Informix format)
Name: PACEport for Oracle
Description: PACE application for Reverse Engineering PACE Meta Data into
ABsolut (ABsolut for Oracle format)
Name: DB Analyze
Description: Cobol tool that does inventory of PACE Databases
Name: RAND DB
Description: Comprehensive PACE application that performs consistency
check and detailed inventory information. Does additional
pre-conversion work.
LICENSED SOFTWARE:
NONE
TRADEMARKS AND TRADE NAMES:
PACEport
ABsolut
ABSone
Porter
DBANALYZE
RAND DB
All names used in connection with the PACE and ABsolut software packages
<PAGE>
SCHEDULE 1.l(d)
ASSETS
EQUIPMENT
The following constitutes the Assets described in Section 1.1(d):
PC 80486DX2, 4 Mb. RAM, Monitor VGA Color, 1 HD 326 Mb., Trackball mouse.
Floppies 5.25", 3.5".
PC 80486DX2, 16 Mb. RAM, Monitor LEO SVGA Color SN M340102369, 1 HD 503 Mb., 1
HD 162 Mb. Keyboard SN 950501800299, Mouse SN 0085091. PC 80486DX2, 12 Mb. RAM,
1 HD 503 Mb., Monitor LEO SVGA Color, Keyboard, Mouse, Floppy 3.5".
PC 486DX, 4 Mb. RAM, Monitor LEO VGA SN ODIA801314, Keyboard SN C950312319, 1 HD
137 Mb. Floppy 3.5".
WANG-PC 80286, 2 Mb. RAM, 1 HD 69 Mb., 1 HD 40 Mb., Monitor WANG VGA color SN
78542S, Keyboard WANG SN C3959, Floppy 5.25".
TWC-PC 80386, 2 Mb. RAM, 1 HB 161 Mb., Monitor WANG VGA B/W SN V69916, Keyboard
WANG SN C3841, Floppy 3.5".
IBM RS-6000 SN MS70122627495
48 MB Main Memory
2 x 800 MB Drives
1 x 1.3 Gig Drive
WANG QIC Tape Unit 150 Mg. SN 30379Z
WYSE Terminal SN 0lFl9C00730
WYSE Terminal SN 0lCl005314
WANG User Printer LDP8III SN Y52930
WANG VS 6 SN 82097E
4Mb Main Memory
2 x 145 MB hard drives
1 x 314 MB Hard drive
1 WANG HD Disk Unit SN TU0009
WANG Terminal SN 07274E
WANG Terminal SN 04177E
WANG Terminal SN 37419A
WANG QIC Tape UNIT 60 Mb. SN ZB9430
WANG Printer Enteia 180, SN 17351
<PAGE>
Schedule 1.2
Assumed Contracts
NONE
<PAGE>
Schedule 4.3
Conflicts and Required Consents
NONE
<PAGE>
Schedule 4.4
Deposits
NONE
<PAGE>
Schedule 4.6
Intellectual Property and Software Tools
SOFTWARE:
Name: ABsolut for Informix
Description: Application Builder Solution for Informix 6.0
Name: ABsolut for Oracle
Description: Application Builder Solution for Oracle 7.0 & Forms 3.0
Name: Forms conversion for Oracle Forms 4.5
Description: Automatic Form converter from Forms 3.0 to Forms 4.5
Name: PACEport for Informix
Description: PACE application for Reverse Engineering PACE Meta Data into
ABsolut (ABsolut for Informix format)
Name: PACEport for Oracle
Description: PACE application for Reverse Engineering PACE Meta Data into
ABsolut (ABsolut for Oracle format)
Name: DB Analyze
Description: Cobol tool that does inventory of PACE Databases
Name: RAND DB
Description: Comprehensive PACE application that performs consistency
check and detailed inventory information. Does additional
pre-conversion work.
KNOW-HOW
1. Knowledge regarding internal PACE Meta Data. Such knowledge includes the
internal structures that PACE uses, both for PACE Data Dictionary and PACE
Application Builder.
2. Knowledge regarding Oracle & Informix specific limitations and abilities.
Research & Development work required for the code generation and
replicating WANG specific functionality.
3. Knowledge regarding internal structures of ORACLE Forms 4.5 "fmt" files
required for converting and adjusting converted 3.0 forms into forms
version 4.5
<PAGE>
Schedule 4.6
Intellectual Property and Software Tools
Continued
TRADEMARKS AND TRADE NAMES:
PACEport
ABsolut
ABSone
Porter
DBANALYZE
RAND DB
All names used in connection with the PACE and ABsolut software packages
NeoMedia Technologies, Inc.
Exhibit 10.46
Master Lease Between William E. Fritz and NeoMedia Technologies, Inc.
Dated November 6, 1996
<PAGE>
MASTER LEASE
------------
This Master Lease Agreement ("Master Lease") dated November 6, 1996 is between
William E. Fritz ("Lessor") and NeoMedia Technologies, Inc. ("Lessee"), a
Delaware corporation.
Lessee wants from time to time to lease from Lessor personal property to be
described in one or more Schedules of leased equipment. Lessor is willing to
lease such personal property to Lessee at the rent, for the term and upon the
conditions stated. Any present and future Schedules executed by Lessor and
Lessee which are identified as being a part of this Master Lease, shall be
deemed to incorporate by reference all the terms and conditions of this Master
Lease except as provided in any such Schedule. In the event of a conflict
between this Master Lease and any Schedule, the provisions of such Schedule
shall control.
1. EQUIPMENT LEASED AND TERM. This Master Lease shall cover such personal
property as is described in any Schedule executed by or pursuant to the
authority of Lessee, accepted by Lessor in writing and identified as a part
of this Master Lease (which personal property with all replacement parts,
additions, repairs, accessions and accessories incorporated in and/or
affixed to the personal property is referred to as the "Equipment"). Lessor
leases to Lessee and Lessee hires and takes from Lessor, upon and subject
to the covenants and conditions of this Master Lease, the Equipment
described in any Schedule. The term and rental of the Master Lease with
respect to any item of Equipment shall be for the period as set forth in
the Schedule (the "Initial Lease Term").
2. RENT. The aggegate rent payable with respect to each item of Equipment
shall be in the amount shown with respect to such item on the Schedule.
Lessee shall pay to Lessor the aggregate rental for each item of Equipment
for the full period and term for which the Equipment is leased, such rental
to be payable at such times and in such amounts for each item of Equipment
as shown in the applicable Schedule.
3. PURCHASE AND ACCEPTANCE. Lessee requests Lessor to acquire all scheduled
Equipment pursuant to an assignment of Lessee's purchase order(s) for the
Equipment. Delivery of each item of Equipment shall be deemed complete upon
the acceptance date ("Acceptance Date") stated in the Schedule for each
item of Equipment. LESSOR SHALL NOT BE LIABLE FOR LOSS OR DAMAGE OR FOR THE
DELAY OR FAILURE OF ANY SUPPLIER OF THE EQUIPMENT ("SELLER") TO FILL OR
DELIVER THE ORDER FOR ANY ITEM OF EQUIPMENT. THE LESSEE REPRESENTS THAT
LESSEE HAS SELECTED BOTH THE EQUIPMENT LISTED IN ANY SCHEDULE AND THE
EQUIPMENT SELLER BEFORE HAVING REQUESTED LESSOR TO ACQUIRE SAME FOR LEASING
TO LESSEE.
4. NON-CANCELABLE LEASE. THIS MASTER LEASE IS NON-CANCELABLE. When Lessee
signs and delivers a Certificate of Acceptance for the Equipment, its
obligations to pay all rent for the Initial Lease Term and other amounts
when due for the Equipment and otherwise to perform as required under this
Master Lease are unconditional,
1
<PAGE>
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 Fquipment, defects in or
damage to the Equipment, its loss or destruction or otherwise.
5. 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 MASTER LEASE AND/OR THE
EQUIPMENT. LESSEE MAY COMMUNICATE WITH THE SELLER AND RECEIVE AN ACCURATE
AND COMPLETE STATEMENT OF THOSE RIGTHS, PROMISES AND WARRANTIES, INCLUDING
ANY DISCLAIMERS AND LIMITATIONS OF THEM OR OF REMEDIES.
6. 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 Master 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
Master Lease.
7. TITLE; LOCATION OF THE EQUIPMENT: EQUIPMENT IS PERSONAL PROPERTY;
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 in the applicable Schedule and may be removed without the
prior written consent of Lessor. LESSEE FURTHER COVENANTS AND AGREES THAT
THE EQUIPMENT IS, AND WILL AT ALL TIMES BE AND REMAIN, PERSONAL PROPERTY.
At each scheduled termination date, or upon Lessee's default, Lessee, at
its own expense, shall assemble and deliver the Equipment to Lessor at the
location designated by Lessor, in good order and repair, ordinary wear and
tear excepted. Lessee shall give Lessor 90 days written notice prior to
each scheduled termination date, that it is returning the Equipment.
8. NO ASSIGNMENT BY LESSEE: ASSIGNMENT BY LESSOR. THIS MASTER LEASE
SHALL NOT BE ASSIGNED BY LESSEE, NOR SHALL ANY OF THE EQUIPMENT BE
SUBLEASED BY LESSEE WITHOUT THE PRIOR
2
<PAGE>
WRITTEN CONSENT OF LESSOR. Lessor may at any time sell or assign to any
bank, or financial institution, or any person, firm, or corporation all or
part of its right, title and interest in and to this Master Lease and in
and to each item of Equipment and monies to become due to the Lessor, and
Lessor may grant security interests in the Equipment, subject to the
Lessee's rights as set forth in this Master Lease, and in such events, all
the provisions of this Master 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 Master Lease and assigned by Lessor shall be paid directly to
assignee, upon written notice of such assignment to Lessee. 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 shall not
be subject to any defense, counterclaim or setoff which the Lessee may have
or assert against the Lessor. Lessee agrees that it will not assert any
such defenses, setoffs, counterclaims and claims against the assignee.
9. CASUALTY AND LIABILITY INSURANCE, RISK OF LOSS, DAMAGE OR DESTRUCTION.
Lessee shall keep all Equipment insured against loss by fire, theft and all
other hazards (comprehensive coverage) in such amounts as Lessor requires
(but not less than the casualty value (the "Casualty Value") for such item
indicated in the Casualty Value Table attached to the applicable Schedule).
Lessee appoints Lessor Lessee's attorney in fact to endorse any loss
payment or returned premium check and to make any claim under such
insurance shall not be canceled except upon thirty days written notice
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 and against risks
customarily insured against by the Lessee for equipment owned by it. All
policies shall be endorsed with Lessor as a loss payee and additional
insured and shall contain provisions (a) that such insurance is to Lessor
at the address set forth under its name below and (b) that the interest of
Lessor shall not be invalidated by any act of Lessee. The policies of
insurance or any endorsement certificates shall be delivered to Lessor
within 30 days after any scheduled Acceptance Date. In the event of loss,
destruction or theft of, or damage to, any of the Equipment, Lessee will
immediately notify Lessor. Upon Lessor's and any assignee's written
consent, Lessee may act as a self-insurer in amounts acceptable to Lessor
and any assignee.
If Lessee defaults in obtaining any insurance to be provided, Lessor may,
but is not required to, 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. At Lessor's sole option, such amounts
together with interest may be added to the lease balance to be paid by
Lessee as additional monthly rent. NOTWITHSTANDING THE PROVISIONS OF THIS
PARAGRAPH, LESSEE WILL HOLD LESSOR HARMLESS AGAINST ANY SUCH CLAIM OR
LIABILITY (INCLUDING ATTORNEY'S FEES, COSTS AND EXPENSES FOR ANY DEFENSE)
ARISING OUT OF THE OWNERSHIP, USE OR OPERATION OF THE EQUMMIENT
3
<PAGE>
DURING THE PERIOD OF THIS MASTER LEASE AND UNTIL THE EQUIPMENT IS RETURNED
TO AND ACCEPTED BY THE LESSOR.
Lessee assumes and shall bear all risks of loss of, damage to or
destruction of each item of Equipment, whether partial or complete. Except
as provided in this Section 9, no such event shall relieve the Lessee of
its obligation to pay the full rental payable for such item.
If any item of Equipment is damaged (but not beyond economical repair),
Lessee must promptly notify Lessor and, within 60 days of such damage,
shall repair the item at its own expense and restore it to the same state
and condition as required under the Master Lease. Lessee shall then be
entitled to receive from Lessor or any assignee, any insurance proceeds
received in connection with such damage.
If any item of Equipment is destroyed, damaged beyond economical repair,
lost or stolen, or taken by governmental action for a stated period
extending beyond the Initial Lease Term for such item (an "Event of Loss"),
Lessee must promptly notify Lessor and any assignee and pay to Lessor or
the assignee, as the case may be, on the next rent payment date following
the Event of Loss the Casualty Value of the item of Equipment. Upon such
payment and provided no Event of Default as defined in Section 12 has
occurred, Lessee's obligation to pay rent for such item of Equipment will
cease and Lessee will be entitled to receive any insurance proceeds or
other recovery received by the Lessor or assignee in connection with the
Event of Loss.
10. REPAIRS: USE: ALTERATION. 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. Lessee will at all
times during the Initial Lease Term of each Schedule maintain in force a
maintenance agreement covering each item of Equipment with the manufacturer
of the Equipment or such other party as is acceptable to Lessor. Lessor,
or Lessor's assignee, shall keep the Equipment free and clear of all
levies, liens and Lessee's normal business hours.
11. LIENS AND TAXES. Lessee as its expense shall keep encumbrances. Lessee
shall declare and pay all charges and taxes (local, state and federal)
which may now or hereafter be imposed or levied upon the Master Lease,
rental, operation, leasing, sale, ownership, possession or use of the
Equipment excluding all taxes based upon income or gross receipts of
Lessor. Upon the request of Lessor, Lessee shall provide evidence of such
payment.
12. DEFAULT. Any of the following shall constitute an event of default
("Event of Default") by Lessee: (a) Lessee fails to pay when due any
scheduled rent or other amount required by this Master Lease; (b) Lessee
breaches any covenant of this Master Lease or fails to promptly perform any
of its terms or conditions, including but not limited to
4
<PAGE>
return of the leased Equipment at the expiration of any scheduled 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 Master Lease or related
document is incorrect, fraudulent or breached; (h) Lessee defaults under
the terms of any agreement or instrument relating to any lease or debt for
borrowed money such that the Lessor accelerates the rent or the creditor
declares the debt due before its maturity; or (i) 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 Master Lease.
Lessee covenants and agrees to give Lessor prompt notice upon the
occurrence of an event of default, and the Lessee's failure to give such
notice shall constitute a further event of default.
13. LESSOR'S REMEDIES UPON DEFAULT BY LESSEE. Upon the occurrence of an
event of default, Lessor without further notice may (i) recover from Lessee
the Casualty Value of the Equipment together with any unpaid rent and (ii)
regardless of whether such amounts are paid, take possession of any item or
items or Equipment with or without process of law and at Lessor's option
sell or lease at public auction or by private sale or otherwise dispose of
such item or items of Equipment free and clear of any rights of Lessee and
without any duty to account to Lessee except as expressly provided in this
Section 13.
If Lessee shall have paid the Casualty Value and unpaid rent referred to
above and all other amounts owing under this Master Lease and any items of
Equipment have been taken from Lessee, the proceeds of any reletting or
sale (less all costs and expenses including attorney's fees) shall be paid
to reimburse the Lessee for the Casualty Value up to the amount previously
paid. Any surplus remaining after such payment will be retained by the
Lessor.
In addition, Lessor may exercise any other right or remedy available to
Lessor at law or in equity including rights of setoff. Regardless of any
sale or lease of the Equipment or any payment of the Casualty Value,
Lessee will remain liable to Lessor for all damages as provided by law and
for all costs and expenses incurred by Lessor including court costs and
attorney's fees. No remedy under this Master Lease is intended to be
exclusive, but each remedy shall be cumulative and in addition to any other
remedy available at law or in equity.
14. RENEWAL. If the Equipment is not delivered to Lessor at any scheduled
termination date in accordance with paragraph 7, then the Initial Lease
Term shall renew on a month to month basis upon the same terms and
conditions, subject to the right of Lessor or Lessee to terminate the
renewed term on 30 days written notice, in which event, the Equipment shall
immediately be returned to Lessor.
5
<PAGE>
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 with a minimum late charge being $10.00. This
late charge shall be reassessed in each subsequent month that the rental or
other payment remains unpaid.
16. FINANCING STATEMENTS. THE LESSOR IS AUTHORIZED TO FILE A FINANCING
STATEMENT IN ACCORDANCE WITH THE UNIFORM COMMERCIAL CODE SIGNED BY LESSEE
OR BY LESSOR, AS LESSEE'S ATTORNEY IN FACT.
17. JURISDICTION: VENUE: SEVERABILITY. THIS AGREEMENT. STATE OF FLORIDA.
LESSEE CONSENTS TO THE JURISDICTION OF THE COURTS OF FLORIDA. 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.
18. WARRANTIES BY LESSEE. Lessee warrants and represents that: (a) the
Equipment is being leased for business purposes; (b) all signatures are
genuine; (c) the person signing the Master 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; (e) the execution and performance of this Master Lease,
each Schedule and related documents and the performance of the obligations
they impose, do not violate any law and do not conflict with any agreement
by which Lessee is bound, and that no consent or approval of any
governmental authority or any third party is required in connection with
the execution or delivery of this Master Lease, any Schedule or related
documents, and that this Master Lease, each Schedule and related documents
are valid and binding agreements, enforceable in accordance with their
terms; and (f) there are no actions, suits or proceedings pending, or to
the knowledge of the Lessee threatened, before any court, administrative
agency, arbitrator or governmental body which will, if determined adversely
to the Lessee, materially adversely affect its ability to perform its
obligations under this Master Lease or any related agreement to which it is
a party. If Lessee is other than a natural person, it further represents
that (a) it is duly organized, existing and in good standing pursuant to
the laws under which it is organized; and (b) the execution and delivery of
this Master Lease and the performance of the obligations it imposes are
within its powers and have been duly authorized by all necessary action of
its governing body and do not contravene the terms of its articles of
incorporation or organization, it bylaws, or any partnership, operating or
other agreement governing its affairs.
19. 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 attorney's fees, arising out of or in
any manner pertaining to the Equipment or this Master 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 insumnce policies.
6
<PAGE>
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 lowed under the Internal Revenue Code of 1986, as amended,
shall ("Code") to an owner of personal property.
In addition, notwithstanding any other provision of this Master 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, shall be lost, disallowed, eliminated, reduced, recaptured or
otherwise unavailable to Lessor for any reason, then Lessee shall pay to
Lessor an 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.
The indemnities given and liabilities assumed by the Lessee pursuant to
this Section 19 shall continue in full force and effect notwithstanding
the expiration or other termination of this Master Lease.
20. NOTICES. Notice from one party to another relating to this Master Lease
shall be deemed effective if made in writing (including telecommunications)
and delivered to the recipient's address, telex number or telecopier number
set forth under its name below by any of the following means: (a) band
delivery, (b) registered or certified mail postage prepaid, with return
receipt requested, (c) first class or express mail, postage prepaid, (d)
overnight courier service or (e) telecopy, telex or other facsimile
transmission with request for assurance of receipt in a manner typical with
respect to communication of that type. Notice made in accordance with this
section shall be deemed delivered upon receipt if delivered by hand or wire
transmission, 3 business days after mailing if mailed by first class,
registered or certified mail or one business day after mailing or deposit
with an overnight courier service.
21. 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.
22. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and expenses,
including reasonable attorney's 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.
7
<PAGE>
23. PERFORMANCE BY LESSOR. If the Lessee fails to duly and promptly perform
any of its obligations under this Master Lease, Lessor may, at its option,
perform such act or make such payment which the Lessor deems necessary.
All sums so paid or incurred by Lessor including attorney's fees shall be
immediately due and payable by Lessee, without demand, and shall bear
interest at the lesser of one and one-half percent (1-1/2%) per month or
the highest rate permissible by law. The performance of any act or payment
by Lessor shall not constitute a waiver or release of any obligation or
default on the part of Lessee.
24. ENTIRE AGREEMENT. This Master Lease and subsequent Schedules constitute
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,
administrators, successors and assigns of the parties.
25. WAIVER. No delay on the part of Lessor in the exercise of any right or
remedy shall operate as a waiver. No single or partial exercise by Lessor
of any right or remedy shall preclude any other future exercise of it or
the exercise of any other right or remedy. No waiver or indulgence by
Lessor of any default shall be effective unless in writing and signed by
Lessor, nor shall a waiver on one occasion be construed as a bar to or
waiver of that right on any future occasion.
26. 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.
27. WAIVER OF JULY 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 Master 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.
8
<PAGE>
THIS MASTER LEASE THE LESSEE
AGREEMENT SHALL AGREES TO ALL OF THE
NOT BE BINDING ON LESSOR TERMS AND CONDITIONS
UNTIL IT HAS BEEN ACCEPTED ABOVE WHICH ARE PART
AND EXECUTED BY LESSOR OF THIS MASTER LEASE
AGREEMENT
Acceptcd by:
By /s/ WILLIAM E. FRITZ By /s/ CHARLES W. FRITZ
-------------------- --------------------
Title Title PRESIDENT
------------------ ------------------
Date 11-6-96 Date 11-6-96
------------------ ------------------
Address For Notices: Address For Notices:
William E. Fritz NeoMedia Technologies, Inc.
411 Le Provence Circle 280 W. Shuman Blvd., Suite 100
Naperville IL 60540 Naperville, IL 60563
9
<PAGE>
SCHEDULE A
----------
Date: November 6, 1996
Exhibition Booth Cost: $85,434.50
Months: 36
Monthly Payment: $2,858.09
Florida Sales Tax: $171.49
Total Monthly Payment: $3,029.58
First Payment Due December 1, 1996
Lessee may purchase form the Lessor the Exhibition Booth at any time
at fair market value.
NeoMedia Technologies, Inc.
Exhibit 10.47
Agreement for Wholesale Financing (Security Agreement) Between IBM
Credit Corporation and NeoMedia Technologies, Inc. Dated February 20, 1997
<PAGE>
IBM CREDIT CORPORATION Stamford, CT 06904
AGREEMENT FOR WHOLESALE FINANCING
(SECURITY AGREEMENT)
TO: IBM CREDIT CORPORATION DATE: 2/20, 1997
In the course of our business, we acquire inventory and want you to finance
our purchase of such inventory under the following terms and conditions:
1. You may in your sole discretion from time to time decide the amount of
credit you extend to us, notwithstanding any prior course of conduct between us.
You may combine all of your advances to make one debt owed by us.
2. You may in your sole discretion decide the amount of funds, if any, you
will advance on any inventory we may seek to acquire. We agree that any decision
to advance funds on any inventory will not be binding on you until such time as
the funds are actually advanced.
3. All financing provided by you to us will be used exclusively for the
acquisition of inventory for which you have approved us to receive financing
pursuant to the terms of this Agreement (the "Approved Inventory"). From time to
time, you will identify such trademarks and tradenames to us in writing. When
you advance funds, you may send us a Statement of Transaction or other statement
if you choose. If you do, we will have acknowledged the debt to be an account
stated and we will have agreed to the terms of the financing programs identified
on such statement, unless we notify you in writing of any question or objection
within seven (7) days after it is mailed to us.
4. To secure payment of all of our current and future debts to you whether
under this Agreement, any guaranty that we now or hereafter execute, or any
other agreement between us, whether direct or contingent, we grant you a
security interest in all of our inventory, equipment, fixtures, accounts,
contract rights, chattel paper, instruments, reserves, documents of title,
deposit accounts and general intangibles, whether now owned or hereafter
acquired, and all attachments, accessories, accessions, substitutions and/or
replacements thereto and all proceeds thereof. All of the above assets are
defined pursuant to the provisions of Article 9 of the Uniform Commercial Code
and are hereinafter collectively referred to as the "Goods". This security
interest is also granted to secure our debts to all of your affiliates. We will
hold all of the Goods financed by you, and the proceeds thereof, in trust for
you and we will immediately account for and remit directly to you all such
proceeds when payment is required under the terms of our financing program with
you. You may directly collect any amount owed to us with respect to the Goods
and credit us with all sums received by you. Your title, lien or security
interest will not be impaired by any payments we make to the seller or anyone
else or by our failure or refusal to account to you for proceeds.
5.Our principal place of business Is located at: __________________________
2201 Second St., Ste. 600 Ft. Myers FL 33901
________________________________________________________________________________
(Number and Street) (City, County, State, Zip Code)
and we represent that our business is conducted as a [ ] SOLE PROPRIETORSHIP,
[ ] PARTNERSHIP, [XX] CORPORATION (check applicable term). We will notify you
immediately of any change in our identity, name, form of ownership or
management, and of any change in our principal place of business, or any
additions or discontinuances of other business locations. The Goods will be
kept at our principal place of business. We will immediately notify you if any
of the Goods are kept at any other address. We and our predecessors have done
business during the last six (6) months only under the following names:
________________________________________________________________________________
This paragraph is for informational purposes only, and is not in any manner
intended to limit the extent of your security interest in the Goods.
Page 1 of 6
<PAGE>
6. We promise that the Goods are and will remain free from all claims and
liens superior to yours unless otherwise agreed to by you, and that we will
defend the Goods against all other claims and demands. We will not rent, lease,
lend, demonstrate, pledge, transfer or secrete any of the Goods or use any of
the Goods for any purpose other than exhibition and sale to buyers in the
ordinary course of business, without your prior written consent. We will execute
all documents you may request to confirm or perfect your security interest in
the Goods. We warrant and represent that we are not in default in the payment of
any principal, interest or other charges relating to any indebtedness owed to
any third party, and no event has occurred under the terms of any agreement,
document, promissory note or other instrument, which with or without the passage
of time and/or the giving of notice constitutes or would constitute an event of
default thereunder. We will promptly provide our year-end financial statement to
you after our fiscal year ends and, it requested by you, we will also promptly
provide our financial statement to you after each calendar quarter. Each
financial statement that we submit to you, is and will be correct and will
accurately represent our financial condition. We further acknowledge your
reliance on the truthfulness and accuracy of each financial statement that we
submit to you in your extension of various financial accommodations to us.
7. We will pay all taxes, license fees, assessments and charges on the
Goods when due. We will immediately notify you of any loss, theft, or
destruction of or damage to any of the Goods. We will be responsible for any
loss, theft or destruction of Goods. We will keep the Goods insured for their
full insurable value against loss or damage under an "all risk" insurance
policy. We will obtain insurance under such terms and in amounts as you may
specify, from time to time, with companies acceptable to you, with a loss-payee
or mortgagee clause payable to you to the extent of any loss to the Goods and
containing a waiver of all defenses against us that is acceptable to you. We
agree to provide you with written evidence of the required insurance coverage
and loss-payee or mortgagee clause. We assign to you all amounts owed to us
under any insurance policy, and we direct any insurance company to make payment
directly to you to be applied to the unpaid debt owed you. We further grant you
an irrevocable power of attorney to endorse any checks or drafts and sign and
file all of the necessary papers, forms and documents to initiate and settle
any insurance claims with respect to the Goods. If we fail to pay any of the
above-referenced costs, charges, or insurance premiums, or if we fail to insure
the Goods, you may pay such costs, charges and insurance premiums, and the
amounts paid will be considered an additional debt owed by us to you.
8. You have the right to enter upon our premises from time to time, as you
in your sole discretion may determine for your sole benefit, and all without any
advance notice to us, to: examine the Goods; appraise them as security; verify
their condition and non-use; verify that all Goods have been properly accounted
for; verify that we have complied with all terms and provisions of this
Agreement; and assess, examine, and make copies of our books and records. Any
collection by you of any amounts we owe under our financing programs with you at
or during your examination of the Goods does not relieve us of our continuing
obligation to pay our indebtedness owed to you in accordance with the terms of
such financing programs.
9. We agree to immediately pay you the full amount of the principal balance
owed you on each item of inventory financed by you at the time such inventory is
sold, lost, stolen, destroyed, or damaged, whichever occurs first, unless you
have agreed in writing to provide financing to us on other terms. We also agree
to provide you, upon your request, an inventory report which describes all the
Approved Inventory in our possession (excluding any inventory financed by you
under the Demonstration and Training Equipment Financing Option and the Rental
Equipment Financing Option). Regardless of the terms of any scheduled payment
financing program with you, if you determine, after conducting an inspection of
all of our inventory, that the current outstanding indebtedness owed by us to
you exceeds the aggregate wholesale invoice price of the Approved Inventory in
our possession, we agree to immediately pay to you an amount equal to the
difference between such outstanding indebtedness and the aggregate wholesale
invoice price of such inventory. We will make all payments to you at your
appropriate branch office. Any checks or other instruments delivered to you to
be applied against our outstanding obligations will constitute conditional
payment until the funds represented by such instruments are actually received by
you. You may apply payments to reduce finance charges first and then principal,
irrespective of our instructions. Further, you may apply principal payments to
the oldest (earliest) invoice for the inventory financed by you, but, in any
case, all principal payments will first be applied to such inventory which is
sold, lost, stolen, destroyed, damaged, or otherwise disposed of. If we sign any
instrument for the amount of credit extended, it will be evidence of our
obligation to pay and will not be payment. Any discount, rebate, bonus, or
credit for the inventory granted to us by any third party will not, in any way,
reduce the debt we owe you, until you have received payment in cash.
Page 2 of 6
<PAGE>
l0. During each year or part of a year in which you have extended credit to
us, we will pay you finance charges an the total amount of credit extended to us
in the amount agreed to between us from time to time. The period, during which
any third party provides a finance charge subsidy for us, will be included in
the calculation of the annual percentage rate of the finance charges. Such
finance charges may be applied by you to cover any amounts expanded for your:
appraisal and examination at the Goods; maintenance of facilities for payment;
assistance in support of our retail sales; your commitments to manufacturers or
distributors to finance shipments of Goods to us; recording and filing fees;
expenses incurred in obtaining additional collateral or security; and any costs
and expenses incurred by you arising out of the financing you extend to us. We
also agree to pay you additional charges which will include: late payment fees;
flat charges; charges for receiving NSF checks from us; renewal charges; and any
other charges applicable to our financing program with you. Unless we hereafter
otherwise agree in writing, the finance charge and additional charges agreed
upon will be your applicable finance charge and additional charges for the class
of Goods involved, prevailing from time to time at your principal place of
business. You will send us, at monthly or other intervals, a statement of all
charges due on our account with you. We will have acknowledged the charges due,
as indicated on the statement, to be an account stated, unless we object in
writing to you within seven (7) days after it is mailed to us. This statement
may be adjusted by you at any time to conform to applicable law and this
Agreement. If any manufacturer or distributor fails to provide a finance charge
subsidy for us, as agreed, we will be responsible for and pay to you all
finance charges billed to our account.
11. Any of the following events will constitute a default by us under this
Agreement: we breach any of the terms, warranties or representations contained
in this Agreement or in any other agreements between us or between us and any of
your affiliates; any guarantor of our indebtedness to you under this Agreement
or any other agreements breaches any of the terms, warranties or representations
contained in any guaranty or other agreements between any guarantor and you; any
representation, statement, report or certificate made or delivered by us or any
of our representatives, employees or agents or by any guarantor to you is not
true and correct; we fail to pay any of the liabilities or indebtedness owed to
you or any of your affiliates when due and payable under this Agreement or under
any other agreements between us or between us and any of your affiliates; you
determine that you are insecure with respect to any of the Goods or the payment
of our debt owed to you; we abandon the Goods or any part thereof; we or any
guarantor become in default in the payment of any indebtedness owed to any third
party; a judgement issues on any money demand against us or any guarantor; an
attachment, sale or seizure is issued against us or any of the Goods; any part
of the Goods are seized or taken in execution; the death of the undersigned if
the business is operated as a sole proprietorship or partnership, or the death
of any guarantor; we cease or suspend our business; we or any guarantor make a
general assignment for the benefit of creditors; we or any guarantor become
insolvent or voluntarily or involuntarily become subject to the Federal
Bankruptcy Code, state insolvency laws or any act for the benefit of creditors;
any receiver is appointed for any of our or any guarantor's assets, or any
guaranty pertaining to our indebtedness to you is terminated for any reason
whatsoever; we lose any franchise, permission, license or right to sell or deal
in any Goods which you finance; we or any guarantor misrepresent our respective
financial condition or organizational structure; or you determine, in your
sole discretion, that the Goods, any other collateral given to you to secure our
indebtedness to you, or our or any guarantor's net worth has decreased in value,
and we have been unable, within the time period prescribed by you, to either
provide you with additional collateral in a form and substance satisfactory to
you or reduce our total indebtedness by an amount sufficient to satisfy you.
In the event of a default:
(a) You may, at any time at your election, without notice or demand to
us do any one or more of the following: declare all or any part of the
indebtedness we owe you immediately due and payable, together with all
court costs and all costs and expenses of your repossession and
collection activity, including, but not limited to, all attorney's fees;
exercise any or all rights of a secured party under applicable law;
and/or cease making any further financial accommodations or extending
any additional credit to us. All of your rights and remedies are
cumulative.
(b) We will segregate, hold and keep the goods in trust, in good order
and repair, only for your benefit, and we will not exhibit, transfer,
sell, further encumber, otherwise dispose of or use for any other
purpose whatsoever any of the goods.
(c) Upon your oral or written demand, we will immediately deliver the
Goods to you, in good order and repair, at a place specified by you,
together with all related documents; or you may, in your sole discretion
and without notice or demand to us, take immediate possession of the
Goods, together with all related documents.
Page 3 of 6
<PAGE>
(d) We waive and release: any claims and causes of action which we may
now or ever have against you as a direct or indirect result of any
possession, repossession, collection or sale by you of any of the Goods
and the benefit of all valuation, appraisal and exemption laws. If you
seek to take possession of any of the Goods by court process, we
irrevocably waive any notice, bonds, surety and security relating
thereto required by any statute, court rule or otherwise.
(e) We appoint you or any person you may delegate as our duly authorized
Attorney-In-Fact to do, in your sole discretion, any of the following:
endorse our name on any notes, checks, drafts or other forms of exchange
received as payment on any Goods for deposit in your account; sell,
assign, transfer, negotiate, demand, collect, receive, settle, extend or
renew any amounts due on any of the Goods; and exercise rights we have
in the Goods.
If we bring any action or assert any claim against you which arises out of this
Agreement, any other agreement or any of our business dealings, in which we do
not prevail, we agree to pay you all costs and expenses of your defense of such
action or claim including, but not limited to, all attorney's fees. If you fail
to exercise any of your rights or remedies under this Agreement, such failure
will in no way or manner waive any of your rights or remedies as to any past,
current or future default.
12. We agree that it you conduct a private sale of any Goods by soliciting
bids from ten (10) or more other dealers or distributors in the type of Goods
repossessed by or returned to you hereunder, any sale by you of such property in
bulk or in parcels within 120 days of (a) your taking physical possession and
control of such Goods or (b) when you are otherwise authorized to sell such
Goods, whichever occurs last, to the bidder submitting the highest cash bid
therefor, will be deemed to be a commercially reasonable means of disposing of
the same. We agree that commercially reasonable notice of any public or private
sale will be deemed given to us if you send us a notice of sale at least seven
(7) days prior to the date of any public sale or the time after which a private
sale will be made. If you dispose of any such Goods other than as herein
contemplated, the commercial reasonableness of such sale will be determined in
accordance with the provisions of the Uniform Commercial Code as adopted by the
state whose laws govern this Agreement.
We agree that you do not warrant the Goods. We will pay you in full even if the
Goods are defective or fail to conform to any warranties extended by any third
party. Our obligations to you will not be affected by any dispute we may have
with any third party. We will not assert against you any claim or defense we may
have against any third party. We will indemnify and hold you harmless against
any claims or defenses asserted by any buyer of the Goods by reason of: the
condition at any Goods; any representations made about the Goods, or for any
and all other reasons whatsoever.
13. We grant to you a power of attorney authorizing any of your
representatives to: execute or endorse on our behalf any documents, financing
statements and instruments evidencing our obligations to you; supply any omitted
information and correct errors in any documents or other instruments executed by
or for us; do any and every act which we are obligated to perform under this
Agreement; and do any other things necessary to preserve and protect the Goods
and your rights and security interest in the Goods. We further authorize you to
provide to any third party any credit, financial or other information on us that
is in your possession.
14. Time is of the essence in this Agreement. This Agreement will be
effective from the date of its acceptance at your branch office. We acknowledge
receipt of a true copy and waive notice of your acceptance of it. If you commit
to advance funds under this Agreement, you will have accepted it. This Agreement
will remain in force until one of us gives notice to the other that it is
terminated. If we terminate this Agreement, you may declare all or any part of
the indebtedness we owe you due and payable immediately. If this Agreement is
terminated, we will not be relieved from any obligation to you arising out of
your advances or commitments made before the effective date of termination. Your
rights under this Agreement and your security interest in present and future
Goods will remain valid and enforceable until all our debts to you are paid in
full. We agree that we cannot assign this Agreement without your prior written
consent. This Agreement will protect and bind your and our respective heirs,
representatives, successors and assigns. It can be varied only by a document
signed by your and our authorized representatives. If any provision of this
Agreement or its application is invalid or unenforceable, the remainder of this
Agreement will not be impaired or affected and will remain binding and
enforceable. It we are a corporation, this Agreement is executed with the
authority of our Board of Directors, and with shareholder approval, if required
by the law. All notices you send to us will be sufficiently given if mailed or
delivered to us at our address shown in paragraph 5.
Page 4 of 6
<PAGE>
15. The laws of the State of Illinois will govern this Agreement. We agree
that venue for any lawsuit will be in the State or Federal Court within the
county, parish, or district where your branch office, who provides the financial
accommodations, is located. We hereby waive any right to change the venue of any
action brought against us by you.
16. If we have previously executed any security agreements relating to the
Goods with you, we agree that this Agreement is intended only to amend and
supplement such written agreements, and will not be deemed to be a novation or
termination of such written agreements. In the event the terms of this Agreement
conflict with the terms of any prior security agreement that we previously
executed with you, the terms of this Agreement will control in determining the
agreement between us.
17. We waive all exemptions and homestead laws to the maximum extent
permitted by law. We waive any statutory right to notice or hearing prior to
your attachment, repossession or seizure of the Goods. We further waive any and
all rights of set-off we may have against you. We agree that any proceeding in
which we, or you or any of your affiliates, or our assigns are parties, as to
all matters and things arising directly or indirectly out of this Agreement, or
the relations among the parties listed in this paragraph will be tried in a
court of competent jurisdiction by a judge without a jury. We hereby waive any
right to a jury trial in any such proceeding.
ATTEST: /s/ WILLIAM E. FRITZ Neomedia Technologies, Inc.
- - ----------------------------- -----------------------------
Secretary Customer
Print Name: William E. Fritz By: /s/ CHARLES T. JENSEN
------------------ -------------------------
Print Name: Charles T. Jensen
-----------------
(CORPORATE SEAL)
Title: CFO & VP
---------------------
Page 5 of 6
<PAGE>
SECRETARY'S CERTIFICATION OF RESOLUTION
I certify that I am the Secretary and the official custodian of certain
records, including the certificate of incorporation, charter, by-laws and
minutes of the meeting of the Board of Directors of the corporation named below,
and that the following is a true, accurate and compared extract from the minutes
of the Board of Directors of the corporation adopted at a special meeting
thereof held on due notice, at which meeting there was present a quorum
authorized to transact the business described below, and that the proceedings of
the meeting were in accordance with the cerificate of incorporation, charter and
by-laws of the corporation, and that they have not been revoked, annulled or
amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion; "RESOLVED, That the several officers,
directors and agents of this corporation, or any one or more of them, are hereby
authorized and empowered on behalf of this corporation: to obtain financing from
IBM Credit Corporation ("IBM Credit") in such amounts and on such terms as such
officers, directors or agents deem proper; to enter into security and other
agreements with IBM Credit relating to the terms upon which financing may be
obtained and security to be furnished by this corporation therefor; from time to
time to supplement or amend any such agreements; and from time to time to
pledge, assign, guaranty, mortgage, grant security interest in and, otherwise
transfer to IBM Credit as collateral security for any obligations of this
corporation to IBM Credit and its affiliated companies, whenever and however
arising, any assets of this corporation, whether now owned or hereafter
acquired; hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do in the premises."
IN WITNESS WHEREOF, I have executed and affixed the seal of the
corporation on the date stated below.
Dated: 2/20, 1997 /s/ William E. Fritz
---------------------------
Secretary
Neomedia Technologies, Inc.
---------------------------
Corporate Name
Page 6 of 6
NeoMedia Technologies, Inc.
Exhibit 10.48
Collateralized Guaranty Between IBM Credit Corporation
and NeoMedia Migration, Inc. Dated February 20, 1997
<PAGE>
IBM CREDIT CORPORATION Stamford, CT 06904
COLLATERALIZED GUARANTY
TO: IBM CREDIT CORPORATION DATE: 2/20, 1997
------------
2707 W. BUTTERFIELD ROAD
- - ----------------------------
OAK BROOK, IL 65021
- - ----------------------------
- - ----------------------------
Gentlemen:
In consideration of credit and financing accommodations granted or to be
granted by you to NEOMEDIA TECHNOLOGIES, INC. ("Dealer"), which is in the best
interest of the undersigned, and for other good and valuable consideration
received, the undersigned jointly and severally guaranties to you, from
property held separately, jointly or in community, the prompt and unconditional
performance and payment by Dealer of any and all obligations, liabilities,
contracts, mortgages, notes, trust receipts, secured transactions, inventory
financing and security agreements, and commercial paper on which Dealer is in
any manner obligated, heretofore, now, or hereafter owned, contracted or
acquired by you ("Liabilities"), whether the Liabilities are individual, joint,
several, primary, secondary, direct, contingent or otherwise. The undersigned
also agrees to indemnify you and hold you harmless against any losses you may
sustain and expenses you may incur, suffer or be liable for as a result of or
in any way arising out of, following, or consequential to any transactions with
or for the benefit of Dealer.
If Dealer fails to pay or perform any Liabilities to you when due, all
Liabilities to you shall then be deemed to have become immediately due and
payable, and the undersigned shall then pay upon demand the full amount of all
sums owed to you by Dealer, together with all expenses, including reasonable
attorney's fees, which shall be deemed to be not less than fifteen percent of
the debt or the amount legally permitted if placed with an attorney for
collection.
The liability of the undersigned is direct and unconditional and shall not
be affected by any extension, renewal or other change in the terms of payment of
any security agreement or any other agreement between you and Dealer, or any
change in the manner, place or terms of payment or performance thereof, or the
release, settlement or compromise of or with any party liable for the payment or
performance thereof, the release or non-perfection of any security thereunder,
any change in Dealer's financial condition, or the interruption of business
relations between you and Dealer. This Guaranty shall continue for so long as
any sums owing to you by Dealer remain outstanding and unpaid, unless terminated
in the manner provided below. The undersigned acknowledges that its obligations
hereunder are in addition to and independent of any agreement or transaction
between you and Dealer or any other person creating or reserving any lien,
encumbrance or security interest in any property of Dealer or any other person
as security for any obligation of Dealer. You need not exhaust your rights or
recourse against Dealer or any other person or any security you may have at any
time before being entitled to payment from the undersigned.
To secure payment of all of the undersigned's current and future debts and
obligations to you, whether under this Guaranty or any other agreement between
us, whether direct or contingent, the undersigned does assign, pledge and give
to you a security interest in all of the undersigned's invervtory, raw
materials, goods in process, finished goods, machines, machinery, furniture,
furnishings, fixtures, vehicles, equipment, accounts receivable, book debts,
notes, chattel paper, acceptances, rebates, incentive payments, drafts,
contracts, contract rights, choses in action, and general intangibles, whether
now owned or hereafter acquired, and all attachments, accessions and additions
thereto, substitutions, replacements, accessories, and equipment therefor, and
all proceeds therefrom (all of the above property is referred to as "the
Collateral"). This security interest is also granted to secure the undersigned's
debts to all of your affiliates.
You shall have the right, but not the obligation, from time to time, as you
in your sole discretion may determine, and all without any advance notice to the
undersigned, to: (a) examine the Collateral; (b) appraise it as security; (c)
verity its condition and non-use; (d) verify that all Collateral has been
properly accounted for and this Agreement compiled with, and (e) assess,
examine, check and make copies of any and all of our books, records and files.
Page 1 of 6
<PAGE>
If the undersigned does not comply with any of the terms of this Agreement, or
we fail to fulfill any obligation to you or any of your affiliates under any
other agreement between us or between us and any of your affiliates, or the
undersigned becomes insolvent or ceases to do business as a going concern, or a
bankruptcy, insolvency proceeding, arrangement or reorganization is filed by or
against the undersigned, or any of the undersigned's property is attached or
seized, or a receiver is appointed for the undersigned, or the undersigned
commits any act which impairs the prospect of full performance or satisfaction
of the undersigned's obligations to you, or the undersigned shall lose any
franchise, permission, license or right to conduct its business, or the
undersigned misrepresents its financial condition or organizational structure,
or whenever you deem the debt or Collateral to be insecure:
a) You may call all or any part of the amount the undersigned or Dealer
owes you or your affiliates due and payable immediately, if permitted
by applicable law, together with court costs and all costs and expenses
of your repossession and collection activity, Including, but not
limited to attorney's fees of fifteen percent of the total indebtedness
or the amount legally permitted (whichever is greater).
b) The undersigned will hold and keep the Collateral in trust, in good
order and repair, for your benefit and shall not exhibit or sell them.
c) Upon your demand, the undersigned will immediately deliver the
Collateral to you, in good order and repair, at a place reasonably
convenient to you, together with all related documents; or you may, in
your sole discretion and without demand, take immediate possession of
the Collateral, together with all related documents.
d) The undersigned waives and releases: (i) any and all claims and
causes of action which the undersigned may now or ever have against you
as a result of any possession, repossession, collection or sale by you
of any of the Collateral, notwithstanding the effect of such
possession, repossession, collection or sale upon the undersigned's
business; (ii) all rights of redemption from any such sale; and (iii)
the benefit of all valuation, appraisal and exemption laws. If you seek
to take possession of any of the Collateral by replevin or other court
process, the undersigned irrevocably waives any notice, bonds, surety
and security relating thereto required by any statute, court rule or
otherwise as an incident to such possession and any demand for
possession of the Collateral prior to the commencement of any suit
or action to recover possession thereof.
e) The undersigned appoints you or any person you may delegate as its
duly authorized Attorney-in-Fact (without notifying us) to do, in your
sole discretion, any of the following: (i) sell, assign, transfer,
negotiate or pledge any and all accounts, chattel paper, or contract
rights; (ii) endorse the undersigned's name on any and all notes,
checks, drafts, or other forms of exchange received as payment on any
accounts, chattel paper and contract rights, for deposit in your
account; (iii) grant any extension, rebate or renewal on any and all
accounts, chattel paper or contract rights, or enter into any
settlement thereof; (iv) demand, collect and receive any and all
amounts due on accounts, chattel paper and contract rights; and (v)
exercise any and all rights we have in the Collateral.
f) In the event the undersigned brings any action or assess any claim
against you which arises out of this Agreement, any other agreement or
any of our business dealings, in which the undersigned does not
prevail, the undersigned agrees to pay you all court costs and all
costs and expenses of your defense of such action of claim including,
but not limited to, attorney's fees of fifteen percent of the total
indebtedness or the amount legally permitted (whichever is greater).
You may also declare a default under this Agreement and exercise any and
all rights and remedies available herein, if, in your sole discretion, you
determine that the Collateral has decreased in value, and we have been unable to
either: (a) provide you with additional collateral in a form and substance
satisfactory to you; or (b) reduce the total Indebtedness of Dealer by an amount
sufficient to you.
You have and will always possess all the rights and remedies of a secured
party under law, and your rights and remedies are and will always be cumulative.
The undersigned acknowledges and agrees that the Collateral is the subject of
widely distributed standard price quotations and is customarily sold in a
recognized market. We agree that a private sale by you of any of the Collateral
to a dealer in those types of Collateral is a commercially reasonable sale.
Further, we agree that your delivery of any of the Collateral to a distributor
or manufacturer, with a request that it repurchase Collateral, as provided in
any repurchase agreement with you, is a commercially reasonable disposition or
sale.
Page 2 of 6
<PAGE>
The undersigned promises that (a) the Collateral is and shall remain free
from all claims and liens except yours; (b) the undersigned shall defend the
Collateral against all other Claims and demands; and (c) the undersigned will
notify you before it signs, or authorizes the signing of any financing statement
regardless of its coverage. Where permitted by law, you may perfect your
security interest in the Collateral by filing a financing statement signed only
by you. The undersigned will execute any and all documents you may request to
confirm or perfect your title or security interest in the Collateral.
Our principal place of business is located at:
2201 SECOND ST., STE. 600 FT. MYERS FL 33901
- - ------------------------------------------------------------------
(Number and Street) (City, County, State, Zip Code)
and we represent that our business is conducted as a [ ] SOLE PROPRIETORSHIP,
[ ] PARTNERSHIP, [ ] JOINT VENTURE, [X] CORPORATION, [ ] COOPERATIVE (check
applicable term). The undersigned agrees to notify you immediately of any change
in identity, name, form of ownership or management, and of any change in its
principal place of business, or any additions or discontinuances of other
business locations.
The Collateral shall be kept at the undersigned's principal place of
business and at the following addresses:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
until all sums owed you are paid in full. The undersigned will immediately
notity you if the Collateral is kept at any other address. This paragraph is for
your informational purposes only, and is not in any way or manner intended to
limit the extent of your security interest in the Collateral.
The undersigned and its predecessors have done and do business only under
the following names;
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The undersigned will pay all taxes, license fees, assessments and charges
on the Collateral when due. The undersigned will be responsible for any loss of
Collateral for any reason whatsoever. The undersigned will keep the Collateral
insured for its full insurable value against loss or damage by fire, wind, theft
and for combined additional coverage, including vandalism and malicious
mischief, and for other risks as you may require. The undersigned will obtain
insurance under such terms and in amounts as you may specify, from time to time,
in companies acceptable to you, with a loss-payee or mortgagee clause payable to
you to the extent of any loss to the Collateral and containing a waiver of all
defenses against the undersigned that is acceptable to you. The undersigned
further agrees to provide you with written evidence of the required insurance
coverage and loss-payee or mortgagee clause. The undersigned assigns to you all
sums not in excess of the unpaid debt owed you, and directs any insurance
company to make payment directly to you to be applied to the unpaid debt owed
you. The undersigned further grants you an irrevocable power of attorney to
endorse any draft and sign and file all of the necessary papers, forms and
documents to initiate and settle any and all claims with respect to the
Collateral. If the undersigned fails to pay any of the above-referenced costs,
charges or any insurance premiums, or if it fails to insure the Collateral, you
may pay such costs, charges or any insurance premiums, and the amounts paid
shall be considered an additional debt owed by the undersigned to you. The
undersigned will promptly notify you of any loss, theft or destruction of or
damage to any of the Collateral.
The undersigned will not rent, lease, lend, demonstrate, pledge, create a
security interest in, transfer or secrete any of the Collateral, or use the
Collateral for any purpose other than exhibition, without your prior written
consent.
This Guaranty is assignable, shall be construed liberally in your favor,
and shall inure to the benefit of and bind your and our respective successors,
personal representatives and assigns, and also benefit any of your existing or
future affiliates that may extend credit to Dealer.
Page 3 of 6
<PAGE>
If Dealer hereafter is incorporated, acquired by a corporation, dissolved,
or otherwise undergoes any change in its management, ownership, identity, or
organizational structure, this Guaranty shall continue to extend to any
Liabilities of the Dealer or such resulting corporation, dissolved corporation,
or new or changed legal entity, or identity to you.
The undersigned waives: notice of the acceptance of this Guaranty, and of
presentment, demand and protest; notices of nonpayment, nonperformance, any
right of contribution from other guarantors, and dishonor; notices of amount of
indebtedness of Dealer outstanding at any time; notices of the number and amount
of advances made by you to Dealer in reliance on this Guaranty; notices of any
legal proceedings against Dealer; notice and hearing as to any prejudgment
remedies; and any other demands and notices required by law. The undersigned
further waives all rights of set-off and all counterclaims against you or
Dealer. The undersigned also waives any and all rights in and notices or demands
relating to any collateral now or hereafter securing any of the Liabilities,
including, but not limited to, all rights, notices or demands relating, whether
directly or indirectly, to the sale or other disposition of any or all of such
collateral or the manner of such sale or other disposition. All waivers by the
undersigned herein shall survive any termination or revocation of this Guaranty.
The undersigned authorizes you to sell at public or private sale or
otherwise realize upon the collateral now or hereafter securing any of the
Liabilities, in such manner and upon such terms and conditions as you deem best,
all without advertisement or notice to Dealer, the undersigned, or any third
parties. The undersigned further authorizes you to deal with the proceeds of
such collateral as provided in your agreement with Dealer, without prejudice to
your claim for any deficiency and free from any right or redemption on the part
of Dealer, the undersigned or any third parties, which right or redemption is
hereby waived together with every formality prescribed by custom or by law in
relation to any such sale or other realization.
The undersigned further agrees that all of its right, title and interest
in, to and under any loans, notes, debts, and all other liabilities and
obligations whatsoever owed by Dealer to the undersigned, whether heretofore or
hereafter created or incurred and for whatever amount, and all security
therefor, shall be now and hereafter at all times fully subordinated to all
Liabilities. The undersigned will not ask, demand or sue for, or take or receive
payment of, all or any part of such loans, notes, debts or any other liabilities
or obligations whatsoever or any security therefor, until and unless all of the
Liabilites are paid, performed and fully satisfied.
The undersigned has made an independent investigation of the financial
condition of Dealer and gives this Guaranty based on that investigation and not
upon any representations made by you. The undersigned acknowledges that it has
access to current and future Dealer financial information which will enable the
undersigned to continuously remain informed of Dealer's financial condition. The
undersigned also consents to and agrees that the obligations under this Guaranty
shall not be affected by your subsequent increases or decreases in the credit
line that you may grant to Dealer; substitutions, exchanges or releases of all
or any part of the collateral now or hereafter securing any of the Liabilliles;
sales or other dispositions of any or all of the collateral now or hereafter
securing any of the Liabilities without demands, advertisement or notice of the
time or place of the sales or other dispositions; realizing on the collateral to
the extent you, in your sole discretion, deem proper; or purchases of all or
any part of the collateral for your own account.
This Guaranty and any and all obligations, liabilities, terms and
provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against Dealer, whether such
proceedings, actions and/or claims are federal and/or state.
This Guaranty is submitted by the undersigned to you (for your acceptance
or rejection thereof) at your above specified office, as an offer by the
undersigned to guaranty the credit and financial accommodations provided by you
to Dealer. If accepted, this Guaranty shall be deemed to have been made at your
above-specified office. This Guaranty and all obligations pursuant thereto,
shall be governed and controlled as to interpretation, enforcement, validity,
construction, effect and, in all other respects by the laws of the state at your
above-specified office. The undersigned, to induce you to accept this Guaranty,
agrees that all actions or proceedings arising directly or indirectly in
connection with, out of, related to or from this Guaranty may be litigated, at
your sole discretion and election, in courts within the state of your
above-specified office. The undersigned consents and submits to the jurisdiction
of any local, state or federal court located within that state. The undersigned
waives any right to transfer or change the venue of any litigation brought
against the undersigned by you in accordance with this paragraph.
Page 4 of 6
<PAGE>
Any delay by you, or your successors, affiliates or assigns in exercising
any or all rights granted you under this Guaranty shall not operate as a waiver
of those rights. Furthermore, any failure by you, your successors, affiliates or
assigns, to exercise any or all rights granted you under this Guaranty shall not
operate as a waiver of your right to exercise any or all of them later.
This document contains the full agreement of the parties concerning the
guaranty of Dealer's Liabilities and can be varied only by a document signed by
all of the parties hereto. The undersigned may terminate this Guaranty by notice
to you in writing, the termination to be effective sixty (60) days after receipt
and acknowledgment thereof by you, but the termination shall in no manner
terminate the undersigned's guaranty of Liabilities arising prior to the
effective date of termination. If executed by more than one party "undersigned"
shall be deemed to refer to all thereof and the obligations of all thereof
hereunder shall be joint and several.
We agree that any action, suit or proceeding, relating directly or
indirectly to this Guaranty, or the relationship between you and us, will be
tried in a court of competent jurisdiction by a judge without a jury. Thus, we
hereby waive any right to a jury trial in any such action, suit or proceeding.
NEOMEDIA MIGRATION, INC.
-----------------------------------
Name of Corporate Guarantor
WITNESS
/s/ DAVID C. HALL By: /s/ CHARLES T JENSEN
- - ----------------------------------- ---------------------------------
Print Name: /s/ DAVID CARLETON HALL Print Name: /s/ CHARLES T JENSEN
------------------------ --------------------------
Address: 2201 SECOND ST. Title: CFO & VP
-------------------------- ----------------------------
FT. MYERS, FL 33901 Guarantor's Address: 2201 SECOND ST
- - ----------------------------------- --------------
FT MYERS, FL 33901
- - ----------------------------------- -----------------------------------
-----------------------------------
SEAL ATTEST:
/s/ WILLIAM E. FRITZ
-----------------------------------
Secretary
Print Name: /s/ WILLIAM E. FRITZ
STATE OF ILLINOIS ) -----------------------
------------------------
)SS
COUNTY OF COOK )
------------------------
On this 20TH day of FEBRUARY, 1997 the above individuals personally appeared
before me, and who, being duly sworn, each stated that the foregoing Guarantor
was executed in each of their representative capacities as represented above
for the Guarantor.
/s/ BEVERLY SOPCAK
-----------------------------------
Notary Public
My Commission Expires: 2/22/98
-----------
Page 5 of 6
<PAGE>
SECRETARY'S CERTIFICATE
I hereby certify that I am the secretary of the following named corporation
and that execution of the above Guaranty was ratified, approved and confirmed
by the Shareholders at a meeting, if necessary, and pursuant to a resolution of
the Board of Directors of the corporation at a meeting of the Board of Directors
duly called, and which is currently in effect, which resolution was duly
presented, seconded and adopted and reads as follows:
"BE IT RESOLVED that any officer of this corporation is hereby authorized
to execute a guaranty of the obligations of NEOMEDIA TECHNOLOGIES, INC.
("Dealer") to IBM Credit Corporation on behalf of the corporation, which
instrument may contain such terms as any officer may see fit including, but not
limited to a grant of a security interest in all assets of this corporation to
secure this corporation's liabilities and obligations to IBM Credit Corporaton;
a waiver of notice of the acceptance of this guaranty; presentment; demand;
protest; notices of nonpayment, nonperformance, dishonor, the amount of
indebtedness of Dealer outstanding at any time, any legal proceedings against
Dealer, and any other demands and notices required by law; any right of
contribution from other guarantors; and all set-offs and counterclaims."
IN WITNESS WHEREOF and as Secretary of the named corporation I have
hereunto set my hand and affixed the corporate seal on this 20TH day of
FEBRUARY, 1997.
/s/ WILLIAM E. FRITZ
-----------------------------------
Secretary
NEOMEDIA MIGRATION, INC.
-----------------------------------
Corporate Guarantor
CORPORATE SEAL
Page 6 of 6
NeoMedia Technologies, Inc.
Exhibit 10.49
Termination of Collateralized Guaranty Between IBM Credit
Corporation, Gen-Tech, Inc. and Dev-Mark, Inc. Dated February 5, 1997
<PAGE>
IBM
- - -----------------------------------------------------------------------------
IBM Credit Corporation 2707 Butterfield Road
Oak Brook, IL 60521
800-753-7053
February 5, 1997
CERTIFIED MAIL/RETURN RECEIPT REQUESTED
Mr. Charles W. Fritz
NeoMedia Technologies, Inc
2201 Second Street, Suite 600
Fort Myers, FL 33901
RE: Termination of Collateralized Guaranty
Dear Mr. Fritz:
IBM CREDIT CORPORATION ("IBM Credit") hereby acknowledges receipt of your
request to terminate the Collateralized Guaranty from Gen-Tech, Inc., and
Dev-Mark, Inc., of the obligations of NeoMedia Technologies, Inc. (Dealer)
executed by you on August 16, 1994.
Please be advised that according to the terms of the Guaranty, the termination
will be effective sixty (60) days after receipt and acknowledgment by IBM
Credit. The termination does not affect your guaranty of liabilities (as defined
in the Guaranty) prior to the effective date of termination.
The effective date of termination shall be April 5, 1997. You will be obligated
to pay all Liabilities incurred prior to this date.
Please do not hesitate to contact the undersigned if you have any questions.
Sincerely,
/s/ SAGE K. RANDRUP
- - -------------------
Sage K. Randrup
Credit Manager
SKR/klm
Enclosure
NeoMedia Technologies, Inc.
Exhibit 21
Subsidiaries
<PAGE>
EXHIBIT 21
NeoMedia Technologies, Inc.
Subsidiaries
NeoMedia Technologies, Inc., which is incorporated in the State of Delaware, has
one wholly-owned subsidiary, NeoMedia Migration, Inc., which is incorporated in
the State of Delaware and which has one wholly-owned subsidiary, Distribuidora
Vallarta, S. P. A., which is incorporated in Guatemala.
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